U.S. Greatly Exceeds Expectations with 272,000 Jobs Added in May

Vilsack: Supreme Court ‘didn’t understand’ the pork market re: Prop 12 ruling

MARKET FOCUS

• U.S. jobs report great exceeds expectations for jobs; unemployment rises
• Aramco’s share sale priced in the bottom half of its proposed range
• High-yield credit looks attractive amid gradual rate cuts by central banks
• ECB rate path not on auto pilot
• JPMorgan and Citigroup still predicting Fed will ease next month
• WSJ writer: Rapid increase in U.S. gov’t debt at levels that pose significant risks
• Gasoline prices show signs of stabilizing
• Why gold prices are declining
• Ag markets today
• USDA daily export sale: 104,000 MT soybeans to China, 2023-24 marketing year
• Ag trade deficit continues to build in April, more red ink coming
• Ag trade update
• Turkey to halt wheat imports until Mid-October
• Nigeria mulls suspending import duties on staple food, drugs and other essential items
• Extreme heat advisory for Western U.S. states
• NWS weather outlook

CARGO SHIPS

• Out of control cargo ship causes temporary bridge closure in Charleston

ISRAEL/HAMAS CONFLICT

• Israel at risk of losing coal supplies from its biggest supplier, Colombia
  

RUSSIA & UKRAINE

• Russia begins wheat shipments to Brazil from Baltic terminal
  

POLICY

• Southern Ag Today examines farm bill base acre proposals
• Farmdoc analyst keeps up negative mantra on House farm bill.
  

CHINA

• China’s exports surge more than expected in economic boost
• China’s meat imports increase in May
  

ENERGY & CLIMATE CHANGE

• A look at 40B and 45Z Credits for soy biofuels from ASA economist
  

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• Vilsack on Supreme Court decision and Proposition 12
• Minnesota reports first H5N1 outbreak in dairy herd
• UN FAO reports third consecutive monthly rise in food commodity prices as of May
• Dairy farms decline, but raw milk business thrives
• Food Waste App Too Good to Go expands in U.S. with Circle K partnership
  

POLITICS & ELECTIONS

• Carbon dioxide pipeline big issue in South Dakota GOP state primary races
• Slight shift toward Biden after Trump conviction, new survey shows
• EU parliamentary elections begin with far-right parties expected to gain historic seats
• Mexico’s ruling party pledges to respect legislative process
  

OTHER ITEMS OF NOTE

• ASA on Bayer’s dicamba registration: concerns over post-emergent use, cutoff dates
• Cotton AWP drops
• Brazil’s lower house approves main text of bill that introduces 20% import tax

— Equities today: Asian and European stock indexes were mostly firmer overnight. U.S. Dow opened around 70 points lower. In Asia, Japan -0.1%. Hong Kong -0.6%. China +0.1%. India +2.2%. In Europe, at midday, London -0.6%. Paris -1%. Frankfurt -0.9%.

U.S. equities yesterday: The Dow finished with a modest gain and the Nasdaq and S&P 500 with modest declines as traders await the key Employment report due Friday. The Dow was up 78.84 points, 0.20%, at 38,886.17. The Nasdaq was down 14.78 points, 0.09%, at 17,173.12. The S&P 500 eased 1.07 points, 0.02%, at 5,352.96.

— Aramco’s share sale priced in the bottom half of its proposed range, raising about $11.2 billion for Saudi Arabia.

— Ag markets today: Winter wheat futures faced moderate to heavy selling pressure overnight, while milder losses were posted in corn, soybeans and spring wheat. As of 7:30 a.m. ET, corn futures were trading a penny lower, soybeans were 4 to 7 cents lower, SRW wheat was mostly 8 to 11 cents lower, HRW wheat was 12 to 14 cents lower and HRS wheat was mostly a nickel lower. The U.S. dollar index was trading just below unchanged. and front-month crude oil futures were around 50 cents higher.

Still waiting for active cash cattle trade. Cash cattle negotiations remained in a standoff Thursday, as packers worked to buy cattle at lower prices while feedlots still had hopes of steady bids. With nearby live cattle futures trading sharply below the cash market, the eventual outcome of this week’s cash battle won’t likely have much impact unless prices surprisingly rise.

Cash hog index, pork cutout remain near recent levels. The CME lean hog index is down 14 cents to $91.92 as of June 5, remaining in the recent low-$90.00 range. The pork cutout value firmed 38 cents on Thursday, remaining tethered near $100.00.

