Only 18 U.S. Farms Accepted Funds to Fight H5N1 Avian Flu in Dairy Herds

More questions surface re: imports of used cooking oil for U.S. biofuel programs

Jim Wiesemeyer

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June 24, 2024 08:55 AM

More questions surface re: imports of used cooking oil for U.S. biofuel programs

Today’s Digital Newspaper

MARKET FOCUS

Economic reports to watch this week
EU charges Apple with non-compliance with a new digital competition law
Federal prosecutors reportedly recommending criminal charges against Boeing
Japanese officials issue warnings against ‘excessive’ volatility in currency trading
China’s yuan at seven-month low vs U.S. dollar, nearing weakest level since 2008
Ship backups, reminiscent of those during the Covid pandemic, resurfacing
Ag markets today
India puts limits on wheat stocks traders can hold
USDA daily export sale: 228,000 MT soymeal to the Philippines, 2024-2025 MY
Ag trade update
Summary of recent extreme weather events in U.S.
NWS weather outlook
Pro Farmer First Thing Today items

CONGRESS

House GOP leaders have ambitious schedule for FY 2025 spending bills

ISRAEL/HAMAS CONFLICT

Netanyahu warns a Lebanon war could be next

CHINA

China requests EU delay imposing tariffs on Chinese EV imports as of July 4
China imposes more fertilizer export controls
China’s fiscal income drops at quickest pace in more than a year

ENERGY & CLIMATE CHANGE

Concerns rising about potential fraud in used cooking oil (UCO) trade

LIVESTOCK, NUTRITION & FOOD INDUSTRY

Only 18 U.S. farms accepted funds to fight H5N1 avian flu in dairy herds

MARKET FOCUS

— Equities today: In Asia, Japan +0.5%. Hong Kong flat. China -1.2%. India +0.2%. In Europe, at midday, London +0.5%. Paris +0.9%. Frankfurt +0.5%. The U.S. Dow opened up around 110 points.

U.S. equities Friday: U.S. equities finished narrowly mixed on Friday, with the S&P 500 and Nasdaq weaker and the Dow firmer. For the week, the Dow was up 1.5%, the Nasdaq edged up less than 0.1%, and the S&P 500 gained 0.6%, marking the third straight weekly advances for the S&P 500 and Nasdaq.

— European Union has charged Apple with non-compliance with a new digital competition law, alleging that the company’s App Store restricts developers from directing customers to alternative purchasing methods. Announced on Monday, these charges are the first issued under the EU’s Digital Markets Act. Amazon, Google and Meta are also under investigation, and the Financial Times reports that Microsoft could face charges tied to its market dominance.

— Federal prosecutors are reportedly recommending criminal charges against Boeing. The potential case stems from accusations that Boeing violated a 2021 settlement related to the fatal 737 Max crashes in 2018 and 2019. Under that settlement, Boeing agreed to revamp its compliance practices. Since then, the company has been under investigation for faults in additional plane models.

— Ag markets today: Soybeans mildly firmed overnight, while corn and wheat failed to stray far from unchanged in two-sided trade. As of 7:30 a.m. ET, corn futures were trading fractionally to a penny lower, soybeans were 3 to 7 cents higher and wheat futures were within a penny of either side of unchanged. The U.S. dollar index was down more than 200 points, and front-month crude oil futures were around 25 cents higher.

Cattle on Feed Report slightly negative compared to expectations. USDA estimated there were 11.583 million head of cattle in large feedlots (1,000-plus) as of June 1, down 7,000 head (0.1%) from year-ago but 152,000 head more than the average pre-report estimate implied. May placements topped year-ago by 4.3%, whereas traders expected a 1.5% decline. Marketings increased 0.2% from last year, slightly less than expected. The data is mildly negative compared to the pre-report estimates, but not enough to have a major market impact.

Cash hog index continues recent slide, pork cutout firms. The CME lean hog index is down 23 cents to $90.32 as of June 21, marking declines in five of the last six days totaling a net $1.26. The pork cutout firmed $1.18 on Friday to $99.03, despite sharp losses in ribs and bellies as all other cuts strengthened.

