Evening Report | September 2, 2022
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Your Pro Farmer newsletter is now available... We’ve had a week to let the dust settle and reflect on what we found on the Pro Farmer Crop Tour. More importantly, we’ve had a week to do additional analysis of the data from the nearly 3,400 corn and soybean samples scouts gathered Aug. 22-25. We break down all of the Crop Tour data on News page 4. Meanwhile, corn crop condition ratings and crop estimates continue to decline as fundamental focus shifts to USDA’s Sept. 12 Crop Production Report, which will feature its first objective yield (field) samples. On the economic front, recessionary concerns are building and ag markets are paying closer attention, shifting some of traders’ focus away from supply-side fundamentals. September and October are normally a turbulent time for markets anyway and now macroeconomic concerns threaten to make them even more volatile. USDA raised its fiscal year ag import forecast more than its export outlook, reducing the expected surplus. For fiscal year 2023, USDA expects an ag trade deficit. We cover all of these items and much more in this week’s newsletter, which you can access here.
Labor Day schedule... All markets and government offices are closed on Monday, Sept. 5 for Labor Day. As a result, there will be no Pro Farmer market reports and commentary. Grain markets reopen at 7:00 p.m. CT on Monday, Sept. 5 for overnight trade, while livestock markets will resume trade at 8:30 a.m. CT on Tuesday, Sept. 6. Have a safe and enjoyable holiday weekend.
G7 caps Russian oil export prices... The Group of Seven (G7) nations agreed to implement a price capping mechanism on Russian oil exports, seeking to curtail the Kremlin’s ability to fund its war in Ukraine and better protect consumers amid soaring energy prices. Russia warned it would stop selling oil to countries that impose price caps on its exports and said this would lead to significant destabilization of the global oil market.
Three-year RFS mandates may be coming... The Biden administration is expected to announce a rule this year that would detail annual biofuel blending mandates for the refining industry for a three-year period instead of just for one, three sources familiar with the discussions told Reuters. The switch to a multi-year target would be aimed at providing longer-term certainty to the refining and biofuels industries.
“They’re trying to put together a proposal for 2023, 2024 and 2025 where once they put the proposals together, then they don’t have to go back in and they don’t have to change and modify the volumes,” said one of the sources.
EPA has been ordered to propose a rulemaking for 2023 mandates by Nov. 16.
Climate advisor McCarthy steps down... Gina McCarthy is planning to leave her post as the White House national climate adviser this month. Her last day on the job will be Sept. 16. Her long-anticipated exit from the White House comes after playing a key role in coordinating different government agencies in a united climate agenda. She has served as Biden's top domestic climate adviser while John Kerry acts as Biden’s chief climate envoy internationally.
Jobs data gives Fed green light for more aggressive rate hikes... The U.S. economy added 315,000 non-farm payrolls in August, down from a mildly revised 526,000 increase in July. The unemployment rate unexpectedly ticked up 0.2 points to 3.7%. Hourly earnings increased 0.3% in August and jumped 5.2% annually.
Reaction: This is really what the Fed is hoping for, says former Fed official Randall Kroszner on Bloomberg TV. More people are coming back into the labor market and that helps to reduce the tightness of that market. You saw it manifest in slightly lower wage growth, he adds. Investors slightly pared bets that the Fed will raise interest rates by 75 basis points at its Sept. 20-21 meeting, though traders continued to see that as the most likely outcome, with about a 60% probability priced in. In just four months, the target range of the federal funds rate has jumped from near zero to between 2.25% and 2.50%. Most see rates rising to at least 3.5% this year, with additional increases expected next year.
California lawmakers passed aggressive new climate measures... California lawmakers approved $54 billion in spending and voted to reach net-zero emissions by 2045. The measure prevents the state’s last nuclear power plant from closing, introduces sharp new restrictions on oil and gas drilling and includes a mandate that California stop adding carbon dioxide to the atmosphere by 2045. California lawmakers voted to extend the life of Diablo Canyon, the state’s last remaining nuclear power plant, by another five years. In a speech hours earlier, Gov. Gavin Newsom (D) told lawmakers that keeping Diablo online was a crucial part of a strategy to “future-proof” California. “This is critical in the context of making sure we have energy reliability going forward,” Newsom said of Diablo Canyon, which provides roughly 9% of the state’s electricity.
The bills, passed around midnight Thursday at the end of a frenzied two-year legislative session in Sacramento, marked a victory for Newsom, who has sought to portray himself as a climate leader as he has raised his national profile and begun drawing speculation about a possible White House run. Last month, state regulators finalized a plan to ban the sale of new gasoline-powered cars by 2035, a policy that could be adopted by other states and is widely expected to accelerate the global transition toward cleaner electric vehicles.
The budget would spend a record $54 billion over five years on climate programs. That includes $6.1 billion for electric vehicles, including money to buy new battery-powered school buses, $14.8 billion for transit and rail projects, more than $8 billion to clean up the electric grid, $2.7 billion to fight wildfires and $2.8 billion in water programs to help the state deal with drought.
Other states following California’s clean car rule... Nearly one-third of states are poised to adopt California’s new clean cars rule to fully phase out new gas-powered vehicle sales by 2035, as 17 states signed onto California’s vehicle standards and the car market across the country. In total, those states make up roughly 40% of nationwide auto sales. California and its followers still need a waiver under the Clean Air Act from the Environmental Protection Agency to carry out the new regulation, known as Advanced Clean Cars II.
Already, officials from states including Washington, Oregon, and Vermont expressed plans to adopt the California standard by the end of the year. New York indicated in a meeting ahead of California’s adoption vote that it aims to follow. Massachusetts and Virginia — with trigger laws on the books that bind the states to California’s vehicle rules — also are set to join. However, in Virginia, Gov. Glenn Youngkin (R) said he wants to repeal the state’s adherence to California standards. “I am already at work to prevent this ridiculous edict from being forced on Virginians,” Youngkin said in a statement. “California’s out of touch laws have no place in our Commonwealth.” Other states can act through state agencies, some need their governor or legislature’s approval, and others require a mix.
Meanwhile, a new approach to car batteries is about to transform EVs. Auto companies are designing ways to build a car’s fuel cells into its frame, making electric rides cheaper, roomier, and able to hit ranges of 620 miles.