— Agriculture markets yesterday:

• Corn: July corn rallied 12 3/4 cents to $4.52, ending near the session high and above the 10- and 100-day moving averages.
• Soy complex: July soybeans surged 22 3/4 cents to $12.00 and settled nearer session highs. July meal futures closed $3.30 higher to $362.80 and settled near the midpoint of today’s range. July bean oil futures jumped 122 points to 44.35 cents and closed nearer session highs.
• Wheat: July SRW wheat fell 7 1/2 cents to $6.39 1/2, a near one-month low close, while July HRW wheat rose 1 3/4 cents to $6.78. July HRS fell 5 3/4 cents to $7.06 3/4.
• Cotton: July cotton futures rose 100 points to 75.44 cents and settled nearer session highs.
• Cattle: Expiring June cattle rose a nickel to $181.825, while the higher-volume August contract slipped 40 cents to $177.475 cents. August feeder cattle futures plunged $1.975 to $252.85.
• Hogs: Hog futures proved mixed Thursday, with the nearby contracts edging up and deferred futures sliding. Expiring June hogs rose 5 cents to $92.15, while most-active July climbed 77.5 cents to $92.975.
  

— Quotes of note:

• High-yield credit looks attractive amid gradual rate cuts by central banks. Gabriele Foa, portfolio manager at Algebris Investments, notes that high-yield credit is appealing as central banks, including the European Central Bank (ECB), are expected to cut interest rates gradually. Following the ECB’s recent 25 basis points rate reduction, Foa highlights that the ECB is unlikely to accelerate rate cuts due to strong economic growth and inflation remaining above the 2% target. Foa emphasizes the value in the high-yield component of global credit, which is more influenced by growth than interest rates. Specifically, lower-rated euro financial bonds and lower-quality euro bonds in defensive sectors such as telecom and utilities are seen as having favorable valuations.
  
• ECB rate path not on auto pilot. The European Central Bank (ECB) announced this week that future interest rate decisions will be made on a meeting-by-meeting basis, following a recent rate cut from record highs. This approach was reinforced by various European central bankers who emphasized that inflation remains a concern. Bundesbank chief Joachim Nagel stated that the recent rate reduction was not premature, but emphasized that the ECB is not on an automatic path for future rate cuts. Austria’s Robert Holzmann, who was the sole dissenting vote against the rate reduction, highlighted that inflation is more persistent than anticipated, urging caution in future decisions. ECB Vice President Luis de Guindos mentioned that the road ahead will be challenging and noted the possibility of slight inflation increases in some months. However, he expressed confidence that inflation would align with the target next year.
  
• Rating a cut. “More than a dozen central banks have cut rates already and there’s been a lot of decoupling from the Fed,” Robert Subbaraman, head of global markets research at Nomura, said yesterday. “It might be more bumpy from here.”
  
• JPMorgan and Citigroup are among the few banks still predicting that the Fed will ease next month (July 30-31).
  

— U.S. added 272,000 jobs in May, far higher than forecast. Economists polled by Bloomberg had expected a 180,000 rise in non-farm payrolls last month. The reading is also higher than the average monthly gain of 232,000 over the prior 12 months and 246,000 in the first four months of the year. The number for April, previously estimated at 175,000, was downgraded to 165,000.

Employment continued to trend up in several industries, led by health care; government; leisure and hospitality; and professional, scientific, and technical services.

According to Friday’s figures from the Bureau of Labor Statistics, the unemployment rate was 4% in May, coming in above projections of 3.9% (where it stood in April), and ending an historic streak in which it held below 4%. It was up from May 2023’s 3.7%.

The prime age labor force participation rate — people between the ages of 25 and 54 who are working or looking for work — edged up to 83.6%, the highest it’s been since early 2002.

Average hourly wages rose to a record $34.91, 0.4% higher than they were in April and 4.1% above where they were a year ago.

Market impacts: Investors don’t love these numbers, especially the nudge higher in wage growth, alongside the robust hiring figures. Those will raise concerns again that inflation’s gradual decline could yet stall. The two-year Treasury yield, which is sensitive to interest-rate expectations, is markedly higher. Stock index futures fell after the report (Dow opened around 70 points lower but is currently nearly unchanged) and CME Fed funds futures continued to solidly expect no rate cuts before September and the spread between a steady decision and a 25-basis-point reduction at the September meeting narrowed.

The release comes less than a week before the Federal Reserve’s June meeting when the U.S. central bank is expected to keep interest rates at a 23-year high of 5.25-5.5%. Question: Is today’s report likely to help delay interest rate cuts until after the November election, at the earliest? The conclusion of the FOMC meeting arrives June 12, the same day as the Consumer Price Index update. No rate adjustment is expected at that meeting and the updated forecasts from Fed officials and comments from Fed Chairman Jerome Powell about the path ahead will be the focus.

