House Ag Panel Clears Farm Bill in Tinge of Bipartisan Support; Where’s Stabenow’s Text?

Memorial Day schedule | NOAA predicts record number of hurricanes | Norfolk Southern settles government’s Ohio derailment probe

MARKET FOCUS

• Norfolk Southern settles government’s Ohio derailment probe
• U.S. equities headed for first weekly decline in more than a month
• ESG funds leaking money for first time
• SEC approves rule changes for launch of exchange-traded funds (ETFs) tied to Ether
• ‘Hard landing’ still possible? — JPMorgan Chase CEO Jamie Dimon
• Mortgage rates declined for third consecutive week, dipping just below 7%
• Favorable summer for drivers hitting the road
• Rapid rise in auto insurance costs may be slowing down
• Japan’s core inflation slowed for second straight month in April
• Feature in marketplace late this week: plunge in gold prices
• OPEC+ cancels formal meeting in Vienna; will hold video conference on June 2
• $3.789: Avg price per gallon for diesel fuel across U.S. week ending May 20
• Ag markets today
• Feedlot inventory expected below year-ago
• Ag trade update
• NOAA predicts most hurricanes ever forecast
• NWS weather outlook
• Pro Farmer First Thing Today items

BALTIMORE BRIDGE COLLAPSE

• CSX reopens largest coal export facility at Port of Baltimore

CONGRESS

• Senate Finance Republicans forming working groups to prepare for 2025 tax cliff
• WRDA measure clears Senate panel
  

RUSSIA & UKRAINE

• Yellen nears win on Russian assets
• Russian President Vladimir Putin wants ceasefire in Ukraine
• Ukraine grain exports for 2023-24 reached 45.4 million metric tons, above year ago
  

POLICY

• Four House Dems vote with GOP as House Ag Committee clears new farm bill, 33-21
• USDA announces domestic fertilizer projects using CCC funds

PERSONNEL

• Biden nominates NLRB Chair Lauren McFerran for new five-year term
  

CHINA

• China conducts second day of military drills around Taiwan
• New China trade war?
• China’s FDI continues to slump
• Chinese developer able to delay debt payments
  

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• USDA initiative to compensate dairy farmers for milk losses caused by bird flu
• USMEF conference focuses on differentiation and long-term investment
• Crop index turns higher for the year, rekindling food inflation worries
• USDA to update food price outlook this morning
• Rising costs of cheeseburgers amid post-pandemic economic challenges
• Burger wars intensifying as Burger King reintroduces $5 value meal
  

HEALTH UPDATE

• Covid-19 variant KP.2 now dominant strain in U.S., according to CDC
  

POLITICS & ELECTIONS

• Biden’s weak position limits impact in battleground states
• Supreme Court upholds Republican-drawn congressional map in South Carolina
• GOP Larry Hogan’s run for Senate seat in deep-blue Maryland will test Dems

OTHER ITEMS OF NOTE

• Bloomberg Businessweek: from weekly to monthly with July 2024 issue
• AWP moves higher
• NCAA & five prominent collegiate athletic conferences agreed to $2.8 billion settlement for their players being compensated in some way for their exploits on the field.
• Dogs are ditching kennels and flying first class… BARK Air

— Equities today: Asian and European stock indexes were mixed to weaker overnight. In Asia, Japan -1.2%. Hong Kong -1.4%. China -0.9%. India flat. In Europe, at midday, London -0.4%. Paris -0.2%. Frankfurt -0.4%.U.S. stock indexes are pointed toward higher openings. Surprisingly strong U.S. economic data (U.S. business activity accelerated at the fastest pace in two years) caused traders on Thursday to reduce bets that the Federal Reserve will cut rates this year.

U.S. equities yesterday: All three major indices registered declines with the Dow down 605.78 points, 1.53%, at 39,065.26. It was the Dow’s biggest one-day point drop in 15 months. The Nasdaq fell 65.51 points, 0.39%, at 16,736.03. The S&P 500 fell 39.17 points, 0.74%, at 5,267.84. Only 54 of the S&P 500’s stocks rose on the day. The S&P 500 is up 27% over the past year, including a gain of more than 10% since the start of 2024. That’s the best first 100 trading days of a year since 2021 — and the best ever in an election year, according to Dow Jones Market Data. When the S&P 500 has climbed 10% or more through the first 100 trading days, the rest of the year it has averaged a gain of 8.6% and finished higher 85% of the time.

