Tony C. Dreibus reported yesterday at The Wall Street Journal Online that, “Wheat rose to the highest price in nearly two weeks on concerns that tensions in Ukraine will curb production and exports of the grains.
“Corn and soybeans also gained.”
The Journal article stated that, “Futures also gained as dry weather in the U.S. southern Great Plains further curbs crop prospects. Only trace amounts of rain has fallen in most of western Kansas, the Oklahoma Panhandle and West Texas in the past six months. No rain fell over the weekend in the region despite ample precipitation in western regions of the Plains.
“Corn also rose on the tensions in Ukraine, and as continued wet weather in the U.S. keeps farmers from completing field work in Iowa and Illinois, the biggest producers of the grain.
“As much as 6 inches of rain fell in Iowa yesterday, according to the National Weather Service, muddying fields where farmers would normally be applying fertilizer or preparing soil for planting. As much as six times the normal amounts of rain has fallen in the past two weeks in three bands of stormy weather that range from Iowa to Michigan, Missouri to Ohio, and Texas to Florida, NWS data show.”
Cheri Zagurski reported yesterday at DTN (link requires subscription) that, “Three percent of the nation’s corn crop was planted as of April 13, according to USDA’s latest weekly Crop Progress report, and it’s no surprise that most of that was in the Southern states.
“Texas reported 57% of its corn crop in the ground, North Carolina 20%, Kansas 11%, Miss
“Last year at this time 2% of the U.S. corn crop was planted and the five-year average is 6%.”
The DTN article stated that, “Winter wheat condition worsened as dry weather with strong winds took their toll during the last week. Tuesday morning could see crop-damaging temps in the low 20s in Kansas and Oklahoma on top of the already poor conditions.”
University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdocDaily blog (“Corn Consumption Continues to Exceed Projections“) that, “The USDA’s WASDE report released on April 9 projected corn stocks at the end of the current marketing year at 1.331 billion bushels. The projection of year ending stocks has declined for five consecutive months and is now 556 million bushels smaller than the November 2013 projection. Compared to consumption projections made in November, current projections are 100 million bushels larger for corn used for ethanol production, 350 million bushels larger for exports, and 100 million bushels larger for feed and residual use. There have been minor changes in the estimate of stocks at the beginning of the marketing year, the projection of imports, and the projection of other domestic consumption.”
After additional analysis, yesterday’s update stated that, “Based on current and expected consumption rates, it appears that corn consumption during the current marketing year could exceed the most recent USDA projection. Even if higher rates are confirmed over the next four months, the magnitude of year ending stocks will remain a mystery until the September 1 Grain Stocks report is released on September 30. The magnitude of those stocks will take on a little more importance due to the projected decline in corn acreage this year and what appears will be a slow start to the planting season.”
Also yesterday, Grigori Gerenstein reported at The Wall Street Journal Online that, “Russia’s grain export between July 1, 2013, the beginning of the current marketing year, and April 9, totaled 21.488 million metric tons, 47.5% more than in the corresponding period in the previous marketing year, the agriculture ministry reported Monday.”
More specifically with respect to livestock related issues, John Holland reported over the weekend at the Modesto Bee (Calif.) Online that, “Dairy farming in the Northern San Joaquin Valley has turned profitable, at long last, thanks mainly to booming exports for powdered milk and other products.
“It’s welcome news for the several thousand residents who work in the plants that process milk from the region’s farms.
“But not all is rosy. Farmers have to pay down debt built up over half a decade of generally low prices, and they face a drought that likely will squeeze their feed supplies this year.”
And Bloomberg writers Megan Durisin and Elizabeth Campbell reported today that, “Record-high prices for U.S. beef burgers and pork chops are helping to make 2014 the most profitable year ever for chicken producers.
