USDA again lowers FY 2023 ag export forecast
In Today’s Digital Newspaper |
USDA’s annual ag outlook confab has begun and will continue into Friday, We have some initial USDA projections for the year ahead below.
Putin and Xi’s possible meeting in Russia. Vladimir Putin, Russia’s president, suggested that Xi Jinping, China’s leader, had agreed to visit Moscow and hailed “new frontiers” in relations between the two countries. On Wednesday Putin met Wang Yi, China’s top diplomat, laying the ground for Xi’s trip.
Jens Stoltenberg, NATO’s chief, said the alliance believes that China may be planning to supply Russia with weapons in Ukraine. Stoltenberg urged China, which has previously denied such claims, to desist.
China to shake up financial system as Xi Jinping installs key associates. Zhu Hexin and He Lifeng, two close associates of China’s leader, have emerged as leading candidates for top positions at the country’s central bank. More in China section.
Russia and China vow to strengthen ties despite international ‘pressure’ — Beijing’s top diplomat meets Vladimir Putin two days before first anniversary of Ukraine invasion.
Brazil announced that it would temporarily halt exports of beef to China after detecting a case of mad cow disease in the northern state of Pará. Brazil, which is the world’s largest beef exporter, previously suspended exports to China for more than three months in 2021 because of an outbreak. The suspension will hurt Brazilian food producers as China is their largest export market. We have more in Livestock section
Transportation Secretary Buttigieg will visit the site of a Norfolk Southern train derailment in East Palestine today, the second Cabinet official to make a visit to the Ohio village since the incident two weeks ago. According to the Washington Post, Buttigieg “will meet with members of the community, get an update on the National Transportation Safety Board’s investigation and speak to investigators from his department who have been helping to determine the cause of the derailment.”
FDA said plant-based milk products may continue to be labeled as “milk.” The agency said in a proposal that the products’ labels should explain how the products are different from cow’s milk. The move drew mixed reviews from the dairy industry and its advocates, which want to prohibit nondairy milks from using the word “milk,” but cheered the push to explain nutritional differences.
If you or your various groups haven’t released new farm bill priorities, you would be the exception. A plethora of recommendations have been released recently. Upshot: Most of them are ideas from the past, with few mentioning how much the ideas will cost. Stay focused on the House and Senate Ag Committee, and their leaders, as they and their staff will write the farm bill. Meanwhile, leaders of the Senate Agriculture Committee have invited the public to submit proposals for the new farm bill by emailing FarmBill2023@ag.senate.gov or by filling out a digital form on the committee’s website.
More than 850,000 power outages have been reported in winter storms across the U.S. today, with more snow, icing and blizzard conditions ahead. The wintry weather has already closed roads and hampered air travel across the Midwest, with more than 40 inches of snow dumped in Wyoming and 32 inches in Montana over the past two days. More than 60 million people are currently under winter weather alerts from the West into the northern Plains, Great Lakes region and New York and New England. Out West, in an extremely rare event, some parts of Southern California will be under blizzard warnings beginning Friday —- the first blizzard alert of its kind since 1989.
MARKET FOCUS |
Equities today: Global stock markets were mixed but mostly firmer overnight. U.S. Dow opened around 130 points higher. In Asia, Japan closed. Hong Kong -0.4%. China -0.1%. India -0.2%. In Europe, at midday, London -0.2%. Paris +0.5%. Frankfurt +0.6%.
U.S. equities yesterday: The Nasdaq ended higher for the session while the Dow and S&P 500 were lower but well off their session lows after the losses registered Tuesday. The Dow finished down 84.50 points, 0.26%, at 33,045.09. The Nasdaq rose 14.77 points, 0.13%, at 11,507.07. The S&P 500 declined 6.29 points, 0.16%, at 3,991.05.
Agriculture markets yesterday:
- Corn: March corn fell 6 1/2 cents to $6.74, ending the session right above the 100-day moving average. May corn fell 6 1/4 cents to $6.74 1/4.
- Soy complex: March soybeans fell 9 1/4 cents to $15.39 1/2, marking a low-range close, while March meal dropped $5.10 to $492.60. March soyoil rose 6 points to 62.83 cents.
- Wheat: March SRW wheat futures fell 14 cents to $7.36 1/2. May SRW wheat fell 12 3/4 cents to $7.50, near the session low and hit a three-week low. March HRW wheat dropped 28 1/4 cents to $8.76. May HRW wheat slid 24 cents to $8.69 1/2 and near the session low. March spring wheat fell 10 1/4 cents to $9.14 1/4 and May spring fell 9 3/4 to $9.09.