U.S. stocks headed for their first weekly decline in more than a month as traders pushed back expectations for the Federal Reserve’s first interest rate cut.

— ESG funds are leaking money for the first time. The Financial Times reports (link) that “although buoyant markets are still lifting their overall assets under management — now at apparently over $1.7 trillion — ESG funds are suffering severe outflows for the first time in their (admittedly limited) history this year.”

— Securities and Exchange Commission approved rule changes that allow for the launch of exchange-traded funds (ETFs) tied to Ether, the world’s second-largest cryptocurrency. This anticipated approval has contributed to a 60% increase in Ether’s price this year. In January, the SEC had already permitted bitcoin ETFs to be listed on stock exchanges.

— Memorial Day schedule. Grain and livestock markets will trade normal hours today. All markets and government offices are closed Monday, May 27, for Memorial Day. Grain markets will reopen with the overnight session at 6:00 p.m. ET on Monday, May 27. Livestock markets will resume trading at 7:30 a.m. RT on Tuesday, May 28. Pro Farmer salutes all who gave their lives serving our great country. Happy Memorial Day.

— Ag markets today: Corn, soybeans and wheat held in relatively tight trading ranges during a quiet overnight session. As of 7:30 a.m. ET, corn futures were trading fractionally lower, soybeans were narrowly mixed, SRW wheat was mostly 6 to 7 cents lower, while HRW and HRS wheat were mostly a penny higher. The U.S. dollar index was more than 200 points lower, and front-month crude oil futures were trading just below unchanged.

Additional cash cattle trade at higher prices. Cash cattle activity picked up on Thursday, with feedlots in the Southern Plains moving supplies at $1.00 higher prices. Activity was quieter in the northern market, where most feedlots passed on $1.00 higher prices in hopes of even stronger bids.

Cash hog fundamentals extend slide. The CME lean hog index is down another nickel to $91.77 as of May 22, the fourth straight daily decline. The pork cutout value dropped another $1.38 on Thursday to $98.69, as all cuts except loins and butts weakened, marking the third consecutive decline.

— Agriculture markets yesterday:

• Corn: July corn rose 2 3/4 cents to $4.64 and ended the session above the 10-day moving average.
• Soy complex: July soybean futures led weakness today, falling 7 cents to $12.39 1/4, though deferred contracts saw milder selling. July meal futures closed $1.50 lower to $3.76.70, settling nearer session lows. July bean oil futures sunk 69 points to settle at 45.19 cents, on session lows.
• Wheat: July SRW wheat closed up 5 cents at $6.98. July HRW wheat rose 11 1/4 cents at $7.10 3/4. Prices closed nearer their session highs. July spring wheat futures closed 7 1/2 cents higher at $7.44 and near session highs.
• Cotton: July cotton futures climbed 234 points to 81.72 cents and settled nearer session highs.
• Cattle: June live cattle closed down 65 cents at $183.525. August feeder cattle fell $1.45 to $261.45. Prices closed nearer their daily lows but hit two-month highs early.
• Hogs: Cash and wholesale weakness undercut hog futures again Thursday. Nearby June futures slid 87.5 cents to $94.525 and led the deferred contracts lower.
  

— Of note:

• Fedspeak. Federal Reserve Bank of Atlanta President Raphael Bostic offered more reason to think rates may stay higher for longer. Yesterday he said monetary policy has been less effective in slowing growth than in previous cycles.
  
• ‘Hard landing’ still possible? — JPMorgan Chase CEO Jamie Dimon said Thursday that the U.S. could still see a so-called hard landing and even stagflation, CNBC reports.
  
• Mortgage rates have declined for the third consecutive week, dipping just below 7%, according to new data from Freddie Mac. This offers some relief for prospective homebuyers, as high inflation in the U.S. has dampened hopes for a Federal Reserve interest rate cut soon. Despite this dip in mortgage rates, financial experts predict that the housing market’s recovery will remain slow in the short term. The National Association of Realtors reported that sales of previously owned homes, which constitute the majority of the U.S. housing market, fell in April for the second consecutive month, marking a significant contrast from earlier in the year when sales surged.
  
