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EU slashes wheat production, export forecasts... The European Commission cut its EU wheat production estimate by 4.7 MMT to 116.1 MMT. The commission didn’t give specific details, but wheat production in France and Germany, the bloc’s two largest producers, was greatly reduced by persistent rains throughout the growing season.
The commission slashed the 2024-25 EU wheat export forecast by 6 MMT to 26 MMT, which would be down 9.1 MMT (25.9%) from last year.
FAPRI updates ag baseline projections... The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri updated its baseline projections based on information as of mid-August and current government policies. FAPRI said, “In the absence of new shocks to the weather, the macroeconomy or policy, projected prices generally remain near current levels over the next five years.” Key results:
• Increased acreage and record yields result in a record 2024 U.S. soybean crop. Even with a significant increase in crush and a rebound in exports, projected year‐end stocks of soybeans increase sharply, pushing projected 2024-25 soybean farm prices down to $9.99 per bushel, below the levels USDA reported in its August World Agricultural Supply and Demand Estimates (WASDE).
• Record yields result in the second consecutive 15-billion-bushel U.S. corn crop in 2024, despite a 4 million acre decline in planted area. The projected $4.10 per bushel 2024/25 farm price of corn is 37% below the price just two years ago.
• Projected prices for wheat, cotton, rice, sorghum and many other crops decline in 2024-25 in the face of large global crop supplies. The value of crop sales declines in 2024, as the effect of lower prices outweighs the effect of increased production for multiple crops.
• Given the projected reduction in prices for a broad range of crops and moderating production costs, there is currently little incentive to sharply change the allocation of crop acreage in 2025.
• Assuming average growing conditions in future years, projected prices remain near 2024-25 levels for many crops. Between 2025-26 and 2029-30, corn prices average $4.12 per bushel, soybeans average $9.98 per bushel and wheat prices average $5.70 per bushel.
• Under the assumed extension of 2018 farm bill provisions, effective reference prices for several crops increase for several years but then decline again, based on statutory formulas tied to moving averages of past market prices. However, a new farm bill could change reference prices and other farm program provisions.
• Projected biomass‐based diesel production increases, as more renewable diesel plants come online. Used cooking oil, much of it imported, accounts for a large share of the growth in feedstock supplies, limiting the growth in demand for soybean oil and other fats and oils.
• Ethanol production is projected to remain relatively stable. More efficient gasoline‐powered cars and more electric vehicles reduce gasoline use, but there is a modest uptick in projected use of E‐15 and higher‐level ethanol blends; ethanol exports also increase.
• The outlook assumes a continuation of current policies, but changes in the implementation of the federal renewable fuel standard, California’s low‐carbon fuel standard or tax policies could result in very different levels of biofuel production, even without changes in laws. Sustainable aviation fuel use is assumed to grow slowly.
• The cattle sector is the most important exception to the pattern of declining commodity prices. Past years of drought and low returns have resulted in a smaller U.S. beef cow herd, reducing beef production and pushing up prices for feeder and slaughter animals.
• Beef production declines again in 2025, although not as much as projected by USDA in its August WASDE report.
• The cow herd begins to expand in 2026, resulting in more production and lower prices.
• Hog prices fell in 2023, reducing net returns in 2023 and 2024, despite some moderation in feed costs. By 2026, the result is a reduction in production, causing an increase in hog prices and net returns. After dipping in 2022 from reduced demand from China, pork exports increase with global economic growth and a projected weakening of the dollar against many other currencies after 2024.
• Wholesale chicken prices also fell in 2023 but remain above pre‐2022 levels. Projected broiler production increases at a modest pace, with both exports and domestic use increasing over time.
• Per‐capita domestic disappearance of meat (beef, pork, chicken and turkey) is projected to decline slightly in 2025 because of reduced beef supplies and higher beef prices, but then increase in later years, reaching a record 227 pounds by 2027.
• Like many other commodities, milk prices fell sharply in 2023 from the record levels of 2022. In 2024, annual production is steady, resulting in slightly higher prices given demand growth, despite challenges in the nonfat dry market.
• Projected milk prices remain slightly under $21 per hundredweight from 2025 to 2029, as growth in milk production is matched by increases in dairy exports and in domestic cheese demand.
Comments: Market and some policy makers are paying attention to this due to the foreshadowing of what’s ahead from USDA. This will be the most current until USDA releases their baseline after the October WASDE.
Thompson, Vilsack address farm bill, other key ag issues... At the Farm Progress Show held in Boone, Iowa, discussions took place regarding the farm bill and other topics.
· House Ag Chairman Glenn “GT” Thompson (R-Pa.) expressed optimism about the farm bill but noted it likely won’t be finalized until after the election. He emphasized the importance of passing the bill through the House in September, citing the need for farmers and rural communities to feel supported. Thompson criticized the Biden administration for changes to financial aid forms, arguing they disadvantage farm families when applying for college assistance.