— Ag trade deficit continues to build in April, more red ink coming. The U.S. exported $14.44 billion of agricultural goods in April against imports of $18.30 billion, resulting in a deficit of $3.86 billion. That was up from a deficit of $2.85 billion in March. During the first seven months of fiscal year (FY) 2024, U.S. ag exports stood at $108.83 billion, while imports totaled $119.62 billion for a deficit of $10.79 billion.

USDA forecasts ag exports at $170.5 billion and imports at $202.5 billion for FY 2024, which would imply a record deficit of $32.0 billion. The first four or five months of the fiscal year are typically the best for ag exports, while imports are strongest during spring/summer, which is why the ag trade deficit is expected to increase sharply through September.

Of note: Since June 2023, there have only been two months where U.S. agriculture has a positive trade balance.

Factors driving the deficit:

• Strong U.S. dollar: A strong dollar makes U.S. exports more expensive and imports cheaper, increasing the volume of imports.
• Consumer preferences: There is a growing demand for high value imported goods such as fresh fruits, vegetables, and processed foods, which are not always available domestically year-round.
• Global competition: Increased competition from countries like Brazil and Russia, particularly in commodities like soybeans and corn, has impacted U.S. export volumes.
  

Import and export dynamics:

• Imports: The U.S. has seen a rise in imports of horticultural products, livestock, and dairy, driven by strong domestic demand and competitive pricing from foreign producers.
• Exports: While there have been increases in exports of livestock, dairy, and ethanol, these gains have been offset by reductions in grains, feeds, and oilseeds due to global competition and lower prices.
  

Policy implications:

• The agricultural trade deficit has raised concerns among policymakers and industry stakeholders about the competitiveness of U.S. agriculture in global markets.
• There are calls for more vigorous trade policies and new trade agreements to enhance market access and support U.S. agricultural exports.
  

The largest contributors to the U.S. agricultural trade deficit are primarily countries that are significant sources of U.S. agricultural imports. These countries include:

• Mexico is a major supplier of horticultural products such as fruits, vegetables, and alcoholic beverages to the U.S.
• Canada is another key supplier, providing horticultural products, grains, and meats.
• European Union (EU) is a significant source of horticultural products, including wine, spirits, and essential oils.
• Brazil is a major competitor in the global agricultural market, particularly in soybeans and corn. The U.S. faces strong competition from Brazil, which affects its export volumes and contributes to the trade deficit.
• China: Although China is a major market for U.S. agricultural exports, the competition from other countries, especially Brazil, has reduced U.S. exports to China. This shift has contributed to the trade deficit.
  

— Rapid increase in U.S. government debt has reached levels that pose significant risks globally, according to Paul Hannon, writing in the Wall Street Journal (link). In 2008, the U.S. held about a quarter of all outstanding debt issued by the governments of rich countries; now, it accounts for about half. This massive debt appetite is driving up borrowing costs worldwide, making it more expensive for other countries to borrow.

Central bankers, including Francois Villeroy De Galhau of the Bank of France, are concerned that the large U.S. fiscal deficit is tightening financial conditions and fueling inflation. Kristalina Georgieva of the IMF notes that the U.S. borrowing requirements divert resources away from emerging markets, hindering their development.

There is also a fear that investors might become hesitant to buy U.S. bonds, potentially pushing up yields and destabilizing the global financial system. Although the current U.S. debt level is lower than that of Japan and Italy, the lack of a political path to manage the deficit is worrying.

Bottom line: While the immediate risk of a U.S. debt crisis is low, international policymakers are concerned that if a crisis does occur, it will have widespread and severe consequences for bonds, stocks, derivatives, and the dollar’s value.

Market perspectives:

— Outside markets: The U.S. dollar index was slightly weaker ahead of the U.S. Employment report, with the euro, British pound, and Swiss franc all firmer against the US currency. The yield on the 10-year U.S. Treasury note was slightly higher, trading around 4.29%, with a mixed tone in global government bond yields. Crude oil futures were higher, with U.S. crude around $76.05 per barrel and Brent around $80.30 per barrel. Gold and silver futures were under significant pressure ahead of the U.S. jobs report, with gold around $2,353 per troy ounce and silver around $80.26 per troy ounce (see related item below on gold prices).