• “This summer is shaping up to be mostly favorable for drivers hitting the road.” — Patrick De Haan, head of petroleum analysis at GasBuddy.
  
• The rapid rise in auto insurance costs may be slowing down. Although auto insurance rates increased by 1.8% in April and were up 22.6% from a year ago, marking the largest annual increase since 1979, Bank of America (BofA) sees signs of easing. BofA economist Stephen Juneau noted that higher premiums were due to “underwriting losses in the industry.” However, as many insurers are showing signs of returning to profitability, Juneau and BofA believe the rate of premium increases should decelerate. Since auto insurance has significantly contributed to inflation, a slowdown in its cost increase could bolster the Federal Reserve’s confidence to cut rates later in the year if BofA’s forecast is accurate.
  

— Japan’s core inflation slowed for a second straight month in April, likely signaling that the Bank of Japan will be patient in raising interest rates as consumption remains fragile. The nationwide core consumer price index rose 2.2% from a year earlier after gaining 2.6% in March.

Market perspectives:

— Outside markets: The key outside markets today see the U.S. dollar index lower. Nymex crude oil prices are weaker and trading around $76.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is fetching 4.47%.

— Feature in the marketplace late this week has been the plunge in gold prices. Commodity analyst Jim Wyckoff writes: “June Comex gold futures have dropped over $100 below Monday’s record high of $2,454.20. An ominously bearish double-top reversal pattern has formed on the daily bar chart for June gold. That suggests a near-term market top is in place. Fundamentally, precious metals markets bulls did not like the slightly more hawkish lean on U.S. monetary policy from the FOMC minutes that were released Wednesday afternoon. Goldman Sachs reportedly said in a note late this week that gold has more upside due to better demand from Asian countries and from central banks, and from likely lower U.S. interest rates later this year.”

— OPEC+ decided to cancel its upcoming formal meeting in Vienna and will instead hold a video conference on June 2 to discuss production policy for the second half of the year. The Financial Times says this move suggests there is likely already broad agreement among members to continue the existing oil production cuts. The decision may have been influenced by concerns over the health of Saudi Arabia’s 88-year-old King Salman, as the Saudi energy minister, who chairs OPEC is his son. Since the start of the Covid pandemic, OPEC+ has held only two in-person meetings. Analysts expect the group to maintain the voluntary cut of 2.2 million barrels per day agreed upon last November, to support oil prices amid increased U.S. production and uncertain economic conditions in China. Brent crude oil prices are near three-month lows, trading at just over $81 a barrel.

— $3.789: Average price per gallon for diesel fuel across the U.S. the week ending May 20, down 2.4 cents from the week before and 27.2 cents in the past six weeks to the lowest level since the first week of July 2023, according to the Energy Information Administration.

— Feedlot inventory expected to be below year-ago. Analysts expect USDA’s Cattle on Feed Report this afternoon to show the large feedlot (1,000-plus head) inventory under year-ago levels for the first time in eight months. Based on a Reuters poll, USDA is expected to report the May 1 feedlot inventory down 0.8% from last year, while April placements are seen falling 6.1% and marketings rising 9.8%.

— Ag trade update: South Korea purchased 137,000 MT of corn to be sourced from the U.S., South America or South Africa. Taiwan tendered to buy 96,850 MT of U.S. milling wheat.

— NWS weather outlook: Heavy rain and severe thunderstorm chances extend from the Midwest to the southern Plains today... ...Next round of severe weather to develop across the central/southern Plains Saturday evening before shifting into parts of the mid-Mississippi and Ohio valleys on Sunday... ...Dangerous and potentially record-breaking heat continues across South Texas, the Gulf Coast, and southern Florida through Memorial Day.

Items in Pro Farmer’s First Thing Today include:

• Quiet trade overnight
• French wheat crop ratings decline
• Cold Storage Report also out this afternoon

— CSX reopened its largest coal export facility at the Port of Baltimore. “This swift recovery of operations is a testament to the resilience and dedication of the CSX team, who worked tirelessly to ensure service continuity for their export coal customers despite the challenging circumstances,” CSX officials said in a press release. The Curtis Bay coal pier in Baltimore Harbor is one of CSX’s largest export coal facilities. “It’s important for both the global economy by ensuring coal reaches the market, and for our customers and the health of their business,” said John Healy, CSX’s director of sales for export coal.