- Cotton: March cotton rose 133 points to 82.25 cents, a mid-range close after gapping higher overnight. May cotton rose 35 points to 81.88 cents.
- Cattle: April live cattle fell 2 1/2 cents at $165.075 and nearer the session high. March feeder cattle gained $1.10 at $187.975 and near the session high.
- Hogs: April hog futures tumbled $2.55 to $86.55 in response to Tuesday’s late dive in wholesale prices.
Ag markets today: Corn, soybeans and wheat traded on both sides of unchanged while holding in narrow ranges overnight. As of 7:30 a.m. ET, corn futures were trading fractionally on either side of unchanged, soybeans were 2 cents lower to 1 cent higher, SRW and HRS wheat futures were narrowly mixed, while HRW wheat was around 3 cents lower. Front-month crude oil futures were around 75 cents higher, and the U.S. dollar index was about 100 points lower this morning.
Technical viewpoints from Jim Wyckoff:
On tap today:
• USDA annual ag outlook conference begins, through Friday.
• U.S. jobless claims are expected to rise to 197,000 in the week ended Feb. 18 from 194,000 one week earlier. (8:30 a.m. ET) UPDATE: The number of Americans filing for unemployment benefits fell by 3,000 to 192,000 in the week ending February 18, below market expectations of 200,000. The latest value remained close to the nine-month low of 183,000 hit at the end of January, giving further evidence that the U.S. labor market remains tight in part to reduced labor force participation. This could force employers to raise wages to attract and keep staff, adding to further inflationary pressure in the world’s largest economy. The four-week moving average, which removes week-to-week volatility, rose by 1,500 to 191,250. On a non-seasonally adjusted monthly basis, claims fell by 14,465 to 210,867, with significant declines in California (-4,276) and New York (-1,938).
• U.S. gross domestic product for the fourth quarter is expected to rise at a 2.9% annual pace from the prior quarter, unchanged from an earlier reading. (8:30 a.m. ET) UPDATE: The U.S. economy expanded an annualized 2.7% on quarter in Q4 2022, slightly below 2.9% in the advance estimate. Consumer spending rose 1.4%, the least since Q1 2022 and below 2.1% in the advance estimate. Spending on goods went down 0.5%, revised from an initial estimate of a 1.1% rise, mainly dragged down by a fall in jewelry. Spending on services went up 2.4%, also below 2.6% in the advance estimate. Considering full 2022, the GDP expanded 2.1%.
• Kansas City Fed’s manufacturing survey for February is out at 11 a.m. ET.
• Federal Reserve speakers: Atlanta’s Raphael Bostic at a banking outlook conference at 10:30 a.m. ET, and San Francisco’s Mary Daly on leadership and the economy at 2 p.m. ET
FOMC minutes reinforced the idea that the Fed will continue to hike rates. Almost all Fed officials agreed a 25-bps hike was appropriate, and there was virtually zero mention of a pause in rate hikes. Upshot: The minutes lowered the chances of a 50-bps hike, but solidified chances we see the terminal (or peak) fed funds rate above the 5.125% market expectation. The release showed that several Fed members are prepared to stay firm in their fight against inflation as the job market and wages feed more price increases — some officials were concerned about stopping or slowing their inflation-fighting campaign too soon.
The next trigger for the market will come on Friday with the release of the PCE price index. The consensus is for core consumer prices to have accelerated versus the previous month and for the YOY comparison to be flat.
Mortgage applications fall to lowest level in 28 years. U.S. existing-home sales fell for the 12th straight month in January — and the outlook isn’t much better for February. The Mortgage Bankers Association’s weekly purchase index, a measure of applications for mortgages, dropped to its lowest level since 1995 last week. That is the latest sign that high interest rates are keeping potential buyers on the market’s sidelines.
Market perspectives:
• Outside markets: The U.S. dollar index shifted lower. The yield on the 10-year U.S. Treasury note was slightly higher, trading around 3.94%, with a firmer tone in global government bond yields. Crude was higher, with U.S. crude around $74.65 per barrel and Brent around $81.15 per barrel. Gold and silver were lower, with gold around $1,833 per troy ounce and silver around $21.56 per troy ounce. ·
• Natural gas prices have dropped more than 65% since mid-December and this week hit their lowest level since 2020’s pandemic lockdown, leading producers to throttle back drilling in a dramatic turn in the market for the heating and power-generation fuel.
