Minnesota Farmers Negatively Recall Walz’s Calling Rural Min. Mostly ‘Rocks and Cows’

Missouri’s Cori Bush becomes second Squad member to lose primary race

News Markets Policy updates
Farm Journal
(Farm Journal)

News/Markets/Policy Updates: Aug. 7, 2024


— Governor Tim Walz of Minnesota, the newly announced running mate to Vice President Kamala Harris, has collaborated with the Democratic-controlled Legislature to implement a progressive agenda. This includes securing abortion protections, offering free meals for schoolchildren, legalizing recreational marijuana, and setting renewable energy goals.

Walz signed a bill affirming a fundamental right to make autonomous reproductive health decisions and another bill shielding patients and providers involved in out-of-state abortions.

On climate change, his administration aims for 100% renewable electricity by 2040 and net-zero carbon emissions by 2050. Walz supports biofuels and has called for approval of higher blends of the renewable fuels and year-round sales of E15, a 15% blend of ethanol into gasoline. Minnesota is one of the largest corn- and soybean-producing states. It produces more turkeys than any other state and is second to Iowa in hogs.

Economically, he has pushed for free college tuition for low-income students, tax rebates for low- and middle-income residents, and infrastructure funding.

Walz also supports a path to citizenship for undocumented immigrants and signed a bill allowing them to obtain driver’s licenses. On the topic of Israel and Gaza, Walz has condemned Hamas and supported humanitarian aid for Gaza, though he has remained relatively silent since the initial attacks.

— Walz’s 2017 comment referring to rural Minnesota as “mostly rocks and cows” has resurfaced and continues to be a point of contention, especially among farmers and rural constituents. The reaction from Minnesota’s farming community has been mixed. While some farm groups have expressed optimism about Walz’s vice-presidential nomination, others remain skeptical due to past remarks and policies.

• Minnesota Farmers Union: The organization views Walz’s experience and relationships as beneficial for agriculture. Stu Lourey, the government relations director, emphasized that Walz’s depth of knowledge and experience would serve the agricultural community well.

• Minnesota Farm Bureau: Dan Glessing, the president, acknowledged Walz’s understanding of agriculture due to his background representing Minnesota’s 1st Congressional District, a rich agricultural area. However, he also highlighted the need to continually remind Walz of the importance of agriculture and rural Minnesota.


MARKET FOCUS

— Equities today: Asian and European stock indexes were mostly higher overnight. U.S. Dow is up around 300 points.

U.S. equities yesterday: All three major indices finished higher in the wake of Monday’s sharp losses, but all three were well off their highs by the closing bell. The Dow rose 294.39 points, 0.76%, at 38,997.66. The Nasdaq was up 166.77 points, 1.03%, at 16,366.85. The S&P 500 moved up 53.70 points, 1.04%, at 5,240.03.

— Ag markets today: Grain markets extended their moves from Tuesday during the overnight session, with wheat trading higher while corn and soybeans weakened. As of 7:30 a.m. ET, corn futures were trading 3 to 4 cents lower, soybeans were 11 to 12 cents lower and wheat futures were 1 to 3 cents higher. The U.S. dollar index was up around 200 points, and front-month crude oil futures were about $1.35 higher.

Wholesale beef demand strengthens. Wholesale beef movement surged to 181 loads on Tuesday as Choice prices fell $2.13 and Select dropped 44 cents. Strong retailer demand suggests consumers haven’t balked at record prices at the meatcase yet. While there’s some stability in wholesale beef trade, the outlook for cattle futures is clouded by the recent long liquidation plunge.

Cash hog index, pork cutout drop. The CME lean hog index is down 26 cents to $93.33 as of Aug. 5, marking the second straight daily decline after the extended rally. The pork cutout dropped $1.97 on Tuesday, pressured by sharp losses in hams, bellies and butts.