— Senate Finance Committee Republicans are forming working groups to prepare for the 2025 tax cliff, when many provisions from the 2017 tax law are set to expire.

• Working groups formation: Led by Sen. Mike Crapo (R-Idaho), the groups will address every aspect of the expiring tax breaks to prepare for negotiations in 2025. The aim is to understand the issues, explore options, and develop approaches to handle the expirations.
• Expiration of tax cuts: Most individual tax cuts from the 2017 law will expire at the end of 2024. Corporate tax cuts and other breaks, even those not expiring, will likely be discussed.
• Preparation for 2025: The groups will begin meeting in the coming weeks. Republicans are preparing for various scenarios, including potential control of Congress after the November elections. Sen. Chuck Grassley emphasized the importance of being ready to start work immediately in 2025.
• House Ways and Means Committee: Similar to the Senate’s approach, House Ways and Means Committee Republicans have initiated work through 10 tax teams covering various topics, including international issues, supply chains, and workforce concerns.
• Bipartisan collaboration: While currently a GOP-only effort, Crapo mentioned the possibility of working with Democrats in the future, highlighting the need for bipartisan cooperation down the line.
• Democratic approach: Senate Finance Chair Ron Wyden (D-Ore.) is using a different strategy, like his approach for the 2022 tax-and-climate law. Wyden is meeting individually with senators to create a “menu” of proposals, providing members with choices for future legislation.

Of note: During the legislative process on tax cuts, farm-state lawmakers are expected to push for including multiyear extensions of expiring biofuel tax incentives, notably the Clean Fuel Production (CFPC) tax credits (45Z) which end after 2027.

Bottom line: Unless there’s a “clean sweep” by one party of the House, Senate and the White House, passing more tax cuts “is not going to be as smooth sailing,” Bill Hoagland of the Bipartisan Policy Center told the Big Take DC podcast. The 2017 tax cut bill cost about $1.5 trillion for both the corporate and individual side, and renewing just the individual rates for the next decade would be upwards of $4 trillion, according to estimates from the Congressional Budget Office.

— WRDA measure clears Senate panel. The Senate Environment & Public Works Committee this week passed the Water Resources Development Act (WRDA) of 2024, which focuses on improving the nation’s water resources infrastructure, crucial for the U.S. ag sector and other industries reliant on efficient transportation systems.

1. WRDA provisions:

• Enhancements to ports, inland waterways, locks, dams, flood protection, and ecosystem restoration.
• Critical for soybean farmers to transport their crops and remain competitive in the global market.

2. Cost-share adjustments:

• Permanent adjustment of the inland waterways cost share for construction and major rehabilitation projects to 75% general revenues (up from 65%) and 25% Inland Waterways Trust Fund (down from 35%).
• 100% federal funding for projects included in the Infrastructure Investment and Jobs Act (IIJA).

3. Beneficiary projects:

• Kentucky Lock
• Three Rivers
• J. O’Brien Major Rehabilitation
• Lock and Dam 25 (full funding potentially by FY30, saving an estimated $720 million)
• Montgomery Lock (full funding potentially by FY28)
• Emsworth
• McClellan-Kerr Arkansas River Navigation System (MKARNS) 12-foot deepening

4. Funding and impact:

• The 75/25% cost-share change could provide an estimated $1.4 billion in additional project funding over 10 years, equating to an annual program level of $500 million.
• This allows for efficient funding of major lock projects, supporting more than one major navigation modernization project at a time.

5. Next steps:

• The House Transportation and Infrastructure Committee is working on its version of the WRDA bill, with plans to release the text and hold a markup in June.

— Russian President Vladimir Putin wants ceasefire in Ukraine that recognizes the current battlefield lines, four sources told Reuters, saying he is prepared to fight on if Kyiv and the West do not respond.