“Americans are buying more chicken as a cheaper alternative just as fast-food restaurants including Yum! Brands Inc. and McDonald’s Corp. add new menu items from wings to club sandwiches. The sales surge has sent wholesale prices to an all-time high, boosted profit for processors including Tyson Foods Inc., and left Ozark Mountain Poultry unable to keep up.
“‘We’re sold out,’ said Ed Fryar, the chief executive officer of Rogers, Arkansas-based Ozark, which processes 3 million pounds (1,361 metric tons) a week. ‘Last fall, when I looked at 2014, I didn’t anticipate demand being as strong as it is. This is going to be a really good year for the industry.'”
The Bloomberg writers explained that, “With whole birds at U.S. supermarkets selling at half the per-pound cost of beef or pork, Americans will eat the most chicken in three years, while tight supply and high prices send red-meat demand to an all-time low, government data show. In a year when farm income is set to drop because of crop surpluses, the U.S. Department of Agriculture says poultry farms will earn $203,500 on average, the most on records going back to 1996.”
And Reuters writers Tom Polansek and Meredith Davis reported yesterday that, “The United States is considering rules that would require outbreaks of a deadly pig virus to be reported to the government in an effort to improve tracking of the disease, which has already spread to 30 states, an industry group said on Monday.
“Porcine Epidemic Diarrhea virus (PEDv) has killed millions of baby pigs since it was first detected in the United States a year ago. PEDv has crimped hog supplies in the United States and sent prices to record highs. It remains unclear how the virus entered the country, and farmers have struggled to find ways to contain it.”
Also yesterday, Shawn Donnan reported at The Financial Times Online that, “The World Trade Organisation has raised its forecast for growth in global trade this year to 4.7 per cent, while warning that risks such as the slowdown in developing economies and increasing geopolitical tensions, including in Ukraine, threaten to undermine its recovery.
“Several trade economists had expected the WTO to lower its previous 4.5 per cent forecast for this year. In an interview with the Financial Times last week, Roberto Azevêdo, the WTO director-general, said he had yet to detect signs of a significant recovery in global commerce in the first quarter of 2014.
“In releasing its latest forecasts on Monday, the WTO said the global recovery and the upturn in the US and especially Europe were likely to lead to stronger-than-expected trade growth.”
Farm Bill- Policy
An update posted yesterday at fibre2fashion.com
“According to a statement issued by ABRAPA, board members of ABRAPA recently met with Brazilian Ambassador to WTO Paulo Estivallet de Mesquita, also the director of the Economic Department of the Brazilian Ministry of Foreign Affairs (MFA), and requested him to seek for quick action from the WTO panel against the US farm bill [sic].”
Yesterday’s update added that, “At the meeting, president of ABRAPA Gilson Pinesso said that it was necessary to minimize the damage caused to Brazilian cotton producers as soon as possible, and not let the US farm bill cause more harm to them.
“According to Mr. Pinesso, as per ABRAPA estimates, the US farm bill could bring distortions in prices of cotton as well as production by 7 to 13 percent, and it was necessary to take steps against the new farm bill.
“The new farm bill passed by the US Government in February 2014 ended the subsidies provided by the US Government to cotton growers, but insurance programs offered under the new farm bill tend to cause even greater distortions in prices and cotton production than in the past, as per ABRAPA.”
Also yesterday, an update at the Peterson Institute indicated that, “Carlos Márcio Cozendey, Brazil’s deputy minister of finance and G-20 sherpa, discussed Brazil and its role in the global economy on April 14, 2014, at the Peterson Institute for International Economics.”
An audio replay of yesterday’s presentation by Carlos Márcio Cozendey is available here.
During the “Q and A” portion of yesterday’s event, Finlay Lewis of Congressional Quarterly (Roll Call), asked Cozendey about the WTO Brazil Cotton Case- an audio clip of this exchange from yesterday’s Peterson Institute event is available here(MP3- 3:43).