• Reuters: India not planning on lifting rice export ban, export taxes. India is not planning on lifting its ban on broken rice exports nor does it plan on cutting a 20% tax on white rice exports as the country deals with inflation, Reuters reported, citing two government sources. India is the world’s largest rice exporter but banned broken rice exports and put a duty on exports of other rice grades in September 2022 on concern over supplies due to below-average monsoonal rainfall. the 20% duty failed to slow rice exports and that has apparently convinced the government not to limit or remove the duty, one official said. There also are concerns that El Nino could also impact monsoon rains ahead and the country wants to maintain its ample rice stocks. The situation will keep international rice prices elevated and it is unclear whether that will open the door for any further for U.S. rice exports.
• Ag trade: Egypt purchased 240,000 MT of Russian wheat. Algeria purchased between 30,000 and 40,000 MT of corn from Argentina. Taiwan tendered to buy 48,975 MT of U.S. milling wheat. South Korea passed on a tender to buy up to 138,000 MT of optional origin corn. Jordan tendered to buy up to 120,000 MT of optional origin milling wheat.
• NWS weather outlook: A deep layer low will produce heavy snow across the terrain of California and heavy rainfall across southern California... ...A swath of heavy snow and locally significant ice will stretch from the Great Lakes to the Northeast... ...Record-breaking warmth expected over the East going through Thursday as extreme cold hits the Northern Plains and the Intermountain West.
Items in Pro Farmer’s First Thing Today include:
• Two-sided grain trade overnight
• USDA Weekly Export Sales report pushed back to Friday
• Eurozone January inflation a tad higher than initially indicated
• China continues wheat auctions
• Choice beef continues to surge
• Cash hog index picks up steam
USDA AG OUTLOOK FORUM |
— USDA’s initial 2023-24 projections... Based on the January WASDE Report, USDA projects the following:
- Corn: Planted acreage of 91.0 million, with harvested acres of 83.1 million. A national average corn yield of 181.5 bu. per acre would produce a crop of 15.085 billion bushels. Total use is projected at 14.490 billion bu., with feed and residual use of 5.600 billion bu., food, seed & industrial use of 6.690 billion bu. (5.250 billion bu. for ethanol) and exports of 2.200 billion bushels. Carryover: 1.887 billion bushels (13.0% stocks:use). Price: $5.60.
- Soybeans: Planted acreage of 87.5 million, with harvested acres at 86.7 million. A national average bean yield of 52.0 bu. per acre would result in a crop of 4.510 billion bushels. Total use is projected at 4.461 billion bu., including a record 2.310 billion bu. of crush and exports of 2.025 billion bushels. Carryover: 290 million bushels (6.5% stocks:use). Price: $12.90.
- Wheat: Planted acreage of 49.5 million, with harvested acres at 38.4 million. A national average yield of 49.2 bu. per acre would produce a crop of 1.887 billion bushels. Total domestic use is projected at 1.142 billion bu., with exports forecast at 825 million bushels. Carryover: 608 million bushels (30.9% stocks:use). Price: $8.50.
- Cotton: Planted acreage of 10.9 million, with harvested acres at 8.9 million and a national average yield of 852 lbs. per acre. That would produce a crop of 15.80 million bales. Total use is projected at 16.1 million bales, including exports of 13.8 million bales. Carryover: 4.0 million bales (24.8% stocks:use). Price: 80.0¢.
- Cattle: U.S. beef production is projected at 26.5 billion lbs., down 6% from 2022. Exports are projected at 3.09 billion lbs., down 12.6% from last year. Cash price: $159.00, which would be a record and approximately $15.00 above last year.
- Hogs: U.S. pork production is projected at 27.4 billion lbs., up 2% from last year. Exports are expected to inch up 0.2% from last year to 3.65 billion pounds. Cash price: $66.50, down $4.71 from last year.
- Broilers: U.S. production is projected to be 46.7 billion lbs. with broiler meat exports seen at 7.32 billion pounds. Wholesale broiler price: $1.27 per lb., down 10% from last year.
— USDA again cuts U.S. ag export forecast for fiscal year (FY) 2023 but kept their forecast for US agricultural imports intact, resulting in an expansion of the forecast for a trade deficit for the sector in FY 2023. USDA forecasts ag exports at $184.5 billion vs imports of $199 billion for a trade deficit of $14.5 billion. In November, USDA saw exports at $190 billion against imports of $199 billion.
“The U.S. dollar remains relatively strong,” USDA Chief Economist Seth Meyer said in delivering the updated forecast at the USDA Outlook Forum near Washington. “That produces headwinds for us when we think about exports. On the other side, the strong dollar makes US consumers able to import products they like.”
China remains the top destination for U.S. ag exports based on the FY 2023 forecasts, with Mexico in the number two spot and Canada at number three.
RUSSIA/UKRAINE |
— Ukraine exports are drying up because of uncertainty about whether the deal will be renewed ahead of its expiration on March 18 or March 19. Wheat prices have risen about 10% over the past month. The uncertainty is being compounded by delays as ships wait weeks for inspection by Russian officials before they can leave the Black Sea. Ukraine’s grain exports will continue to be weak even if a new deal is reached. Grain exports from August 2022 through February 2023 were down 43% year over year. Around 3 million tons of grains and oilseeds were shipped out of Ukraine last month, according to the U.N. Black Sea Grain Initiative vessel tracker, down from the 3.7 million tons shipped in December. So far this month, about 1.5 million tons had shipped by Feb. 20, the U.N. data shows, of the 2.8 million tons scheduled.
— Medvedev: Russia has right to use nuclear weapons if U.S. aim is to defeat them. Former Russian President Dmitry Medvedev hit back at the U.S. on Wednesday, warning that his country reserved the right to use its nuclear arsenal to defend itself following President Joe Biden’s Tuesday speech in Warsaw. Medvedev, still a high-ranking official, wrote on Telegram, “After all, it is obvious to all reasonable forces that if the United States wants the defeat of Russia, then we are on the verge of a world conflict. If the United States wants to defeat Russia, then we have the right to defend ourselves with any weapon, including nuclear.”
POLICY UPDATE |
— WaPo: White House aides have discussed Social Security tax, eyeing shortfall. Aides to President Biden have in recent weeks discussed proposing raising payroll taxes on the rich to fund Social Security, but it is unclear if the president will ultimately endorse that measure when he releases his budget in March, the Washington Post reports (link), citing three people familiar with international deliberations. Meanwhile, two U.S. lawmakers just back from visits to Taiwan said the island’s government is bolstering its defenses against cyber attacks and disinformation, and called on U.S. technology companies to better confront China’s online offensives.
CHINA UPDATE |
— WSJ: U.S. to expand troop presence in Taiwan for training against China threat. The U.S. is markedly increasing the number of troops deployed to Taiwan, more than quadrupling the current number to bolster a training program for the island’s military amid a rising threat from China, the Wall Street Journal reports (link).
— Yellen: U.S. to resume discussions on economic issues with China at ‘appropriate time’. Treasury Secretary Janet Yellen said the U.S. would resume discussions with China on economic issues “at an appropriate time” but continued to warn Beijing of the consequences of violating U.S. sanctions on Russia. Ahead of a G20 meeting of financial leaders in Bengaluru, Yellen said communication between the United States and China was important for “the sake of the entire globe.” Tensions between the Washington and Beijing have heightened after the U.S. shot down a Chinese surveillance balloon and the U.S. warned China to not provide Russia with “lethal assistance” in its war with Ukraine.
— Xi to shake up China’s financial system. Chinese President Xi Jinping is preparing to shake up the leadership of the country’s financial system, the Wall Street Journal reported (link). Xi will install key associates to run the central bank and revive a Communist Party body to tighten political control over financial affairs. Zhu Hexin was the leading candidate to succeed U.S.-educated economist Yi Gang as governor of the People’s Bank of China, WSJ reported. Meanwhile, the Central Commission for Discipline Inspection vowed to “seriously punish... corrupt elements” in “resource-rich, capital-intensive areas” including finance, state-owned enterprises and grain purchasing entities.
LIVESTOCK, FOOD & BEVERAGE INDUSTRY |
— Brazil discovers case of BSE. Brazil confirmed a case of bovine spongiform encephalitis (BSE) in a cow in the northern state of Para. Ag ministry officials say it appears to be an “atypical form” of the disease, but samples from the animal were sent to the World Health Organization for further testing. Brazil halted beef export to China, effective immediately. Brazil can ship beef to the U.S. as it is considered a country with negligible risk for BSE. But Brazil is affected with Foot and Mouth Disease (FMD) and the U.S. only allows imports of beef from the state of Santa Catarina, which is recognized as being FMD free. So, this BSE case in Para should not impact Brazilian beef shipments to the United States.
Brazil’s agricultural minister Carlos Favaro said in a television interview late Wednesday that he hoped the ban would be lifted before President Luiz Inácio Lula da Silva visited China at the end of March, his first visit to the country since taking office for a third time last month. Wednesday’s suspension is part of a 2015 bilateral agreement between Brazil and China to automatically halt shipments of beef on detection of the disease.
— Plant-based dairy alternatives. FDA issued new guidance Wednesday that requires companies to better explain how plant-based dairy alternatives compare with dairy milk. Link for details. Under the new proposal, the FDA would continue to label those products “milk,” but explain on prominent labels how their nutritional content differs from cow’s milk, such as calcium or vitamin D levels. The framework drew mostly cheers from dairy producers, but advocates for plant-based milks said that it would add unnecessary burdens to the growing industry. The agency is soliciting comments.