— Treasury Secretary Janet Yellen’s efforts to rally European support for using Russia’s sovereign assets to help Ukraine seem close to success. After months of disagreement, G7 finance ministers meeting in Italy are nearing a plan to issue a massive loan for Ukraine, backed by future earnings from frozen Russian state assets. This compromise falls short of the U.S.’ initial push to seize $300 billion in Russian assets outright but goes beyond what the EU previously agreed to. The proposed loan, potentially up to $50 billion, would be repaid by income from these Russian assets, rather than by confiscating them.

Yellen emphasized that this plan provides assured financing for Ukraine’s military and reconstruction needs through 2025 and beyond. Although a conceptual agreement may be reached this weekend, technical details and the exact loan amount are still under discussion. Additionally, European leaders are concerned about potential retaliation from Moscow, highlighted by a recent decree from Vladimir Putin threatening U.S.-owned assets in Russia.

In the U.S., the Biden administration has significant powers to manage Russian assets under the REPO Act, but a G7 deal might require national parliaments’ approval. European officials also worry about repaying the loan if the war ends and assets are returned to Russia. Yellen suggested that a peace agreement could address Russian compensation to Ukraine, covering loan repayment. Yellen, G7 counterparts, and central bank governors are scheduled to meet with Ukraine’s finance minister, Serhiy Marchenko, on Saturday.

— Ukraine grain exports for 2023-24 have reached 45.4 million metric tons (MMT) as of May 24, ahead of the year-ago level of 44.6 MMT, according to Agriculture Ministry data. The total included 25.6 MMT of corn, 16.9 MMT or wheat, and 2.4 MMT of barley. The Ministry also said shipments so far in May were nearly 5 MMT.

— Four House Dems vote with GOP as House Ag Committee clears new farm bill, 33-21. In a special report (link), we detail the contentious markup session that ended with four Democrats joining all 29 panel Republicans in voting for the measure, bringing the final tally to 33-21. The four Democrats voting for the farmer-friendly measure were Don Davis of North Carolina, Yadira Caraveo of Colorado, Eric Sorensen of Illinois and Sanford Bishop of Georgia. Remember when many lawmakers and former lawmakers said there would be no House Dem vote for the measure during the markup vote? They were wrong.

One farm bill watcher comments: “Those four Democratic votes, if you examine the Members more closely, represent diversity in a number of ways. Geographically. Agriculturally. Demographically. They along with GT should be congratulated for their legislative sincerity because they proved capable of serious legislating instead of tired dogma.”

Ag Committee Chair GT Thompson (R-Pa.) said that previous farm bills had unfairly favored public nutrition programs, “so I have no shame transitioning available resources” into programs popular in farm country. Roughly $4 of every $5 in the farm bill would be spent on SNAP and a handful of other public nutrition programs. “From production and processing to delivery and consumption, this bill strengthens the rural economy across every region, state, and district,” he said.

Key questions now include:

• What will be the House floor strategy?
• How many total Dems will vote for the bill if and when it gets a House floor vote?
• How many Republicans will vote against the measure on the House floor?
• Will the House Rules Committee be a problem in clearing the bill?
• How many and which amendments will be ruled in order in House floor action?
• Will this help push Senate Ag Chairwoman Debbie Stabenow (D-Mich.) to officially release text of her bill, seen as wanting in key Title I farmer safety-net programs compared with the House measure. After the House vote, Stabenow said: ““Despite areas of common ground, it is now clear that key parts of the House bill split the farm bill coalition in a way that makes it impossible to achieve the votes to become law. And it is also clear that we do not have time to waste on proposals that cannot meet that goal.”
• What will ranking Senate Ag member John Boozman’s (R-Ark.) alternative farm bill contain when released likely in June?
  

The panel approved 19 amendments to the bill, en bloc, by a voice vote. Link/pdf.

Ag Committee Republicans blocked attempts by Democrats to amend the bill. In votes along party lines of 25-29, the GOP-led committee rejected:

• A push to restore requirements that conservation money from the Inflation Reduction Act focus on climate-smart practices.
• Language keeping USDA secretary’s authority over the Commodity Credit Corporation.
• Restoring $27 billion in funding over 10 years to the Supplemental Nutrition Assistance Program (SNAP).
• Ensuring meatpackers with USDA contracts follow child-labor laws.
  

Of note: Southern Ag Today has compiled a useful side-by-side comparison (link) of the major farm safety net features of the House Ag Committee-passed bill and the Senate majority proposal — the Rural Prosperity and Food Security Act of 2024.