— Agriculture markets Friday and for the week:

Corn: July corn futures settled 4 3/4 cents lower to $4.35, marking a 15-cent loss on the week.
Soy complex: July soybeans rose 5 1/4 cents to $11.60 1/2 Friday, but lost 19 1/4 cents on the week, while July soymeal rose $4.20 to $361.80, but marked a weekly loss of $6.60. July soyoil fell 3 points to 43.94 cents and picked up 26 points on the week.
Wheat: July wheat futures sunk 11 1/4 cents to $5.61 1/2 and lost 51 1/4 cents on the week. July HRW futures closed 10 3/4 cents lower to $5.81 1/4 and lost 46 1/4 cents on the week. July spring wheat fell 7 1/4 cents to $6.11 1/2 and lost 51 1/4 cents week-over-week.
Cotton: July cotton plunged 266 points to 68.19 cents and marked a 278-point weekly loss.
Cattle: Nearby live cattle futures rose modestly Friday, while the rest of the complex fell. Expiring June futures rose 52.5 cents to $187.60, while most-active August cattle rose 60 cents to $183.15. That marked a weekly dip of 2.5 cents. August feeder futures dropped $1.45 to $258.375; that represented a weekly decline of $3.60.
Hogs: The nearby July hog contract rose 90 cents to $92.05 Friday, while the deferred contracts were flat to lower. Most-active August inched up 20 cents to $89.325, which represented a weekly drop of $1.125.

— Quotes of note:

“We like to call this kind of stuff ‘boomer candy.’” — Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, discussing exchange-traded funds that give retirees and other investors the chance to chase stock returns while also protecting against a potential market slide.
“So far, regulation has definitely hurt the people that it’s supposed to protect.” — Uber CEO Dara Khosrowshahi, on declining customer orders after food-delivery apps raised fees to cover required wage increases for drivers.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with the euro and British pound both firmer against the greenback. The yield on the 10-year U.S. Treasury note was higher, trading around 4.26%, with a firmer tone in global government bond yields. Crude oil futures were higher ahead of U.S. trading, maintaining advances seen in Asian action, with U.S. crude around $80.90 per barrel and Brent around $84.55 per barrel. Gold and silver futures were higher ahead of U.S. economic data, with gold around $2,337 per troy ounce and silver around $29.62 per troy ounce.

— In early trading, the dollar reached 159.94 yen, prompting Japanese officials to issue warnings against “excessive” volatility, a signal of potential intervention. The 160.00-yen level is critical for Japan, which previously intervened when the dollar hit 160.245 in late April. The yen’s weakness contributes to imported inflation and pressures the Bank of Japan (BoJ) to reconsider its super-easy monetary policies. Minutes from the BoJ’s last meeting revealed significant discussions about tapering bond buying and raising rates. The yen’s decline is also affecting emerging markets, as Asian currencies weaken to maintain export competitiveness. The Chinese yuan has appreciated more than 10% against the yen this year, nearing its highest level since 1992. This has led analysts to believe that Beijing is gradually devaluing its own currency.

— China’s yuan has reached a seven-month low against the U.S. dollar, nearing its weakest level since 2008, putting policymakers in a difficult position. A weaker yuan could boost exports and bring inflation, but it risks undermining President Xi Jinping’s goal of internationalizing the currency. On June 21, the People’s Bank of China set the daily fixing at 7.1196 against the dollar, the weakest since Nov. 23.

Foreign investors expect the yuan to weaken further due to reduced expectations of a U.S. Federal Reserve interest rate cut. The PBOC also maintained its benchmark rate, though some economists anticipate it might loosen monetary policy to combat a property market downturn. Offshore demand for Hong Kong dollars by Chinese companies is adding pressure on the yuan.

Analysts predict the yuan will continue to weaken, potentially reaching 7.4 against the dollar by the third quarter, the weakest since December 2007. A weaker yuan could stimulate exports and help with inflation but may escalate trade tensions with the U.S. and Europe. China’s central bank is managing the currency strategically to avoid market shocks.

— Ship backups, reminiscent of those during the Covid pandemic, are resurfacing and raising concerns about delays and increased costs during this year’s peak shipping season. Flotillas of containerships and bulk carriers are forming off the coasts of Singapore, Malaysia, South Korea, and China, while ports in Spain and other parts of Europe are struggling with container piles. According to the Wall Street Journal (link), these backups stem from vessel diversions caused by attacks by Yemen’s Houthi rebels on commercial ships in the Red Sea. These disruptions have thrown shipping schedules off balance and left shipments and sea containers out of sync. This situation is complicating logistics for retail and manufactured goods, and there are worries that the congestion could worsen as demand increases. Experts note that some shippers are already booking earlier to avoid the anticipated congestion.

— India has imposed limits on the amount of wheat stocks that traders can hold and is considering ending or reducing the import tax to keep prices in check, according to Food Secretary Sanjeev Chopra. Despite these measures, Chopra assured there is no wheat shortage in the country. Government wheat stocks fell to a 16-year low of 7.5 million metric tons in April following the sale of 10 million metric tons to stabilize prices. India has banned wheat exports and has no plans to lift this ban or remove export restrictions on sugar and rice. Speculation about potential actions on wheat has increased due to the upcoming elections.

— USDA daily export sale: 228,000 MT soybean cake and meal to the Philippines, 2024-2025 marketing year.