— Gasoline prices show signs of stabilizing. Gasoline prices in the U.S. seem to have peaked for now, with the national average for regular unleaded dropping to $3.49 per gallon from $3.67 this spring. Soft fuel consumption and a well-supplied market have helped curb prices at the pump. Diesel prices have also decreased, averaging $3.83 per gallon. Crude oil prices are falling due to concerns about excess supply, with West Texas Intermediate dropping from nearly $90 per barrel this spring to $75. This decline is driven by signals from OPEC and its partners that they may roll back some export cuts. While lower energy prices help contain inflation, significant further drops are unlikely unless the economy weakens considerably. OPEC and Russia, unable to afford a major decline in oil prices, may cut production again if necessary. U.S. oil output has plateaued, with energy firms idling drilling rigs to control costs amid the recent price drop. Additionally, an active hurricane season poses a risk to refineries and fuel supplies later this summer.

— Gold prices are currently experiencing a decline due to a combination of several economic and geopolitical factors:

• Interest rate expectations: The anticipation of interest rate cuts by the Federal Reserve has been a significant driver of gold prices. As the Fed signals potential rate cuts, the appeal of non-yielding assets like gold increases. However, if these rate cuts are delayed or fewer than expected, it can lead to a decline in gold prices. For instance, recent robust U.S. economic data and job creation exceeding expectations have raised doubts about the timing and extent of the Fed’s rate cuts, contributing to the cooling of gold prices.
• U.S. dollar strength: Gold prices typically have an inverse relationship with the value of the U.S. dollar. When the dollar strengthens, gold becomes more expensive for investors holding other currencies, reducing demand. Conversely, a weaker dollar supports higher gold prices. Recent fluctuations in the dollar’s value have influenced gold prices, with periods of dollar strength contributing to the decline in gold prices.
• Geopolitical factors: Geopolitical tensions and conflicts often drive investors to seek safe-haven assets like gold. However, if these tensions ease or do not escalate as expected, the demand for gold can decrease. For example, while ongoing conflicts and geopolitical uncertainties have supported gold prices, any resolution or de-escalation can lead to a decline.
• Central bank policies: Central banks’ actions, such as purchasing gold to diversify reserves, have a significant impact on gold prices. If central banks reduce their gold purchases or if there is a perception that they might do so, it can lead to a decline in gold prices. Central banks, particularly in China and other emerging markets, have been significant buyers of gold, but It appears gold dropped right after the news report that China’s central bank did not add to its gold reserves in May.
• Market sentiment and speculation: Investor sentiment and speculative activities also play a crucial role in gold price movements. If investors believe that gold prices have peaked or are vulnerable to a setback, they may reduce their holdings, leading to a price decline. For instance, some market analysts have expressed concerns that gold prices are “very vulnerable” to a setback due to various economic factors, including U.S. dollar strength and rising bond yields.

— Turkey to halt wheat imports until Mid-October. Turkey will stop wheat imports from June 21 until at least Oct. 15 to protect local producers, ensure domestic supplies, and create a favorable market for producers, according to the Agriculture Ministry. The ministry did not specify additional measures but mentioned that market conditions on Oct. 15 will determine if the import ban continues. The government aims to shield producers from price drops during the harvest, meet export raw material needs domestically, and stabilize the market in favor of local producers. The International Grains Council predicts Turkey will import 12 million metric tons (MMT) of grain in 2024-25, including 8.5 MMT of wheat. Russia, which supplies 60% to 75% of Turkish wheat imports, may be significantly impacted. However, this could benefit other importing countries if Russian wheat is sold at lower prices due to the loss of the Turkish market.

— Nigeria is considering suspending import duties on staple food, drugs and other essential items for six months to slow inflation in Africa’s most-populous nation.

— USDA daily export sale: 104,000 MT soybeans to China, 2023-24 marketing year.

— Ag trade update: South Korea purchased 68,000 MT of corn expected to be sourced from South America or South Africa.

— Extreme heat advisory for Western U.S. states. More than 25 million people in California, Nevada, Arizona, Utah, and New Mexico are under heat advisories due to soaring temperatures. A robust heat dome, a large high-pressure area trapping air and heating it with abundant sunshine, is causing this prolonged, unseasonable heat wave. Several temperature records were broken on Thursday. Las Vegas reached 111 degrees, surpassing the 110-degree record set in 2010. In California, Death Valley hit 122 degrees, breaking a record from 1996. Phoenix also recorded a high of 113 degrees, with more triple-digit temperatures expected in the coming days.

— NWS weather outlook: There is a Slight Risk of severe thunderstorms over parts of the Central Plains on Friday... ...There is a Slight Risk of excessive rainfall over parts of the Central Plains and Middle Mississippi Valley on Friday and the Central/Southern Plains and Middle/Lower Mississippi Valley on Saturday... ...There are Excessive Heat Warnings and Heat Advisories over parts of Central/Southern California, Southwest, and the Great Basin.