— USDA announces domestic fertilizer projects using CCC funds. As the House Ag Committee considered restricting the Agriculture authority’s use of the Commodity Credit Corporation (CCC), Agriculture Secretary Tom Vilsack announced new projects to increase domestic fertilizer production using CCC funds. Vilsack announced $83 million in awards for projects in 12 states through the Fertilizer Production Expansion Program (FPEP). The announcement was made in Casco, Wisconsin, emphasizing the administration’s commitment to bolstering the economy and increasing competition for farmers, ranchers, and small business owners.

Projects are located in California, Florida, Hawaii, Iowa, Illinois, Kansas, Kentucky, Minnesota, North Carolina, North Dakota, Oregon, and Washington.

To date, USDA has invested $251 million in 57 projects across 29 states through FPEP.

The FPEP was created to address rising fertilizer prices, which more than doubled between 2021 and 2022 due to factors like the war in Ukraine and a lack of competition in the fertilizer industry. The administration committed up to $900 million through the CCC for FPEP to support long-term investments, strengthen supply chains, create economic opportunities, and support climate-smart innovation.

— Biden is nominating National Labor Relations Board Chair Lauren McFerran for a new five-year term, moving to lock in the Democrat ahead of the 2024 election.

— China conducted a second day of military drills around Taiwan, focusing on exercises intended to test their forces’ capabilities to “seize power” and “occupy key areas.” On Thursday, China’s armed forces reported that fighter jets had executed “mock strikes” successfully. These drills were initiated in response to the election of Lai Ching-te as Taiwan’s new president, whom China regards as a “separatist.”

— New China trade war? Group of Seven (G7) trade ministers are debating China’s industrial overcapacity, which U.S. Treasury Secretary Janet Yellen says is pumping cheap exports onto the global market. Other G7 members joining the call for China to rein in overcapacity, with France’s finance minister said there needs to be a clear assessment of overcapacity in China and of the “most efficient tools” to address the issue. He said the International Monetary Fund could be involved in the analysis.

— China’s FDI continues to slump. Foreign direct investment (FDI) into China slowed for a fourth straight month in April, underscoring Beijing’s struggle to attract more overseas funds to boost its flagging economic growth. New utilized foreign investment into China was 58.5 billion yuan ($8.1 billion) last month, according to calculations based on figures provided by China’s commerce ministry. That was down 36% from year-ago and was the second-lowest total for any month since late 2019. FDI into China totaled 360.2 billion yuan ($49.73 billion) in January-April, down 27.9% from the same period last year.

— Chinese developer able to delay debt payments. China Vanke Co. has swapped some of its privately issued debt held by insurers into asset-backed securities, as the builder works to further push back already deferred payments, people familiar with the matter told Bloomberg. China’s second-largest builder by sales, had been negotiating with insurers after it deferred payments twice since December 2023, when the lenders first asked for early payment. The swap will allow Vanke to move payments to 2027 at the earliest, according to one of the people.

— USDA is launching a new initiative to compensate dairy farmers for milk losses caused by bird flu, marking potentially the largest economic aid for the dairy industry to date.

• Compensation details: Dairy farmers with bird flu-infected cows will be compensated for their milk losses. Payments will be retroactive and calculated on a per-cow basis, considering the loss of milk production and prices in the preceding month.
• Program design and application: USDA will spend a few weeks designing the program before accepting applications.
• Impact of bird flu: The avian flu outbreak, which began in March, has affected multiple states and raised health concerns as the disease spreads among cattle. Bird flu has been found in over 50 herds across nine states, with potential underreporting of the disease’s prevalence.
• Economic aid: The compensation is significant for dairy farmers, potentially up to $250,000 a week for a farm with 5,000 cows, equating to about $50 per cow. Bird flu can lead to a 20% drop in milk production for two to three weeks, impacting about 10% of cattle in affected herds.
• Indemnity program: Like programs for poultry farms, this indemnity initiative aims to encourage farmers to report cases and take samples for government tracking. USDA’s emergency assistance program will fund the reimbursements, covering losses from weather events and diseases.
• Additional funding: USDA is also extending funding to dairy farmers whose herds have not tested positive for bird flu. This includes reimbursements for veterinary and shipping costs for testing and up to $1,500 for developing and implementing biosecurity plans.