— Agriculture markets yesterday:

Corn: December corn futures closed down 1 3/4 cents to $4.05 1/4 and near mid-range.
Soy complex: November soybeans fell 14 cents to $10.26 3/4, while December soymeal closed $5.20 lower at $326.60, with both ending nearer the session low. September soyoil fell 24 cents to 40.85 cents, marking a high-range close after reaching a fresh contract low early on.
Wheat: December SRW futures firmed 3 1/4 cents to $5.66 1/2 while December HRW futures rose 1 1/2 cents to $5.78 1/4. September HRS futures climbed a nickel to $5.92 1/2.
Cotton: December cotton slipped 48 cents to 67.30 cents, a new contract-low close.
Cattle: October live cattle futures traded on either side of unchanged before firming a nickel to $179.05. Nearby August futures rose 42.50 cents to $181.975, while deferred futures posted losses. September feeder futures sunk 67.50 cents to $240.575.
Hogs: October lean hogs rose 67 1/2 cents at $76.40 and near mid-range.

— Of note:

• BOJ deputy governor walks back rate hike talk, calms markets. A week after Japan’s central bank governor suggested raising interest rates, Bank of Japan (BOJ) Deputy Governor Shinichi Uchida walked back those comments on Wednesday, promising not to tighten rates during market instability. Uchida’s pledge led to a significant recovery in Tokyo stock prices and a weakening of the yen. The Nikkei Stock Average rose 1.2% to close at 35,089.62, rebounding from a more than 2% drop earlier in the day. The yen weakened to around 147 to the dollar, compared to 144.50 earlier.

Uchida clarified that Japan’s situation is different from that of the U.S. and Europe a few years ago when rapid rate hikes were implemented to combat surging inflation. He assured that the BOJ would not raise its policy interest rate under unstable financial and capital markets. This statement came after the BOJ raised its policy interest rate to 0.25% on July 31, followed by Governor Kazuo Ueda’s hawkish comments, which caused a sharp rise in the yen and a significant drop in Japanese stocks. The global stock markets, including the U.S., also experienced a selloff.

Uchida reiterated the dovish aspect of the BOJ’s policy, noting that the current policy rate of 0.25% is low in real terms after accounting for inflation and that the bank will continue to support the economy with highly accommodative financial conditions.

— U.S. ag sector experienced a smaller trade gap in July. Breakdown of the key points:

July Trade Figures:
Exports: $12.94 billion, down 5.8% ($800 million) from June.
Imports: $16.52 billion, down 8.3% ($1.49 billion) from June.
Deficit: $3.58 billion, down from the record $4.27 billion in June.

Fiscal Year (FY) 2024:
Cumulative Exports: $135.29 billion.
Cumulative Imports: $154.09 billion.
Cumulative Deficit: $18.8 billion, already surpassing the FY 2023 deficit of $17.15 billion with three months remaining.

USDA’s forecast:
To meet USDA’s forecast, exports need to average $11.74 billion and imports $16.14 billion over the next three months.
Historical comparison: The last three months of FY 2023 saw exports averaging $12.42 billion and imports $15.73 billion, resulting in a cumulative deficit of $9.93 billion.

Monthly deficits:
The sector recorded 8 monthly deficits in FY 2023 and has already reached that number in FY 2024 with three months to go.

Outlook:
• The sector is on track for a record trade gap in FY 2024, potentially approaching the forecasted $32 billion deficit.
• This trade gap adds to existing challenges like lower prices and a significant drop in farm income for 2024.

USDA will update its agricultural trade forecast on Aug. 27.

— Iowa farmland sees first drop in value in five years amid agricultural downturn and layoffs. Iowa’s farmland values declined in the first half of 2024, the first decrease in five years, as reported by Farm Credit Services of America. This drop is attributed to falling corn and soybean prices and high interest rates, which have also pressured agricultural manufacturers like John Deere, leading to significant layoffs. Average farmland values in Iowa fell by 2.4% through June and over the past year. Despite the decline, values remain 58.3% higher than five years ago.