— Out of control cargo ship causes temporary bridge closure in Charleston. This week, an “out of control” cargo ship led to the temporary closure of the Arthur Ravenel Jr. Bridge in Charleston, South Carolina. Authorities are investigating the cause of the incident, which occurred on Wednesday. This follows a similar event over two months ago when the Dali cargo ship lost power and crashed into Baltimore’s Francis Scott Key Bridge, destroying the 1.6-mile span and resulting in the deaths of six construction workers.

Meanwhile, officials have announced that the Port of Baltimore shipping channel could fully reopen this weekend after extensive debris removal operations. These incidents have heightened scrutiny of U.S. bridges, emphasizing the risks posed by aging infrastructure and the increasing size of cargo ships.

— Israel is at risk of losing coal supplies from its biggest supplier, Colombia. The trade ministry recommended limiting shipments with the aim of helping to “end the armed conflict.”

— Russia starts wheat shipments to Brazil from Baltic terminal. Russia has started wheat shipments to Brazil from Vysotsky Port on the Baltic Sea, the quality inspection arm of Russia’s agricultural watchdog said. Shipments from the Baltic are intended to relieve pressure on grain terminals on the Azov and Black Seas, which are operating at maximum capacity amid record exports this season. The planned capacity of the grain terminal at Vysotsky Port is 4 MMT per year.

— Southern Ag Today examines farm bill base acre proposals. The House and Senate are proposing different approaches to updating base acres in the 2024 Farm Bill. The House’s Farm, Food, and National Security Act would allow up to 30 million additional base acres for farms where planted acres exceed current base acres. In contrast, the Senate’s Rural Prosperity and Food Security Act offers a more limited update opportunity for “underserved producers.”

Key points from the Southern Ag Today report (link):

• Historical context: Base acres were established decades ago and rarely updated. Base acres are decoupled from current planting history, reflecting what was planted in the mid-1980s rather than today.
• Previous updates: The 2014 Farm Bill allowed for a reallocation of base acres but did not permit new base acres to be added. The last significant opportunity to add base acres was in the 2002 Farm Bill when soybeans were included as a covered commodity.
• House proposal: The House Ag Committee’s proposal is optional and would be the largest opportunity to add base acres since the mid-1980s. Farms could add base acres if their average plantings from 2019 to 2023 exceed current base acres. The proposal includes limitations to ensure fairness and practicality:
  • Eligible acres may include non-covered commodities but are limited to 15% of the total farm acres.
  • New base acres would be assigned to covered commodities based on the ratio of plantings from 2019 to 2023.
  • If total applications exceed 30 million acres, a pro-rata reduction would be applied.
• Significance: This proposal could greatly benefit farmers with under-based land, making it highly popular among agricultural producers.

There are challenges about discussing this topic. Reason: There is a lack of comprehensive data, leading the authors (Dr. Bart Fischer and Dr. Joe Outlaw) to note it is difficult to assess the full scope of the issue and the implications of updating base acres.

Bottom line: The authors say the House proposal represents a significant shift in farm policy, providing a substantial opportunity for farmers to align base acres with current planting practices. This change is expected to be very well-received in the agricultural community.

— Farmdoc analyst keeps up negative mantra on House farm bill. The debate over how to offset $53 billion in crop subsidy and crop insurance spending in the House farm bill highlights how Congress tries “to force itself to reduce spending while also being unwilling to live by its own rules,” says Jonathan Coppess, Department of Agricultural and Consumer Economics, University of Illinois (link). Of note: Coppess uses the word “dissonance” 13 times in the report.

— China’s exports surge more than expected in economic boost. In May, China’s exports surged by 7.6% in dollar terms compared to the previous year, surpassing economist forecasts. Imports, however, rose only 1.8%, indicating weak domestic demand. This resulted in a trade surplus of nearly $83 billion for the month. Beijing is leveraging strong global demand to offset sluggish consumer spending at home, which has been affected by a real estate slump.

Analysts note that China’s competitive goods are gaining a larger share in the global market, supported by a strong dollar and price cuts by exporters. Despite challenges like new trade barriers in advanced economies, China’s auto exports remain robust, with May’s sales being the second highest on record.

Exports to the U.S. rose by 4.8%, the most in three months, while exports to ASEAN countries jumped 25%, and those to the EU fell by 0.7%. Steel exports also saw significant volume, reflecting weak domestic demand pushing producers to seek foreign markets.