— USMEF conference focuses on differentiation and long-term investment. The U.S. Meat Export Federation (USMEF) Spring Conference in Kansas City which ends today put a strong emphasis on the quality and consistency of U.S. red meat as key factors for expanding the international customer base.

Randy Spronk, USMEF Chair, highlighted the importance of free trade agreements (FTAs) in creating global opportunities for U.S. red meat. He praised the market access gains from the U.S./China Phase One Economic and Trade Agreement and the U.S.-Japan Agreement. “Would we have found success in South Korea if U.S. beef was still tariffed at 40% and U.S. pork at 25%?” Spronk asked. “Would we have been able to develop Central and South America, or the Dominican Republic, into reliable destinations for U.S. red meat?” While they are not full-blown FTAs, Spronk also praised the market access gains achieved in the U.S./China Phase One Economic and Trade Agreement and the U.S./Japan Agreement. “With the weak yen and other headwinds in Japan, imagine trying to compete effectively there if U.S. beef and pork were still at a tariff disadvantage,” Spronk noted.

Dan Halstrom, USMEF President and CEO: Provided updates on export results, noting significant growth in pork shipments to Mexico and high export values for U.S. beef.

Randy Blach, CEO of CattleFax, emphasized the improvements in the quality of U.S. beef and the importance of long-term market development. He provided an update on the U.S. cattle industry’s herd rebuilding efforts and stressed the need for patience in expanding exports.

Daniel Whitley, USDA Foreign Agricultural Service Administrator, discussed USDA’s Regional Agricultural Promotion Program (RAPP), which aims to help U.S. exporters expand into new markets, particularly in Africa, Latin America, and Southeast Asia.

Kip Tom, former U.S. Ambassador, stressed the link between national security and food security, emphasizing the need for innovation and technology in agriculture to meet the global food production challenge projected by 2050.

Speakers, including Blach and Tom, emphasized that U.S. beef and pork are high-value products that stand out in the global market due to their quality, unlike the commodity-focused exports from countries like Brazil.

— Crop index turns higher for the year, rekindling food inflation worries. The Bloomberg Agriculture Spot Index, which gauges prices of nine major crops, turned higher on the year and is headed for the largest weekly gain since July. Bloomberg notes, “Droughts to frosts and heavy rain are popping up across key growers, risking tighter supplies and lifting the cost of agricultural staples.” While the measure remains far from its 2022 peak, the gains could eventually spell higher consumer prices. USDA will update its food price outlook this morning.

— Rising costs of cheeseburgers amid post-pandemic economic challenges. The cost of a cheeseburger, a staple of American cuisine, has significantly increased, making it a luxury item for many. This price surge is particularly evident at both fast-food chains and gourmet burger joints, largely due to rising beef prices and other associated costs, according to an article (link) in the Philadelphia Inquirer. It says many consumers are now more cautious with their spending on burgers, with some refusing to pay more than $15 unless it’s for premium beef like Kobe or Wagyu. At McDonald’s, a quarter-pounder with cheese meal now costs $12, double the price from a decade ago.

Reasons for rising costs:

• Beef price surge: Beef prices have surged due to a cattle shortage, contributing to a 7% increase over the past year.
• Inflation and supply chain issues: Since the pandemic, food prices have risen more than 20%, exacerbated by inflation and supply chain disruptions.

— The burger wars are intensifying as Restaurant Brands’ Burger King reintroduces its $5 value meal, which typically includes a sandwich, chicken nuggets, fries, and a drink. This follows reports of McDonald’s launching a $5 value meal in the U.S. on June 25, and Wendy’s announcing a $3 breakfast meal deal that includes a sandwich and seasoned potatoes. Many Americans, impacted by higher food costs, are visiting restaurants less frequently, making deals and discounts more important in their decision-making. These value meals aim to attract cost-conscious consumers who are looking for affordable options. Burger King plans to offer its new meal for several months, while McDonald’s promotion is expected to last four weeks, which may not be sustainable. The goal of these promotions is to boost customer traffic and convert it into steady sales despite the temporary nature of the discounts.

