Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Ag trade deficit continues to build... The U.S. exported $12.94 billion of agricultural goods in June against imports of $16.52 billion, resulting in a deficit of $3.58 billion. During the first nine months of fiscal year (FY) 2024, U.S. ag exports stood at $135.29 billion, while imports totaled $154.09 billion for a deficit of $18.80 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.
U.S. trade deficit narrows in June... The U.S. trade deficit narrowed to $73.1 billion in June, a decrease from $75.0 billion in May. This reduction was driven by a significant increase in exports, which rose $3.9 billion to $265.9 billion, while imports increased $2.0 billion to $339.0 billion. The decrease in the trade deficit suggests a shift in the balance of trade, influenced by various economic factors.
Factors influencing the trade deficit:
· Cooler domestic demand. There is evidence suggesting that domestic demand in the U.S. is cooling. The moderation in consumer spending and business investment has been noted as key factors. Consumer spending, which constitutes a significant portion of the GDP, has shown signs of slowing down. This is attributed to factors such as high inflation, rising interest rates, and a cooling labor market. As domestic demand cools, the need for imported goods may decrease, thereby reducing the trade deficit.
· Moderating pace of consumer spending. Consumer spending has been decelerating, particularly in discretionary areas such as entertainment, travel, and dining out. This trend is expected to continue through the remainder of the year, especially among lower-income consumers who are more affected by inflation and interest rates. The reduction in consumer spending can lead to a decrease in imports, as there is less demand for foreign goods.
· Business investment trends. Business investment has shown resilience despite higher interest rates. However, there are signs that the pace of investment is moderating. Factors such as higher borrowing costs and economic uncertainty may contribute to a slowdown in business investment. This can result in a reduced demand for imported capital goods and materials, further narrowing the trade deficit.
The narrowing of the trade deficit has implications for overall GDP growth. Net exports, which are the difference between exports and imports, can influence GDP. With cooler domestic demand and moderating consumer spending and business investment, imports are likely to ease, potentially turning net exports into a neutral or even positive factor for GDP growth. This shift can help offset some of the negative impacts of reduced domestic consumption and investment.
Second round of RAPP funding available... A second round of $300 million in funding is now available through the Regional Agricultural Promotion Program (RAPP) to boost U.S. food and agricultural exports to new markets. Allocations are expected by the end of the year, with applications due by Oct. 4.
Harris chooses Walz as running mate... Vice President Kamala Harris chose Minnesota governor Tim Walz as her running mate. The Harris campaign revealed the choice before a rally in Philadelphia, where the duo will make their first joint appearance.
Walz, 60, has been the Governor of Minnesota since 2018. He also serves as chair of the national Democratic Governors Association. He previously served six terms in the U.S. House of Representatives. Walz’s background includes a diverse range of experiences:
· He was born in West Point, Nebraska.
· A graduate of Chadron State College in Nebraska, Walz served in the Army National Guard, and then worked as a teacher, first on the Pine Ridge Indian Reservation in South Dakota, where he met his wife Gwen, a fellow teacher, and then in China and later as a high school teacher in Mankato, Minnesota, south of Minneapolis.
· He spent several decades as a high school educator, coaching football and serving as a faculty advisor for the school’s gay-straight alliance.
· Walz initially entered politics as a member of former Massachusetts Sen. John Kerry’s 2004 presidential campaign.
· In Congress, Walz focused on veterans’ issues and agricultural policy, reflecting his roots in rural America.
· As governor, some of Walz’ political accomplishments include ensuring tuition-free meals at participating state universities, enshrining abortion rights into state law, banning conversion therapy and providing protections for gender-affirming healthcare.
· Walz signed a bill last May expanding voting rights in Minnesota for an estimated 55,000 formerly incarcerated residents, and in 2020, oversaw the state’s response to both the Covid-19 pandemic and police brutality protests in the wake of George Floyd’s death at the hands of police, though he faced criticism from state Republicans over his delayed response to protests following Floyd’s killing.
Walz’s selection is seen as a strategic move to appeal to rural voters and progressives, given his track record of progressive policy achievements and his Midwestern charm.
Perspective: His appeal to rural voters could be challenged. Sources say once he became governor, Walz was more attuned to city and suburban voters, not the rural sector, telling one contact that “I don’t need the Ag vote any longer.”
Iowa farmland sees first drop in value in five years... Iowa’s farmland values declined in the first half of 2024, the first decrease in five years, as reported by Farm Credit Services of America. This drop is attributed to falling corn and soybean prices and high interest rates. Average farmland values in Iowa fell by 2.4% through June and over the past year. Despite the decline, values remain 58.3% higher than five years ago.
Iowa was the only state in the Farm Credit Services report to experience a decline in farmland values, while values in South Dakota, Wyoming, Kansas and Nebraska increased.
The reduction in farmland values comes alongside a decrease in sales activity and increased competition for investment dollars, with alternative investments like certificates of deposits becoming more attractive due to higher interest rates. Some experts predict farmland values could fall by another 20% next year due to continuing economic pressures.
Brazil continues to actively export soybeans, corn... Brazil exported 11.25 MMT of soybeans during July. While that was down from 13.95 MMT the previous month, shipments increased from 9.70 MMT in July 2023.
Brazil’s corn exports totaled 3.55 MMT last month, up from 850,892 MT in June but up from 4.23 MMT in July 2023.
Farmer sentiment improves despite financial performance concerns... The Purdue University/CME Group Ag Economy Barometer Index rose 8 points (7.6%) to 113 in July but was 10 points (8.1%) below year-ago. The Index of Current Conditions increased by 10 points (11.1%) to 100, and the Index of Future Expectations rose 7 points (6.3%) to 119.
The survey noted, “The sentiment improvement was puzzling in part because prices for principal commodities weakened from mid-June to mid-July, which could be expected to reduce farmers’ income. In contrast to the sentiment improvement, producers confirmed that their farms’ financial condition was weaker than a year ago. Looking ahead, producers continue to express concerns about high input costs and declining prices for crops and livestock. Producers in July were somewhat less concerned about the impact of interest rates on their farm operations.”