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Your Pro Farmer newsletter is now available... USDA’s crop condition ratings are subjective, but they typically start to mean more in terms of yield potential when the corn crop gets to August. This year’s 68% good/excellent rating at the end of July suggests USDA’s initial yield estimate in the Aug. 12 Crop Production Report will be above trendline. Crop ratings for soybeans also remain above average, though August weather has a major impact on yields. China and France faced more weather struggles amid persistent rains and flooding, while the Australian wheat crop was boosted by July rains. On the monetary policy front, the Fed kept interest rates unchanged but suggested its first cut may come in September. England cut interest rates, while Japan tightened monetary policy in a shift in stance. Our page 4 feature looks at key issues farmers are facing and asking about. We cover all of these items and much more in this week’s newsletter, which you can access here.
August will be driest in southwest Corn Belt, Southern Plains and Delta... Weather this month is expected to trend drier across the southwestern Corn Belt, Southern Plains and Delta, along with the far western states, according to World Weather Inc. It says the heart of the Corn Belt is likely to see normal rainfall, though temps will be warmer. The forecaster says the Delta is likely to be the driest relative to normal this month, with the warmest temps in the Rocky Mountain states, Great Basin, Central Plains and Delta.
World Weather expects below-normal rainfall to continue in the Delta during September and October, while “late September and October may be the most anomalously warm part of autumn this year.”
Major slowdown in jobs growth... The U.S. economy added 114,000 non-farm payrolls in July, the smallest increase since January 2021. May and June payrolls were also lowered 29,000 from prior levels. The unemployment rate rose 0.2 point to 4.3%. The decelerating jobs growth and drop in manufacturing activity are causing some economists to believe the Fed is behind the curve on easing monetary policy. Fed fund futures now reflect about 70% odds of a 50-basis-point cut to interest rates in September.
House farm bill scoring unfavorable... Congressional Budget Office (CBO) is expected to issue a final score on the House farm bill, which is waiting on a House floor vote. Sources told us CBO used the method to score the bill as in the past, which some say has led it to underestimate Commodity Credit Corporation (CCC) outlays by more than $60 billion over the past seven fiscal years. A veteran farm bill analyst said CBO cannot assume appropriators will replenish CCC funding, even though they have in the past. One contact said when there is a clear conflict between scoring convention and reality, the situation is tailor made for the Budget Committee to weigh in. Recall, Rep. Jodey Arrington (R-Tex.) left the House Ag Committee to become chair of the Budget Committee.
China’s solar expansion raises food security concerns... China installed more solar power capacity last year than the U.S. has built in its history, but this expansion has raised concerns as solar farms encroach on cropland, challenging President Xi Jinping’s goal of food self-sufficiency, the Wall Street Journal reports. High demand for renewable energy and lucrative state subsidies have led some companies, officials and farmers to repurpose agricultural land for solar projects, defying Beijing’s policies. This issue gained national attention after China Central Television (CCTV) reported that high-quality farmland in Hubei province was covered with solar panels, contradicting plans to enhance crops.
Despite Xi’s emphasis on protecting farmland and promoting renewable energy to cut carbon emissions, local governments have sometimes prioritized solar developments for immediate economic benefits. Beijing has responded by punishing those exploiting subsidies at agriculture’s expense and issuing directives to prevent solar projects on farmland. However, conflicts between renewable energy expansion and food security continue, with solar projects affecting agricultural productivity and leading to lower crop yields. The tension underscores the challenge of balancing China’s renewable energy goals with its need for arable land to ensure food security.
Panama Canal back to normal by 2025... The Panama Canal is on track to resume normal transit levels in the coming months, thanks to early rainfall that has alleviated the severe drought conditions experienced in the past year. The Panama Canal Authority (ACP) announced plans to incrementally increase the number of daily transit slots for vessels.
At of the end of July, the Panama Canal had increased its daily transit slots to 34 vessels per day. This month, the number of daily transits will be raised to 35. In September, the daily transit slots will further increase to 36 vessels per day.
ACP aims to fully normalize operations by 2025, provided that the expected rainfall continues. The authority is also implementing long-term measures to mitigate the impact of climate change, including the development of a second reservoir and various water-saving initiatives.
The restrictions and subsequent adjustments have had significant economic implications. ACP anticipates a reduction in toll revenue by up to $700 million for the fiscal year ending in September. However, the gradual return to normal transit levels is expected to mitigate some of these losses.
EU grants conditional approval of Bunge, Viterra merger... The European Commission approved the $34 billion merger between Bunge and Viterra, subject to certain conditions. The approval is contingent upon the companies fulfilling specific commitments, including:
· The companies are required to divest Viterra’s entire oilseed operations in Hungary and Poland.
· Several logistical assets linked to these oilseed operations must also be divested.
The combined entity is expected to become the world’s second-largest agricultural trading company by revenue. Bunge will own approximately 70% of the combined entity. The merger will strengthen the companies’ positions in the soybean and wheat markets.
The deal still requires regulatory clearance from other jurisdictions, notably China and Canada. Due to ongoing regulatory reviews, the closure of the deal may be delayed beyond the initially targeted mid-2024 timeframe.
The U.S. position on the proposed merger is currently under review by regulatory authorities, including the Department of Justice (DOJ) and other antitrust regulators. DOJ is expected to review the merger to assess its impact on market competition, particularly in the grain and oilseed sectors, where both companies have substantial operations. The Consumer Federation of America has expressed concerns the deal would consolidate the processing of oilseeds used to make plant-based foods and biofuels, potentially harming consumers and businesses reliant on these commodities.
Similar concerns have been raised in Canada, where the Competition Bureau has highlighted potential anti-competitive effects, particularly in grain handling and export markets.