Meanwhile, Damian Paletta reported in today’s Wall Street Journal that, “The U.S. government’s gap between spending and revenue will be narrower both this year and later in the decade compared with prior estimates, driven in part by reductions in near-term military spending and falling longer-run costs associated with the Affordable Care Act, the Congressional Budget Office said.”
Yesterday’s CBO report also noted that, “Supplemental Nutrition Assistance Program. Technical revisions have decreased projected outlays for SNAP over the 2015-2024 period by about $24 billion (3 percent). The most significant of those revisions is a change in CBO’s estimate of the average monthly SNAP benefit per person; CBO lowered that estimate on the basis of updated data from the Department of Agriculture” (at page 13).
The CBO report added that, “Farm Bill. The Agricultural Act of 2014 (P.L. 113-79) authorized agricultural, nutrition, and other programs through 2018. CBO estimates that the new law will reduce mandatory spending over the 2014-2023 period by $17 billion” (at page 14).
This sentence included a footnote; and, the footnote stated: “The cost of P.L. 113-79 was estimated relative to CBO’s May 2013 baseline (because the legislation was developed in 2013) rather than relative to CBO’s February 2014 baseline. Because the May 2013 baseline did not extend through 2024, the estimated budgetary effect of the law was extrapolated into 2024 for this update to the baseline; according to that extrapolation, savings in 2024 were estimated to be $2 billion. For more information on the estimates for the 2014-2023 period, see Congressional Budget Office, cost estimate for H.R. 2642, the Agricultural Act of 2014 (January 28, 2014), www.cbo.gov/
And at page six, the CBO report included this table, “Mandatory Outlays Projected in CBO’s Baseline,” which contained a line for agriculture.
A news release Friday from Sen. Angus King (I -D, Maine) indicated that, “U.S. Senators [King] and Susan Collins and Representatives Mike Michaud and Chellie Pingree, along with a bipartisan group of their Senate and House Colleagues, are urging the Department of Agriculture (USDA) to reverse its proposal to close or consolidate 250 Farm Service Agency offices. The plan, they wrote, could be particularly disruptive to farmers in rural states like Maine who often depend on the technical assistance provided by local FSA officials.”
A news release yesterday from Sen. John Hoeven (R., N.D.) stated that, “Senators [Hoeven] and Maria Cantwell (D-Wash.) have introduced the Farm and Small Business Expensing Tax Relief Act, legislation that eases the burden of unfair and onerous new repair expensing regulations for small businesses and family farms that became effective January 1st of this year. Hoeven’s and Cantwell’s legislation amends the IRS code to alleviate the negative impacts of the new Tangible Property Repair Regulations (TD 9636), which forces family farms and other businesses to meet unrealistic requirements to expense the cost of repairs. The new rule took effect in January 2014.”
And Kimberly Kindy reported yesterday at The Federal Eye Blog (Washington Post) that, “It’s being called an ‘interagency throw down.’
“The National Institute for Occupational Safety and Health, and the U.S. Department of Agriculture officials are publicly feuding over the results of a study that found the same double-digit injury rates among poultry plant workers both before and after processing lines had accelerated.”
Clifford Krauss reported in today’s New York Times that, “There is an old joke in the energy business that advanced biofuels are the fuel of the future, and always will be.
“A Spanish company, Abengoa Bioenergy, has bet $500 million on robbing that joke of its punch line. In the middle of a cornfield here [Hugoton, Kan.] it is building a 38-acre Erector set of electrical cable and pipe that will soon begin producing cellulosic ethanol, which it calls a low-polluting alternative to petroleum products. This is just as the George W. Bush administration and Congress intended seven years ago with legislation promoting energy independence.
“But even as Abengoa and other companies prepare to produce significant amounts of cellulosic ethanol, using corn stalks and wheat straw as opposed to corn itself, the appetite for such fuels seems to be diminishing.”
The Times article noted that, “The market is saturated with ethanol from corn. The automobile and oil industries are resisting efforts to increase the amount of ethanol blended into gasoline. And now the Environmental Protection Agency is considering reducing the amount of advanced biofuels required for blending into vehicle fuels this year by more than 40 percent below the original target in the Energy Independence and Security Act of 2007. A final decision is due in June.”
Today’s article added that, “Other things have changed, too, since 2007. A boom in shale drilling has produced a sudden gush of domestic oil. Increasingly efficient cars and a sluggish economy have cut demand for fuel. (In recent weeks, ethanol prices spiked because of transportation problems in the Midwest. Gas stations in several states ran out of gasoline because there was not enough ethanol to blend, but the problem is considered temporary.)
“And there is disagreement about the potential for biofuels. Several companies have failed to develop commercial biofuels or have given up trying.”
Also, Laura Barron-Lopez reported yesterday at The Hill’s Energy Blog that, “A Government Accountability Office (GAO) report released Monday said when the Environmental Protection Agency’s (EPA) is late in issuing its annual Renewable Fuel Standards (RFS) it increases costs for refiners.
“The RFS each year sets the amount of biofuels refiners must blend into the nation’s fuel supply. The standards have contributed to declining petroleum consumption while increasing costs, according to the report.
“The GAO report looked at three major changes that have affected the domestic petroleum, or gasoline, refining industry, a key one being the EPA’s renewable fuel mandate.”
CFTC (Commodity Futures Trading Commission)
Katie Micik reported yesterday at DTN (link requires subscription) that, “The Commodity Futures Trading Commission topped the Senate and House Agriculture Committees’ agendas last week, and each body took steps that will shape the future of the commission and its tense relationship with the grain industry.
“On Tuesday, the Senate Agriculture Committee approved a slate of nominees to fill three vacancies on the commission’s leadership team. None of them have a background in agriculture. The full Senate still needs to confirm the nominees.
“The House Agriculture Committee passed a bill Wednesday reauthorizing the CFTC and codifying into the law important transparency and accountability reforms in the wake of MF Global’s bankruptcy. It also fixes some of the grain industry’s biggest concerns with CFTC’s recent customer protections rule.”
The DTN article noted that, “The developments expose a fractured relationship between the commission and its ag constituents. Dodd-Frank financial reform legislation strained the relationship, but the tension became even more apparent last fall when the CFTC approved its customer protection rule, ignoring grain industry concerns that the changes to residual interest calculations would dramatically increase the cost of hedging.
“Todd Kemp, vice president of the National Grain and Feed Association, said the customer protection rule was a catalyst that brought agriculture and agribusiness groups together.”
Ms. Micik explained that, “Dodd-Frank financial reform legislation added the wild world of swaps and derivatives to CFTC’s oversight.
“Even though commodity futures didn’t play a role in the 2008 financial crisis, the Dodd-Frank law amplified the importance of CFTC’s mission, and the commission heightened its scrutiny of everyone. Like a well-behaved child with rebellious siblings, the grain industry had to start complying with rules designed to address other industries’ problems.
“As a result, groups like NGFA have had to respond to a much larger volume of rulemakings and regulatory filing at a quicker pace than ever before. ‘It’s a much broader range of issues that we’ve been required to respond to than in the past. It’s been a frustrating process,’ Kemp said.”
Yesterday’s article also noted that, “CFTC needs to have five commissioners, and there are currently three vacancies. The Senate Ag Committee advanced a slate of nominations on Tuesday, but their confirmation in the full Senate is far from certain.
“President Barack Obama nominated Timothy Massad, a former Treasury Department lawyer who oversaw the $700 billion bank bailout program, to replace former Chairman Gary Gensler. He also nominated Chris Giancarlo, a swaps broker in New York, and Sharon Bowen, head of the Securities Investor Protection Corporation, to serve on the commission.
“NGFA and other ag groups have met with all of the nominees, Kemp said, and they’ve been impressed by the nominees’ desire to learn and work with the agriculture industry.”