Despite potential new tariffs, Chinese exporters are expected to continue front-loading shipments to avoid duties.

Upshot: While favorable global demand is likely to sustain export growth, it may not fully compensate for weak domestic demand, as highlighted by lower-than-expected import figures.

— China’s meat imports increase in May. China imported 557,000 MT of meat in May, up 2.4% from April but down 6.7% from last year. Through the first five months of this year, China imported 2.78 MMT of meat, down 11.5% from the same period last year.

— A look at 40B and 45Z Credits for soy biofuels was provided by American Soybean Association (ASA) Chief Economist Scott Gerlt. The following are the highlights of what Gerlt wrote for ASA’s weekly report:

Federal tax credits for biofuels are set to change direction following the enactment of the Inflation Reduction Act (IRA) in August 2022. This legislation extends the Biodiesel Blenders Tax Credit, establishes a sustainable aviation fuel (SAF) tax credit, and transitions future biofuel tax credits to a carbon intensity (CI) basis.

Sustainable Aviation Fuel (SAF) is a renewable alternative to fossil fuel-based jet fuel, produced through multiple pathways, including fats and oils such as soybean oil. Due to increased interest in reducing carbon emissions, SAF production has gained significant attention. The IRA introduced the 40B tax credit to offset the higher costs of SAF production.

40B Credit is available for 2023 and 2024. The program offers up to $1.75 per gallon for SAF with a CI reduction of at least 50% compared to petroleum-based aviation fuel. The credit amount increases with greater GHG reductions. For example, a 70% GHG reduction earns a $1.45 credit per gallon. Several methods determine CI, with the most favorable result applied to the credit calculation.

SAF production and CSA Practices. SAF producers can further reduce CI scores through renewable energy use and climate-smart agriculture (CSA) practices, like no-till farming and cover crops. However, the current credit for these practices is insufficient to incentivize widespread adoption.

Transition to 45Z credit. On Jan. 1, 2025, the 40B and 40A credits will expire, and the 45Z program will begin, running through 2027. The new credit will be based on emissions rates, providing $1.75 minus $.035 per kg of CO2e per mm BTU for SAF with emissions below 50%. This shift may reduce incentives for agricultural feedstocks, favoring waste-based materials.

Non-SAF biofuels under 45Z. The 45Z program also establishes a tax credit for biodiesel and renewable diesel, which will receive $1.00 minus $.02 per kg of CO2e per mm BTU, indexed to inflation. The GREET model will be used for CI scoring.

Implications for soy biofuels. The potential 45Z credits for soy biofuels are lower than the current biomass-based diesel tax credit, with most renewable diesel receiving additional Low Carbon Fuel Standard credits in California. The 45Z program may further increase demand for waste-based feedstocks over agricultural ones.

Future developments. The details of 45Z are still unfolding, and the program’s 2027 expiration adds uncertainty for farmers and biofuel producers. Expanding CSA practices could help balance credit discrepancies between agriculture and waste-based feedstocks. The 40B program is a transitional step, providing insight into the development of 45Z and its impact on biofuel production and feedstock use.

Of note: ASA anticipates that Treasury will publish a request for information in the coming weeks, which would allow stakeholders to provide formal feedback. While further guidance is yet to be released, ASA is urging Treasury to publish before the tax credit takes effect so farmers can make appropriate planting decisions.

— Vilsack on Supreme Court decision and Proposition 12. USDA Secretary Tom Vilsack expressed concerns that the Supreme Court “didn’t understand” the pork market when it upheld California’s animal welfare law, Proposition 12. Speaking in Asheville, North Carolina, Vilsack highlighted the tension between states’ rights to regulate farming within their borders and the implications of extending these regulations to farmers in other states.

California’s Proposition 12 has faced backlash from major pork-producing states. The House farm bill aims to overturn Prop 12 and similar state animal welfare laws affecting dairy, beef, and pork products, while still allowing states to enforce their laws within their own borders.

Vilsack suggested that Congress has the opportunity to clarify that states can regulate farming practices within their borders but should not impose those regulations on farmers in other states. However, he also pointed out the political challenges, noting potential opposition in the Democratic-controlled Senate and the difficulty in passing the farm bill.

Vilsack concluded by acknowledging the complexity of the issue and the need to carefully consider the political costs involved.

— Minnesota reports first H5N1 outbreak in dairy herd. Minnesota reported the state’s first outbreak of the H5N1 virus in dairy cattle in a herd in Benton County. This marks the 11th state to discover the virus in dairy herds. This was not the first Minnesota dairy farm tested for H5N1 due to cattle showing signs of illness, but it was the first to confirm positive results.

