Evening Report | September 23, 2022

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Your Pro Farmer newsletter is now available... Russian President Vladimir Putin ordered Russia’s first partial mobilization since World War II and backed a plan to annex swathes of Ukraine. He also warned the U.S. and its western allies he would be prepared to use nuclear weapons to defend Russia. That not only heightened tensions in the war with Ukraine but put the West on notice. President Joe Biden condemned Putin’s words and actions, stating a nuclear war “cannot be won and must not be fought.” While the world watches Russia closely, global central banks continue to actively fight inflation with higher interest rates, including the Federal Reserve, which raised the benchmark level another 75 basis points and pledged further strong actions to tame the price surge. That pushed the U.S. dollar to a new 20-year high. On the ag policy front, the battle lines are being drawn for the next farm bill. House Republicans made it clear they want to focus less on Biden’s climate-change initiatives and more on improving conservation programs. We cover all of this and much more in this week’s newsletter, which you can access here.

 

USDA again raises food price outlook... USDA raised its outlook for all food prices and grocery store prices in 2022, with all food price inflation now forecast to rise 9% to 10% and food at home (grocery store) prices up 10.5% to 11.5% — the most since 1979 and 1974, respectively.  Food away from home (restaurant) prices are still forecast to rise 6.5% to 7.5%.

Food prices are expected to grow more slowly in 2023 than this year, but still be above historical average rates. In 2023, USDA forecasts all food prices will increase between 2.5% and 3.5%, food-at-home prices will rise between 2.0% and 3.0% and food-away-from-home prices will increase between 3.0% and 4.0% -- all unchanged from its prior outlook.

Click here for more details.

 

Lower milk production, labor shortages weigh on butter prices...  Lower milk production on U.S. dairy farms and labor shortages at processing plants have weighed on butter output for months, sending prices up 24.6% over the past 12 months — outpacing most foods. The Wall Street Journal reports the forces at work in butter highlight the challenge of curtailing inflation. Economic pressures fueling high prices for livestock feed, labor shortages and other factors could persist, keeping prices for the kitchen staple elevated longer term.

 

Bread prices highlight extreme EU food inflation... Bread prices have risen sharply across Europe over the past year, according to new data, with the increase particularly steep since Russia invaded Ukraine on Feb. 24 Hungary has been the worst hit — it saw a huge 65.5% rise over the year, while France has seen the slowest growth, though still up 8.2% from year-ago.

 

 

Cattle on Feed: August placements higher than expected... USDA estimated there were 11.279 million head of cattle in large feedlots (1,000-plus head) as of Sept. 1, which was up 45,000 head (0.4%) from year-ago and the average pre-report estimate. August placements also rose 0.4% from last year, while marketings topped year-ago by 6.4%.  

Cattle on Feed Report

USDA
(% of year-ago)

Average Estimate

(% of year-ago)

On Feed on Sept. 1

100.4

100.0

Placements in August

100.4

97.3

Marketings in August

106.4

105.9


A weight breakdown of placements showed lightweights (under 600 lbs.) up 6.2%, 6-weights up 1.6%, 7-weights down 3.2%, 8-weights up 0.8%, 9-weights down 1.8% and heavyweights (1,000-plus lbs.) down 5.0% from year-ago levels. On a state-by-state breakdown, placements rose in Texas (up 35,000 head), Nebraska (up 15,000 head) and Kansas (up 5,000 head) while they declined in Colorado (down 40,000 head) and “other states” (down 6,000 head).

The data is generally neutral and won’t likely have much impact on prices, though there could be some bull spreading (nearby contracts firmer and deferred futures lower) in live cattle with both marketings and placements near the top end of the pre-report range of estimates.

 

USDA to mandate cattle contract reporting... USDA in a note to the ag industry said it plans to require beef processors to start reporting details of active cattle contracts. The information is to be used in a cattle contracts library that Congress authorized as a pilot program. The Agricultural Marketing Service says the reporting requirement is necessary to “populate the pilot with information from active contracts.” But the North American Meat Institute (NAMI) claims AMS lacks the legal authority to mandate contract reporting. The pilot program is funded through September 2023.

 

NGFA asks FMCSA to keep emergency trucking declaration for feed, livestock... In comments submitted on Sept. 21, National Grain & Feed Association (NGFA) urged the Federal Motor Carrier Safety Administration (FMCSA) to extend the emergency declaration for livestock and feed to help provide necessary additional trucking capacity for the agricultural supply chain. Agricultural shippers have been experiencing significant rail service challenges and emergency truck freight has been indispensable to help meet demand, NGFA noted in response to FMCSA’s request for input on the extent to which motor carriers currently rely on the emergency declaration. “Even though truck transportation capacity is tight, agricultural shippers have been forced to find extra truck freight to help fill the void where rail is unavailable or unreliable,” the comments state. “While the trucking industry is doing what it can to help with the rail service challenges, there is a limited amount of trucking capacity.” Noting that the Surface Transportation Board called an urgent hearing in April to address rail service challenges, NGFA emphasized that rail carriers do not have enough rail workers to service freight demand. There has been a 20% decrease in train and engine employees compared to five years ago, the comments noted. “The emergency declaration for livestock and feed is still needed to provide flexibility during the ongoing supply chain challenges,” NGFA concluded.

 

Biofuel proponents urge EPA to maximize RFS levels... The Renewable Fuel Standard (RFS) is the most successful clean energy tool available to the government, which should make full use of it when setting the biofuel mandate for 2023 and future years, biofuel trade groups said on Thursday. “What we’re really looking to take place with EPA is that they maximize the full potential of the RFS,” said Emily Skor, chief executive of Growth Energy. EPA is due to announce its “set” for the RFS by Nov. 16.

Emily Skor, chief executive of Growth Energy, and Geoff Cooper, chief executive of the Renewable Fuels Association, told reporters they expect the EPA “set” to expand biofuel volumes from this year’s 15.25 billion gallons of corn ethanol and 5.63 billion gallons of advanced biofuels and to list the biofuel targets for the next two or three years.

“We are producing more and more with less and less,” said Jon Doggett, head of the National Corn Growers Association, so each bushel of corn had a smaller carbon footprint than in the past.

 

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