— Ag trade update: South Korea purchased 66,000 MT of corn expected to be sourced from South America or South Africa. Egypt tendered to buy 30,000 MT of soyoil from multiple origins.

— Summary of recent extreme weather events in the U.S.:

Record-breaking Heat:
- Washington D.C. and Baltimore:
  - D.C. hit 100 degrees for the first time since 2016 and the first time in June since 2012.
  - Baltimore reached 101 degrees, breaking a 36-year-old daily heat record.
- Mid-Atlantic and Southern States:
  - Continued extreme heat expected, with potential record-high temperatures in North Carolina, Mississippi, Georgia, Arkansas, and other southern states.
Severe Weather and Flooding:
- Iowa:
  - Iowa Gov. Gov. Kim Reynolds said Sunday she has submitted a request for an expedited presidential major disaster declaration as northwestern Iowa communities continue to face floods and storm damages. The governor requested aid for 22 counties through the Federal Emergency Management Agency’s Public Assistance Program.
  - Rock River town faced evacuations after six inches of rain caused a levee break.
  - Flooding led to a bottled water advisory due to contamination.
- South Dakota:
  - Heavy rainfall (up to 18 inches in some areas) prompted nine emergency rescues.
  - Gov. Kristi Noem warned of potentially record-breaking levels in the Big Sioux River.
- Wisconsin:
  - Tornado leveled the historic Apple Grove Lutheran Church in Argyle.
- Northern Central states:
  - Flood warnings remain in effect for Minnesota, Nebraska, Iowa, and South Dakota.
- New England:
  - Potential for flash flooding, strong winds, and tornadoes, with severe thunderstorms and heavy rainfall expected.
Wildfires in New Mexico:
- Salt and South Fork fires:
  - Burned over 24,000 acres, with only partial containment (South Fork at 26%, Salt at 7%).
  - Approximately 1,400 structures damaged or destroyed.
  - Upcoming rainfall poses a risk of additional flooding in affected areas.
- FBI reward:
  - $10,000 reward for information on the cause of the wildfires.

Outlook:

Continued extreme heat in the mid-Atlantic and southern states.
Ongoing flood warnings and potential severe weather in northern central states and New England.
Impact of upcoming rainfall on wildfire-affected areas in New Mexico.

— NWS weather outlook: Heat wave focus shifts to the Southeast, Mid-South, and central/southern Plains early this week... ...Severe storms for portions of the Upper Midwest on Monday, with an increasing flash flooding threat for the Midwest Tuesday... ...Monsoon-like conditions persist for the Southwest/Four Corners Region.

Items in Pro Farmer’s First Thing Today include:

• Varied tone in quiet overnight grain trade
• Wet weather continues across northern Corn Belt

CONGRESS

— House GOP leaders have outlined an ambitious schedule for passing their version of the fiscal year (FY) 2025 spending bills. They aim to have all 12 annual bills out of the Appropriations Committee by mid-July and through the House by the start of the August recess. Three key bills — Defense, Homeland Security, and State-Foreign Operations — are set to be marked up in the Rules Committee on Tuesday, with floor votes expected later in the week. GOP leaders are confident that all three bills will pass.

Of note: If the House GOP schedule of action is realized, that sets up September as a possibility for House floor action on the House Ag Committee-passed farm bill.

CHINA UPDATE

— China has requested that the European Union (EU) delay imposing tariffs on Chinese electric vehicle (EV) imports as of July 4, following an agreement for consultations between the two parties. According to the state-controlled Global Times, the provisional duties of up to 38.1% are set to take effect while the EU’s investigation continues, with a final decision expected by Nov. 2. However, due to upcoming elections in France, it is unlikely that the EU will halt the tariffs. There are also concerns that China may retaliate with tariffs on EU goods, including dairy, pork, and potentially EU automobiles. It seems improbable that consultations at this stage will change the situation.

— China imposes more fertilizer export controls. China is further restricting fertilizer exports, as it seeks to contain domestic prices, cut farming costs and bolster grain security. Curbs imposed earlier this month apply to urea and phosphates, people familiar with the matter told Bloomberg. Exports of urea and phosphates had already slowed this year, to a trickle in the case of the former, after limits put in place at the end of 2023. Now, urea shipments have been halted entirely, the people said. For phosphates, customs is stepping up inspections on outbound cargoes, which could reduce sales even more. China’s total fertilizer exports climbed to a six-month high of nearly 2.5 MMT in May, as sales of ammonium sulfate offset the drop in the other products.