— UN Food and Agriculture Organization (FAO) reported a third consecutive monthly rise in food commodity prices as of May. The FAO’s Food Price Index (FPI) reached 120.4, marking a 0.9% increase from April’s revised level. Despite this rise, current prices are still 3.4% lower than the previous year and about 25% below the peak seen in March 2022.

In May, prices for cereals and dairy products increased, while sugar and vegetable oils saw a decline. The FAO attributed the rise in wheat prices to increasing global export prices, driven by concerns over poor crop conditions impacting yields for the 2024 harvests in key producing regions such as Northern America, Europe, and the Black Sea area.

Additionally, adverse weather in South America contributed to higher corn prices.

Dairy prices rose by 1.8%, spurred by heightened demand from retail and food services ahead of the summer holidays and expectations of lower milk production in Western Europe.

Conversely, sugar prices fell by 7.4%, and vegetable oil prices dropped by 2.4%, influenced by decreased palm oil prices and weak demand.

Bottom line: These increases in key food commodities are exacerbating global inflationary pressures.

— Dairy farms decline, but raw milk business thrives. While dairy farms have been declining for decades, Mark McAfee’s Raw Farm in Fresno, California, is an exception, according to an account in the Wall Street Journal (link). Since 2020, his business has grown significantly and is expected to reach $30 million in sales this year. Raw Farm is California’s largest supplier of unpasteurized milk, popularized by endorsements from Gwyneth Paltrow and availability at specialty grocers like Erewhon and Sprouts.

Influencers and social-media personalities have boosted demand by promoting raw milk as creamier, more nutritious, and easier to digest than pasteurized milk. “Influencers have really driven us in the last four years to new levels we never imagined,” McAfee said.

However, the FDA warns against consuming unpasteurized milk due to the risks of salmonella, listeria, and E. coli, which can cause severe illnesses and even death. Despite these risks, selling raw milk is legal in California and over half of U.S. states, though interstate sales are banned. The FDA highlights particular dangers for children, the elderly, immunocompromised individuals, and pregnant women and has issued warnings about bird-flu contamination in dairy cows. Twenty states have laws restricting raw milk sales in some form.

— Food Waste App Too Good to Go expands in U.S. with Circle K partnership. Too Good To Go (TGTG), an app that enables consumers to purchase surplus food from restaurants and stores at a discount, is expanding its U.S. presence by adding thousands of Circle K convenience stores. This move aims to increase TGTG’s reach as high food prices continue to impact consumers despite cooling inflation, according to Bloomberg (link).

Circle K’s parent company, Alimentation Couche-Tard, plans to have over 9,000 stores in the U.S., Canada, Ireland, and Poland on TGTG’s app by the end of the year. This will boost the number of North American partner stores by 27%, bringing the total to about 37,000 and expanding beyond urban centers.

TGTG’s “surprise bags” of surplus food, priced around $5, have drawn considerable interest, particularly from budget-conscious and sustainability-minded consumers. The app has seen substantial growth in the US, with a 134% increase in registered users over the past year, reaching 8.2 million. The company aims to sustain this growth rate over the next couple of years.

Globally, TGTG has nearly 100 million users in 17 countries and plans to launch in Australia soon. The app’s popularity has surged as rising living costs put pressure on households, accelerating its growth. TGTG achieved profitability after being valued at approximately €750 million ($816 million) in a 2022 funding round.

TGTG CEO Mette Lykke noted the app’s appeal to young families and college students seeking affordable food options. Chris MacAulay, head of TGTG’s US business, highlighted the high demand for the service, especially in college towns.

— In the 2024 primary election, at least 14 Republican South Dakota state legislators lost to fellow Republicans, with a contentious carbon dioxide pipeline being a key issue. Voters also removed two Native American lawmakers, a mother and son, and re-elected a former House speaker. Some winners opposed Summit Carbon Solutions’ carbon capture pipeline, a project designed to transport CO2 from ethanol producers in South Dakota and other states for sequestration in North Dakota. The project has sparked over two years of legal disputes over landowner rights and eminent domain. Link for details.

Incumbents who lost had endorsed Senate Bill 201’s “Landowner Bill of Rights,” aimed at balancing landowner protections with pipeline project progress. Ethanol advocates argue that carbon sequestration is vital for the industry’s future in South Dakota. Opponents are pushing for a public vote on the new law in November.

The primary featured 44 Republican and only one Democratic race, with winners advancing to the Nov. 5 general election. Statewide voter turnout was 17%, considered low compared to previous primaries.