· USDA Secretary Tom Vilsack highlighted challenges with farm income and defended the administration’s trade policies despite a widening agricultural trade deficit. He announced new funding for fertilizer plants and mentioned ongoing trials for an H5N1 vaccine for dairy cattle. Vilsack also discussed tightening regulations on claims made by companies about animal raising practices and environmental impacts, pointing to misleading labels on food products. Vilsack also addressed the issue of U.S. ag exports to China, noting that exports to China have “dropped significantly.” He attributed this decline to the sensitivity of Chinese officials to criticisms from the U.S., which influences their purchasing decisions. Vilsack suggested the Chinese government’s awareness and reaction to U.S. political and diplomatic actions are impacting trade relations, leading to reduced purchases of U.S. agricultural products. Vilsack highlighted USDA’s efforts to diversify export markets, mentioning the $300 million provided to agricultural groups through the Regional Agricultural Promotion Program (RAPP), aimed at expanding trade opportunities in regions beyond traditional top buyers like China. This initiative seeks to increase U.S. agricultural exports to markets in Southeast Asia, Africa and Latin America, thereby reducing reliance on demand from major markets such as China.
U.S., Canada trade officials discuss USMCA... U.S. Trade Representative Katherine Tai met with Canada’s Trade Minister Mary Ng to discuss ongoing U.S.-Mexico-Canada Agreement (USMCA) cooperation and key trade issues, including electric vehicles, supply chain resilience and concerns over Canada’s digital service tax and dairy tariff measures. The ministers agreed to continue collaborating on these and other shared priorities.
More details of their discussions on several critical areas:
· Electric Vehicles and Supply Chains: The transition to electric vehicles (EVs) is a significant focus, given the challenges posed by USMCA’s rules of origin, which were initially designed for internal combustion engine vehicles. These rules require a high percentage of vehicle content to be sourced from North America, which poses challenges for EV battery supply chains that often rely on components sourced from outside the region. The ministers emphasized the importance of strengthening supply chains, particularly for EVs and critical minerals, to enhance North American economic security and competitiveness.
· Digital service tax and dairy tariff measures: The U.S. expressed ongoing concerns about Canada’s proposed digital service tax, which could affect American technology companies operating in Canada. Additionally, there are longstanding issues with Canada’s dairy tariff rate quota allocation, which the U.S. views as restrictive to its dairy exports.
· The dairy tariff measures under USMCA have been a significant point of contention between the U.S. and Canada, impacting the overall cooperation within the agreement. The primary issue revolves around Canada’s administration of its dairy tariff-rate quotas (TRQs), which the U.S. argues are being allocated in a manner that restricts American access to the Canadian dairy market.
— Dispute over TRQ allocation: The U.S. has challenged Canada’s allocation of dairy TRQs, arguing that Canada reserves a significant portion of these quotas for Canadian processors, which limits the access intended for U.S. dairy exports under the USMCA. This allocation strategy has been seen as a breach of USMCA commitments, leading to formal disputes and panel rulings.
— Panel rulings and compliance issues: The U.S. has prevailed in some dispute panel rulings, which found that Canada’s TRQ allocations were inconsistent with USMCA commitments. However, subsequent Canadian policy revisions have not fully resolved U.S. concerns, leading to ongoing tensions and additional disputes.
— Economic implications: These disputes have significant economic implications for U.S. dairy producers, as they continue to face barriers in accessing the Canadian market. The limited market access affects revenue generation for U.S. dairy farmers and processors, undermining the anticipated benefits of the USMCA.
— Continued negotiations and enforcement: Tai has emphasized the need to enforce USMCA provisions and ensure that U.S. dairy producers receive the full benefits of the agreement. This ongoing enforcement effort reflects the broader challenge of maintaining cooperative trade relations under the USMCA while addressing specific sectoral disputes.
· Trade flow and emergency coordination: Both countries are committed to enhancing coordination on trade flows, particularly in emergency situations. They plan to release mechanisms to support the maintenance of North American trade flows during such times, reflecting the importance of a resilient and responsive trade infrastructure.
· Non-market policies: There is a shared commitment to addressing non-market policies and practices that could undermine the USMCA and harm workers in both countries. This includes ensuring that goods produced with forced labor are not imported into the region.
USDA tightens guidelines for animal-raising, environmental claims on meat labels... USDA’s Food Safety and Inspection Service (FSIS) has issued stricter guidelines for substantiating animal-raising and environmental claims on meat and poultry labels, such as “raised without antibiotics,” “grass-fed” and “climate-friendly.” The new guidelines encourage meat and poultry establishments to provide more documentation, including third-party certification or USDA audit-based programs, to back up their claims. FSIS also highlighted the need for relevant environmental data and warned of enforcement action against false or misleading antibiotic claims, following a study that found 20% of cattle labeled “raised without antibiotics” had detectable antibiotic residues. Further testing and potential rulemaking may follow.
USDA awards additional $35 million in fertilizer production grants... USDA awarded another $35 million in grants under its Fertilizer Production Expansion Program (FPEP), bringing total investments to $286.6 million since January 2023. The program, funded by the Commodity Credit Corporation, aims to boost domestic fertilizer production by supporting independent businesses in modernizing equipment, implementing new technologies and building new facilities. Recent grant recipients include Dramm Corp in Wisconsin and AdvanSix in Virginia, with projects in several states including California, Iowa and New York.
Consumer spending fuels upward revision to Q2 GDP... Real gross domestic product (GDP) in the U.S. grew at an annualize 3.0% rate in the second quarter, up from 2.8% in the initial reading and 1.4% in the first quarter. The upward revision was mainly due to increased consumer spending (2.9% vs. 2.3% earlier reported). Overall GDP growth was driven by gains in consumer spending (2.9% in Q2 vs. 1.5% in Q1), private inventory investment (7.5% vs. 4.4%) and nonresidential fixed investment (4.6% vs. 4.4%), despite a rise in imports (7.0% vs. 6.1%), which subtract from GDP.