Farm income and higher interest rates have contributed to this decrease, with USDA forecasting a 25.5% drop in farm income this year. Nationally, corn and soybean prices have also seen substantial reductions. Iowa was the only state in the Farm Credit Services report to experience a decline in farmland values, while values in South Dakota, Wyoming, Kansas, and Nebraska increased.

The reduction in farmland values comes alongside a decrease in sales activity and increased competition for investment dollars, with alternative investments like certificates of deposits becoming more attractive due to higher interest rates. Some experts predict farmland values could fall by another 20% next year due to continuing economic pressures.

Market perspectives:

— Outside markets: The U.S. dollar index was firmer, with the euro weaker against the greenback. The yield on the 10-year U.S Treasury note was firmer, trading around 3.93%, with a mostly higher tone in global government bond yields. Crude oil futures were higher ahead of U.S. market action and gov’t inventory data due later this morning, with U.S. crude around $74.50 per barrel and Brent around $77.80 per barrel. Gold futures were slightly higher, around $2,437 per troy ounce, with silver weaker around $27.20 per troy ounce.

— Egypt issues record wheat tender. Egypt’s state grains buyer, the General Authority for Supply Commodities, announced a record tender for 3.8 MMT of wheat to cover imports between October 2024 and April 2025 as prices are near four-year lows. Egypt’s Finance Minister Ahmed Kouchouk said the global price drop presents an opportunity to more aggressively procure supplies. “My colleagues (at the government) are seizing this opportunity to buy what we need amid the current situation in the global market,” Kouchouk said.

— The soybean processor worker strike in Argentina has entered its second day. The SOEA and the Federation of Oilseed Industry Workers initiated the strike on Tuesday over wage disputes, leading to a halt in activity at soybean processing plants. In a statement, the unions highlighted the lack of agreement in collective bargaining as the cause for the strike. An official told Reuters that the strike would continue through Wednesday, with discussions planned on whether to extend it further. The Argentine oilseed industry chamber CIARA confirmed that processing has stopped. While work stoppages in Argentina are generally aimed at securing changes for workers and are typically short-lived, any prolonged strike could impact Argentine exports and potentially shift business to other countries.

— Canadian railroads/union talks resume. Talks between Canada’s two major railroads and the union representing about 9,000 employees are set to resume today, just days before the country’s labor-relations board is expected to issue a ruling that could initiate a strike deadline at both companies. A simultaneous strike at Canadian National Railway and Canadian Pacific Kansas City this month poses a significant risk to North America’s supply chain network. Over the long holiday weekend in Canada, Canadian Labor Minister Steven MacKinnon met with representatives from both railroads and the Teamsters Canada union. He announced that all parties have agreed to restart negotiations this week with the assistance of federal labor mediators, expressing hope that these negotiations will be productive and meet the current needs.

Canadian officials previously averted a strike in late May by requesting the Canada Industrial Relations Board to determine whether the railroads are required to transport certain goods during a labor disruption. Both Canadian National and CPKC have received guidance from the board, suggesting a decision could be delivered by Aug. 9. A strike could begin as soon as 72 hours after the board issues its ruling.

The potential strike could have widespread effects across North America. Canadian National, based in Montreal, operates approximately 20,000 miles of tracks, connecting Canada’s eastern and western coasts with the southern United States, and transports around 300 million metric tons of cargo annually. CPKC’s network, also spanning about 20,000 miles, serves markets across Canada, the U.S., and Mexico.

— Indonesia begins testing of B50 biodiesel. Indonesia’s outgoing government of President Joko Widodo has ordered the palm oil industry to prepare for B50 biodiesel and conduct “static tests,” Reuters reported, citing director general of renewable energy at the energy ministry. That will be followed by vehicle road tests, in a process that typically takes a year. Prabowo Subianto, who will take over from Widodo in October, has pledged to raise the biodiesel mandate to B50 to reduce oil imports, without setting a timeline.

— Ag trade update: Algeria tendered to buy a nominal 50,000 MT of optional origin soft milling wheat. Jordan tendered to buy up to 120,000 MT of optional origin milling wheat.