Note: Rep. Dusty Johnson (R-S.D.) advanced from the Republican primary for the U.S. House South Dakota At-large District. The primary election was canceled because only one candidate filed in both the Democratic and Republican primaries.

— Slight shift toward Biden after Trump conviction, new survey shows. After Donald Trump’s conviction, a slight shift toward President Biden has emerged, according to a New York Times/Siena College recontact survey of nearly 2,000 voters. Initially, the group favored Trump by three points, but post-verdict, the margin narrowed to one point. While Trump still retains 93% of his previous supporters, the modest loss of 7% could be crucial in a close election. Young, nonwhite, and disengaged Democratic-leaning voters showed notable shifts away from Trump. Although Biden has gained, the electorate remains unsettled, and opinions could shift again before the election. Link for details.

— EU parliamentary elections begin with far-right parties expected to gain historic seats. The European Union began four days of parliamentary elections on Thursday, with far-right parties predicted to gain a historic number of seats. Although the European Parliament cannot draft laws, it holds significant power through its veto and budget-approval capabilities, influencing the EU’s agenda for the next five years. This election, the second-largest democratic exercise globally after India’s general elections, involves around 350 million registered EU voters choosing 720 parliamentary representatives from approximately 200 parties. Initial results are expected on Sunday.

— Mexico’s ruling party has pledged to respect the legislative process, addressing concerns that it might fast-track reforms before President-elect Claudia Sheinbaum assumes office. Investors are worried about potential bills that could undermine checks and balances on power, causing unease in the market.

— ASA submits comments on Bayer’s dicamba registration, highlights concerns over post-emergent use and cutoff dates. The American Soybean Association (ASA) submitted comments to the EPA regarding Bayer CropScience’s proposed registration for a new low-volatility dicamba product for use on dicamba-tolerant soybeans and cotton. While soy growers support the new registration for market stability, they have several concerns, particularly the lack of post-emergent use for soybeans, which is crucial for managing herbicide-resistant weeds like palmer amaranth.

ASA emphasized that denying post-emergent access to dicamba would significantly harm crops and potentially force farmers to use more environmentally damaging methods. The association also criticized the proposed June 12 cutoff for pre-emergent use on soybeans and the stringent Endangered Species Act restrictions, urging EPA to adopt a more science-based approach.

Additionally, ASA urged the EPA to base off-target risk management on recorded evidence. Without a new registration by fall, there could be significant disruptions to supply chains, as seed producers are already preparing dicamba-tolerant seeds for 2025.

ASA is requesting swift EPA approval by September to avoid these issues. The EPA will review public comments and incorporate feedback into its final decision.

— Cotton AWP drops. The Adjusted World Price (AWP) for cotton fell to 58.13 cents per pound, effective today (June 7), down sharply from 64.37 cents per pound the prior week. This is the lowest AWP since it was at 56.84 cents per pound the week of Nov. 20, 2020. Meanwhile, USDA announced Special Import Quota #8 will be established June 13 for the import of 35,277 bales of upland cotton, applying to supplies purchased no later than Sept. 10 and entered into the U.S. no later than Dec. 9.

— Brazil’s lower house of Congress has approved the main text of a bill that introduces a 20% import tax on international online purchases priced below $50. This new tax rate is a significant reduction from an earlier proposal that aimed to impose a 60% tax on such purchases. The bill now moves to the Senate for consideration.

The decision to establish a 20% tax rate came after negotiations between lawmakers and the administration of President Luiz Inácio Lula da Silva. Despite the government’s initial opposition to the tax plan, the new rate was agreed upon as a compromise. President Lula has expressed his inclination to veto the bill if it passes Congress, although lawmakers could override his veto with a simple majority vote.

This legislative move is part of broader efforts to balance public spending with increased tax revenue. The bill also includes sustainability tax incentives for automakers. The proposed tax has garnered support from local retailers who are concerned about the growing influence of Asian e-commerce giants like Alibaba’s AliExpress and Shein in the Brazilian market. However, it has faced opposition from online shoppers, leading to the abandonment of a similar tax plan by Lula’s administration last year following strong public backlash.

Of note: The proposed 20% tax on international online purchases in Brazil is primarily aimed at consumer goods and is not directly related to agricultural imports or exports. However, the introduction of new taxes on imports might influence Brazil’s trade relations. If other countries perceive this as a protectionist measure, it could lead to retaliatory tariffs or trade barriers, potentially affecting Brazilian agricultural exports. Brazil’s agricultural sector is heavily export-oriented, with significant exports of soybeans, beef, poultry, and other commodities.

The bill must receive Congress approval by September 15 to be enacted.

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