— Covid-19 variant KP.2 has recently become the dominant strain in the U.S., according to the CDC. This variant, part of the Omicron family responsible for the last winter wave, does not seem to cause more severe disease. From April 28 to May 11, KP.2 accounted for nearly 30% of new cases, up from less than 16% in the previous two weeks. Health experts warn that the mutations in this variant could lead to increased transmissibility and a potential summer wave, as current vaccines might be less effective. Covid-19 is also showing some seasonal patterns, typically with a summer increase, though the risk level for this year remains uncertain.

— Biden’s weak position limits impact in battleground states. The Cook Political Report with Amy Walter said it partnered with two top polling firms, BSG (Democratic) and GS Strategy Group (Republican), to understand voter perspectives in seven key battleground states regarding the presidential and down-ballot races. While abortion is a significant issue for Democrats, President Biden’s advantage in this area isn’t sufficient to counteract Trump’s strength on reducing the cost of living. Biden’s overall weak position is currently hindering his ability to argue that Trump poses a greater risk.

— GOP Larry Hogan’s run for a Senate seat in deep-blue Maryland will test whether a moderate Republican can overcome the state’s strong Democratic leanings. While Hogan has early polling advantages and high name recognition, his ability to distance himself from Donald Trump and contend with Maryland’s partisan loyalty remains to be seen. Regardless of the outcome, Hogan’s candidacy compels Democrats to allocate resources to defend a seat they typically take for granted, potentially impacting their efforts in other competitive states.

— A Supreme Court’s ruling allows South Carolina to use a controversial congressional map represents a significant victory for Republicans and sets a high bar for proving racial gerrymandering. The Supreme Court (6-3) reversed a lower court’s decision that South Carolina’s GOP-led legislature had created an unconstitutional racial gerrymander. The court found the evidence that race motivated the map’s design to be weak and emphasized that courts should presume lawmakers acted in good faith. Justice Samuel A. Alito Jr. wrote the majority opinion, noting the correlation between race and partisan preferences. He argued this weakens claims that race, rather than politics, drove the legislature’s decisions. The majority included all justices appointed by Republican presidents: Chief Justice John G. Roberts Jr., and Justices Clarence Thomas, Neil M. Gorsuch, Brett M. Kavanaugh, and Amy Coney Barrett. Justice Elena Kagan, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, criticized the ruling, arguing it makes it easier for states to use racial data for partisan gains while avoiding scrutiny. Kagan highlighted concerns that this ruling allows states to suppress minority voters’ electoral influence.

Of note: The decision follows a recent Supreme Court victory for Black voters in Louisiana, indicating the court’s complex and evolving stance on voting rights.’

— From weekly to monthly. For nearly its entire 100-year run, Businessweek has been distributed weekly, just as its name implies. Starting with the July 2024 issue, Bloomberg said it will publish Bloomberg Businessweek once a month. It will be larger and thicker, printed on higher-quality paper and “contain more of the thoughtful journalism you’ve come to expect from us, chronicling the most important figures, companies and trends in business, technology, economics and politics,” the company said.

— AWP moves higher. The Adjusted World Price (AWP) for cotton moved up to 60.08 cents per pound, effective today (May 24), up from 59.46 cents per pound the prior week, ending a string of 10 straight weekly declines. Meanwhile, USDA also announced Special Import Quota #6 will be opened May 30, allowing the import of 35,277 bales of upland cotton, applying to supplies purchased no later than Aug. 27 and entered into the U.S. no later than Nov. 25.

— The NCAA and the five most prominent collegiate athletic conferences agreed to a $2.8 billion settlement of a class-action lawsuit, ushering in a new era in which schools can pay athletes directly. Link for details via the WSJ. Per ESPN, sources said the parties have agreed to a plan that would allow each school to share up to “roughly $20 million per year with its athletes.” The agreement settles three antitrust cases. Over several years, numerous college programs were punished by the NCAA for their players being compensated in some way for their exploits on the field.

— Dogs are ditching the kennels and flying first class. BARK Air, which wants to pamper pets and their owners even before takeoff, made its initial flight from New York to Los Angeles this week. The dog-first experience starts with a waiting lounge filled with treats and a speedy check-in.

WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | | Russia/Ukraine war, lessons learned | | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |