Evening Report | August 14, 2024

Top stories for Aug. 14, 2024

Pro Farmer's Evening Report
Pro Farmer’s Evening Report
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Farmdoc: Concerns for farm income; budgeting crucial as support payments unlikely... Ongoing price declines are raising concerns about farm incomes for 2023 and 2024. Current trends suggest that PLC and ARC-CO payments are unlikely to be triggered for corn, soybeans or wheat in most areas for 2023, according to Farmdoc (link). It notes even if these supports are triggered for 2024, payments wouldn’t be received until October 2025. With this outlook, farmers will need to focus on careful budgeting and cash flow planning for the remainder of 2024 and into 2025.


U.S. consumer inflation lower than expected... U.S. consumer prices posted an annual increase of 2.9% in July, the first time inflation dropped below 3% in nearly 3-1/2 years. Core inflation, minus food and energy prices, rose 3.2% – the smallest increase since April 2021.

Food prices increased 2.2% annually, with food at home (grocery store) prices up 1.1% and food away from home (restaurant) costs 4.1% higher than last year.

Fed fund futures reflected full odds the U.S. central bank will start easing monetary policy in September, with 56.5% odds of a 25-point cut and a 43.5% chance of a 50-point reduction.


Brazil barge operator says amazon drought worse than in 2023... Drought in the Amazon region is worse this year than in 2023, signaling a challenge for grain shipments, according to Hidrovias do Brasil SA, one of the country’s top barge operators. The company operates along a route known as the Northern Arc, an array of ports on the Amazon and northeastern Atlantic coast that transport crops from farms in central Brazil. Since the end of last year, a severe drought in the region reduced the amount of cargo shipped, forcing volumes to be split into smaller portions so barges could make it through critical points where rivers are at their lowest.


Brazil soybean market faces challenges despite weak real... The soybean market in Brazil is currently experiencing lower prices, which have been somewhat mitigated by the depreciation of the Brazilian real. The real has depreciated by 11% against the U.S. dollar this year, largely due to concerns about Brazil’s fiscal deficit. This depreciation has provided Brazilian soybean farmers with a competitive edge over their U.S. counterparts by allowing them to endure lower commodity prices more effectively, as these prices are typically denominated in dollars.

The weaker real has encouraged Brazilian farmers to increase their sales, contributing to a decline in benchmark prices. Despite the drop in soybean futures by nearly 13% in U.S. dollar terms, the decline is reduced to only 1.7% when prices are converted into reais. This currency situation has allowed Brazilian farmers to maintain higher revenue from soybean sales compared to the previous year, thus shielding them from the full impact of the global price decline.

However, if the Brazilian real were to rally, it could negatively impact Brazilian soybean producers by reducing their competitive advantage and increasing the costs of imported agricultural inputs like crop nutrients and pesticides, which are priced in dollars.

Argentina’s soybean sector is facing challenges due to export taxes, which are cutting into prices for farmers. These taxes reduce the profitability of soybean exports from Argentina, further complicating the situation for Argentine farmers who are already dealing with global price pressures.


Four-state Colorado River talks focus on water conservation credits amid broader negotiations... Colorado River officials from four states, including Colorado, are engaged in negotiations with the federal government to establish a new agreement aimed at conserving water and receiving credits to protect against potential future cutbacks. These discussions are part of broader efforts involving the seven Western states that rely on the Colorado River, as they work on future guidelines for operating the river and its reservoirs.

Besides state and federal negotiations, tribal leaders are also seeking a more significant role in the management of the Colorado River. A historic agreement was recently signed to allow the Colorado River Indian Tribes (CRIT) to lease or exchange part of their Arizona water allocation. This agreement is part of ongoing efforts by tribes to secure water rights and resources, although tribal leaders continue to advocate for equal standing in river management discussions.

The new agreement on the Colorado River is poised to have significant impacts on water usage for both agriculture and urban areas:

Impact on agriculture

• Reduction in water usage: The agreement aims to reduce water consumption by 3 million acre-feet over the next three years. Since agriculture uses over 80% of the river’s water, farmers will be incentivized to reduce water usage by being paid not to farm certain lands (a practice known as fallowing).

• Financial incentives: Farmers will receive compensation, funded by the Inflation Reduction Act, for reducing water usage. The most common compensation rate is $400 per acre-foot of water saved. This financial incentive is seen as a new source of income for some farmers, while others view it as insufficient.

• Shift in farming practices: The agreement encourages farmers to adopt climate-smart production practices and upgrade infrastructure to address the long-term drought crisis. This includes transitioning to less water-intensive crops and improving on-farm water efficiency.

• Concerns and challenges: Some farmers are concerned about the impact on their livelihoods and argue for higher compensation to cover increased production costs and prevent food shortages. The agreement is seen as a temporary solution, with discussions on long-term strategies needed beyond 2026.

Impact on urban areas

• Water conservation: Cities and urban areas will also participate in water conservation efforts. The agreement includes provisions for cities to receive financial support for temporary water reductions, which will help manage their water supply more sustainably.

• Potential for increased water costs: The agreement resets the price signal for water, which could lead to changes in water costs for urban users. This may impact how cities manage and allocate their water resources.

• Environmental considerations: The agreement includes environmental assessments to ensure that conservation efforts do not adversely affect communities, wildlife or air quality. This is important for urban areas that rely on the Colorado River for drinking water and other uses.