— More about Canada’s wild super pigs. We received several inquiries for more information about our report Wednesday on this topic. We asked ace Canada reporter and broadcaster Shaun Haney to find out more, and he did. His report:
“Dr. Ryan Brook from the University of Saskatchewan (U of S) sent me some information. By the way, part of the U of S program is funded by USDA.” Here is Dr. Brook’s comments:
“A super pig is a hybrid of European Wild Boar and domestic pig — this mix makes them the worst invasive large mammal on the planet. They are highly intelligent, have the razor-sharp tusks and thick fur of a wild boar and the large body size and high reproductive rate of a domestic pig. Being large and furry and smart helps them survive 40 below temperatures and they tunnel into snowbanks to stay warm. Their high reproductive rate of six young per litter on average and two litters per year allows their populations to grow rapidly and they will eat just about anything from eggs, birds, insects, plant roots, plants, agricultural crops, baby lambs and deer, adult deer, and frogs.
“These animals were imported to Canada starting in the 1980s to diversify agriculture but escaped and were set free after the sales market peaked in 2001 then collapsed. They started reproducing in the wild then expanded exponentially and spreading across over one million square km, mainly in the prairie provinces but also a bit in BC, Ontario and Quebec. There is now very real risk of them moving south into the US, especially Montana, North Dakota, and Minnesota and establishing there were there are few or no wild pigs, and possibly carrying disease.
“It is now too late to eradicate them in Canada, but many areas can become and stay wild pig free like BC and Ontario. Trapping of entire groups, helicopter capture, ground based removal teams, Judas pigs (GPS satellite tracking collar on a pig that leads you to other pigs), education, and fencing are all good options and indeed success only comes with using all of these together. Sport hunting is NOT the solution and actually makes the problem much worse by breaking up groups and spreading them around the landscape. Most important thing overall is effective LEADERSHIP.”
HEALTH UPDATE |
— Summary:
- Global Covid-19 cases at 674,594,923 with 6,866,386 deaths.
- U.S. case count is at 103,316,622 with 1,116,815 deaths.
- Johns Hopkins University Coronavirus Resource Center says there have been 670,987,625 doses administered, 269,332,266 have received at least one vaccine, or 81.1% of the U.S. population.
— Apple has achieved major breakthroughs in a secret project to develop a continuous blood glucose monitoring system, according to Bloomberg. The moonshot-style project known as E5 dates back to the Steve Jobs era, and if the company can hit its ultimate goal of incorporating it into the Apple Watch, the device will become a must-have for millions of people. About one in ten Americans are diabetics, who usually rely on a finger-prick test or newer continuous glucose monitoring (CGM) devices to measure their blood glucose level. Link for details.
POLITICS & ELECTIONS |
— Tester announces he will seek re-election. Sen. Jon Tester (D-Mont.) announced on Wednesday that he will seek re-election in 2024. Tester was first elected in 2006 in the Republican-leaning state that former president Donald Trump won handily in 2016 and 2020. Reps. Matt Rosendale (R-Mont.) and Ryan Zinke (R-Mont.) are considering running against him. Rosendale, a hard-right conservative, tried and failed to unseat Tester in 2018, with then-President Donald Trump making repeated appearances in Montana on the Republican’s behalf. Trump won Montana by 20 percentage points in the 2016 presidential election and 16 percentage points in the 2020 election, but Tester defeated Rosendale by 3.5 percentage points.
— Iowa Republicans fret Democrats could crash their presidential caucuses in 2024. With Democratic voters potentially having little incentive to attend their own party caucus after changes to their nomination calendar, GOP officials are contemplating ways to block potential interlopers who might want to make mischief, perhaps by backing a Republican candidate they think will be more easily beaten in the general election. Link for more from the WSJ.
— As Sen. Tim Scott (R-S.C.) inches closer to an expected 2024 presidential run, he called for Republicans to seek converts to conservatism, a nod to the fact that GOP presidential candidates haven’t won the popular vote since 2004. Link for details via the Des Moines Register.
OTHER ITEMS OF NOTE |
— Pentagon spent at least $1.5 million on missiles to down three high-altitude objects. Defense officials are still analyzing debris from suspected Chinese surveillance balloon.
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 | Student loan forgiveness | Russia/Ukraine war, lessons learned | Russia/Ukraine war timeline | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS | SCOTUS on Prop 12 | New farm bill primer | China outlook | Omnibus spending package | Gov’t payments to farmers by program | Farmer working capital | USDA ag outlook forum |