— China’s fiscal income drops at quickest pace in more than a year. China’s fiscal revenue shrank at the fastest pace in more than a year, fueling expectations that the government could make another rare mid-year budget revision. Total revenues, which include the general public budget and the government funds budget, fell 4.1% during January-May from last year to 11.36 trillion yuan ($1.6 trillion). That’s the steepest drop since February 2023, according to Bloomberg calculations. The combined spending under the two accounts fell 2.2% from year-ago to 13.61 trillion yuan in the first five months. That left a fiscal shortfall of 2.25 trillion yuan, widening from January-May last year but below the level recorded during the same period in 2022.

ENERGY & CLIMATE CHANGE

— Concerns are rising about potential fraud in the used cooking oil (UCO) trade, with suspicions that some virgin vegetable oils (like palm oil) may be mislabeled as UCO. Indonesia is a major palm oil producer, which raises some concerns about the authenticity of UCO exports. The U.S. renewable diesel industry has been growing rapidly, increasing demand for various feedstocks including vegetable oils and UCO. This growth has led to increased imports of fats and oils. There are indications of irregularities in UCO collection and export rates from some Asian countries. For example, Malaysia is reported to export three times more UCO than it collects, suggesting potential fraud. There is growing demand for UCO and other feedstocks for renewable diesel in the United States, some analysts and traders note a big increase in Indonesian virgin UCO exports to the U.S. specifically for this purpose. The situation appears complex, with concerns about fraud and mislabeling in the international UCO trade. Of note: So much UCO is being imported, some predict a building of U.S. soybean oil stocks.

Last week a bipartisan group of six U.S. Senators urged the Biden administration to increase scrutiny of UCO imports from China. Concerns have arisen that some of these imports may be fraudulent, blended with virgin oils like palm oil, which have higher carbon intensity and are linked to deforestation. This could undermine U.S. renewable fuel policies by displacing cleaner, domestically grown feedstocks and leveraging U.S. renewable fuel incentives. The lawmakers noted that UCO imports to the U.S. have skyrocketed from less than 200 million pounds annually in 2020 to over 3 billion pounds in 2023, with more than half coming from China. They emphasized the need for rigorous verification of UCO imports, like the scrutiny domestic feedstocks undergo. The lawmakers pointed out that Europe has already acted against UCO fraud, leading to a shift in imports to the U.S., where demand for renewable feedstocks is high, particularly in states with clean fuel policies. They urged U.S. agencies to ensure the authenticity of UCO imports and to prevent counterfeit feedstocks from receiving American tax incentives.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Only 18 U.S. farms are currently accepting federal funds to combat the H5N1 avian flu outbreak among dairy herds, which began three months ago, according to USDA. Eligible farms can receive up to $28,000 over three months if they have an outbreak, and $3,500 is available to other dairy producers to improve biosecurity and test their cows.

The Centers for Disease Control (CDC) reported (link) that over 690 people have been monitored for bird flu due to exposure to infected animals, an increase of 140 in a week. At least 51 people with flu-like symptoms have been tested for bird flu, with three farmworkers contracting mild cases since March 25, when it was confirmed that the virus had spread from birds to dairy cattle. The CDC emphasized that the risk to the general public remains low.

Michigan has the highest enrollment for USDA financial assistance, with 11 farms participating. Other states with enrolled farms include New York (one farm), Iowa (three farms), Colorado (two farms), and Wyoming (one farm). A USDA database (link) shows that H5N1 has been confirmed in 112 herds across 12 states. The recent change in format of the database reported 116 affected herds previously. USDA reported that HPAI has been confirmed in six additional Colorado dairy herds, two in Iowa and one in Idaho, according to Animal and Plant Health Inspection Service (APHIS) updates on June 20 and 21. USDA said that 58 cases have been confirmed in the past 30 days, affecting eight states.

In early May, USDA announced up to $28,000 available for farms with infected herds to cover costs such as protective equipment, veterinary testing, treating infected herds, and strengthening biosecurity practices. Farms without positive tests for bird flu could receive up to $1,500 for biosecurity measures and $2,000 for cow testing.

USDA plans to issue a disaster-aid regulation to compensate farmers for 90% of the value of milk production lost due to the virus and compensate farmers at fair market value for culled cows. Dairy cows infected with bird flu typically develop a fever, lose appetite, and produce less milk but generally recover within a couple of weeks, with a mortality and culling rate of 2% or less.

Iowa reported its 11th case of bird flu among dairy herds on Sunday in Sioux County (link), with two other cases in the same county reported on Friday. Four herds in Kansas, Nebraska, New Mexico, and Texas have enrolled in a voluntary USDA program for weekly testing of milk samples, exempting them from testing lactating cows before interstate shipping.

Since February 2022, USDA has allocated $2.1 billion to address bird flu outbreaks, which have resulted in the deaths of over 97 million birds, primarily egg-laying hens and turkeys.

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