— NWS outlook: Considerable flooding associated with Tropical Storm Debby to impact portions of South and North Carolina... ...Monsoon storms continue across the Southwest and Four Corners regions... ...Excessive heat from the Southern Plains to the Lower Mississippi Valley through Thursday.

NWS_080724.png
NWS outlook
(NWS)

Items in Pro Farmer’s First Thing Today include:

• Followthrough buying in wheat, corn and beans extend losses overnight
• BOJ sends dovish signal

RUSSIA/UKRAINE

— Ukrainian grain exports for 2024-25 (July/June) have reached 4.4 million metric tons (MMT), including 1.9 MMT of wheat, 1.7 MMT of corn, and 661,000 metric tons of barley as of Aug. 7, according to the Ukrainian Agriculture Ministry. The agency said that marked an increase of more than 85% compared with the same period one year ago. Exports so far in August are at 654,000 metric tons, up from 303,000 at this point in August 2023.

CHINA UPDATE

— China’s exports unexpectedly slow in warning sign for economy. China’s exports grew at their slowest pace in three months in July, missing expectations and adding to concerns about the outlook for the vast manufacturing sector. China’s exports increased 7.0% from year-ago to $300.56 billion last month, though that was down from an 8.6% rise the previous month and below expectations for a 9.7% rise. China’s imports increased 7.2% to $215.91 billion, surging from a 2.3% decline in June and beating expectations for a 3.5% rise. That widened China’s trade surplus to $84.65 billion. The trade surplus with the U.S. narrowed to $30.84 billion in July. For the first seven months of 2024, China recorded a trade surplus of $518 billion, with exports advancing 4.0% to $2.07 trillion while imports grew 2.8% to $1.49 trillion. The trade surplus with the U.S. through July stood at $190.64 billion.

— China imports less soybeans than expected in July. China imported 9.85 MMT of soybeans in July, down 1.26 MMT (11.3%) from June but up 270,000 MT (2.8%) from last year. Analysts expected soybean arrivals to reach 12 MMT to 13 MMT and challenge the all-time monthly record. Through the first seven months of the year, China imported 58.33 MMT of soybeans, down 1.3% from the same period last year. Given hefty soybean stocks, negative crush margins and weak demand from the livestock sector, China’s soybean imports are expected to slow through year-end.

— China bans poultry imports from RGDS in Brazil. China’s customs authority banned imports of poultry and related products from Brazil’s Rio Grande do Sul due to an outbreak of Newcastle disease.

— China restricts fentanyl chemicals after years of U.S. pressure. The progress on a diplomatic sticking point between the two countries suggests Beijing is eager to smooth ties ahead of the November election. Move is the first time in six years that Beijing will restrict the ingredients used in the drug. Link for more via the Wall Street Journal.

ENERGY & CLIMATE CHANGE

Reuters reports that EPA has confirmed it is investigating the supply chains of at least two renewable fuel producers, focusing on the origins of used cooking oil (UCO) used in renewable fuel production. According to EPA spokesman Jeffrey Landis, audits have been conducted since July 2023, evaluating where UCO was collected. These investigations are ongoing, and specific details or company names have not been disclosed. The probes began after the EPA updated its domestic supply chain accounting requirements in July 2023. The increased scrutiny on UCO imports, particularly from countries like China, stems from concerns that these imports might contain virgin palm oil linked to deforestation. Lawmakers have urged the administration to investigate, as UCO imports used for biodiesel production are eligible for credits under the Renewable Fuel Standard (RFS).

— The Biden administration is seeking to purchase 3.5 million barrels of crude oil for the Strategic Petroleum Reserve (SPR). The Department of Energy issued a solicitation for 1.5 million barrels to be delivered to the Bayou Choctaw site and 2 million barrels to the Bryan Mound site. Offers for the Bayou Choctaw site must be submitted by 11 a.m. CT on Aug. 13, and offers for the Bryan Mound site are due by 11 a.m. CT on Aug. 20. The crude oil for Bayou Choctaw is to be priced at no more than $79.99 per barrel. Details for the Bryan Mound site solicitation have not yet been released, as this is the first solicitation for this site following recent construction work.

POLITICS & ELECTIONS

— Incumbent progressive Representative Cori Bush lost the Democratic primary in Missouri to St. Louis County prosecuting attorney Wesley Bell, who was backed by the pro-Israel group AIPAC. This defeat is a significant victory for the American Israel Public Affairs Committee, which has targeted members of Congress critical of Israel. With 99% of the vote counted, Bell had 51.2% compared to Bush’s 45.6%, according to the Associated Press. Bush, a member of the left-leaning House “Squad,” is the second member to lose a Democratic primary this summer, following Rep. Jamaal Bowman’s defeat in June.

On the Republican side, the primary race in Bush’s district remains undecided, with 99% of votes counted. The eventual winner will face Bell in November.

— In Michigan, the Democratic primary for the Senate seat was won by Rep. Elissa Slotkin, while former Rep. Mike Rogers, endorsed by former President Trump, won the Republican primary. The seat, one of four Senate seats described as a tossup, is crucial as Democrats currently hold a two-seat majority in the Senate.

OTHER ITEMS OF NOTE

— EPA takes emergency action to ban pesticide linked to fetal health risks for first time in 40 years. For the first time in 40 years, the Environmental Protection Agency (EPA) has taken emergency action to halt the use of a pesticide linked to serious health risks for unborn babies. The emergency order, issued on Tuesday, targets dimethyl tetrachloroterephthalate (DCPA or Dacthal), an herbicide used on crops like broccoli, Brussels sprouts, cabbage, and onions. Exposure to DCPA can alter fetal thyroid hormone levels, potentially leading to low birth weight, impaired brain development, decreased IQ, and impaired motor skills.

EPA’s Assistant Administrator for Chemical Safety and Pollution Prevention, Michal Freedhoff, emphasized the urgency of removing DCPA from the market, citing its severe dangers to pregnant women and their unborn children. The agency’s action comes despite the sole manufacturer, AMVAC, attempting to avoid the ban by voluntarily discontinuing DCPA products used on turf, which reduced risks to golfers, athletes, and turf field workers. However, the EPA deemed this measure insufficient to protect farmworkers and others from the pesticide’s harmful effects.

In March, the EPA informed AMVAC that voluntary measures were inadequate, referencing studies showing serious risks to human health from changes in fetal thyroid hormone levels observed in pregnant rats exposed to DCPA. Following a warning to farmworkers in April, the EPA proceeded with the emergency order to suspend all DCPA registrations under the Federal Insecticide, Fungicide, and Rodenticide Act.

Reaction. Mily Treviño Sauceda, executive director of the National Farmworkers Women’s Alliance, lauded the EPA’s decision, acknowledging the severe impact of pesticides like DCPA on farmworker communities and expressing hope for further protective measures.

— Commerce urged to carefully review 2,4-D dumping investigation. A bipartisan and bicameral group of lawmakers is urging (link) the Department of Commerce to “carefully review the facts” in its investigation into whether preliminary duties should be imposed on imports of the herbicide 2,4-D from China and India. This request follows the U.S. International Trade Commission’s (USITC) affirmative preliminary determination of injury in antidumping and countervailing investigations regarding the herbicide. The lawmakers expressed concerns that imposing tariffs on 2,4-D imports could jeopardize reliable and affordable access to essential agricultural inputs. They highlighted that 2,4-D is widely used on various crops and in lawn and garden care, allowing farmers to adopt innovative conservation practices, reduce tillage, and support soil health. Additionally, the lawmakers pointed to a forecasted 25% decline in U.S. farm income for 2024 compared to 2023, arguing that new tariffs would further strain producers who rely on this critical input, worsening their economic challenges. The determination on preliminary duties is expected in September.

KEY LINKS


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 |