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NOPA crush declines more than expected in November but still a record for the month... Members of the National Oilseed Processors Association (NOPA) crushed 193.2 million bu. of soybeans in November, down 6.8 million bu. (3.4%) from the all-time record in October and 3.5 million bu. less than analysts expected. Still, crush rose 4.1 million bu. (2.2%) from last year and was a record for the month.
NOPA data implies the full November crush of 208.0 million bushels.
NOPA soyoil stocks totaled 1.084 billion lbs., up 9.9 million lbs. from the revised October figure but 39 million lbs. less than anticipated. Stocks again coming in lower than expected shows continued robust demand for soyoil use in biofuels.
USDA delays Mexican cattle imports until 2025 amid screwworm control efforts... Despite earlier speculation, USDA clarified Friday that Mexican cattle imports under new protocols won’t resume until early 2025. USDA Undersecretary Jenny Lester Moffitt initially suggested inspections “before the holidays,” but Chief Veterinary Officer Dr. Rosemary Sifford later confirmed shipments will start incrementally early next year. USDA issued a statement that no cattle were likely to come into the U.S. via the new protocols until early in 2025.
“Shipments will likely resume incrementally after the New Year, with full resumption of live animal movements sometime after that,” Dr. Sifford said in a statement. “While the United States continues to work very closely with Mexico and has agreed to protocols, it will take some time to implement these due to multiple steps needed to resume trade.”
USDA is allocating $165 million from the Commodity Credit Corporation to combat New World Screwworms (NWS), a critical step in resuming trade. Industry experts had anticipated delays due to the complexity of implementing the agreed protocols.
Mexico’s Agriculture Ministry is actively addressing the outbreak, having inspected over 116,000 cattle and established new inspection protocols with USDA. Efforts to combat NWS include the use of the Sterile Insect Technique (SIT) and the crucial work of the Panama-United States Commission for the Eradication and Prevention of Screwworm (COPEG), which produces 100 million sterile flies weekly to maintain a biological barrier in Panama.
Defining U.S. ag recessions... There is no single, universally accepted definition for a recession in the U.S. agricultural sector. However, several key indicators and factors are commonly used to assess whether the agricultural economy is experiencing a downturn or recession. Here’s how experts determine if there’s a recession in the U.S. ag sector:
Economic indicators
- Declining Farm Income: A significant and prolonged decrease in net farm income is a primary indicator of an agricultural recession.
- Commodity prices: Sharp declines in prices for major agricultural commodities, such as corn and soybeans, can signal economic distress.
- Input costs: Elevated prices for farm inputs like fertilizers, seeds and fuel, especially when combined with lower commodity prices, can squeeze profit margins.
- Agricultural exports: A reduction in agricultural exports can indicate weakening demand and contribute to economic stress.
Financial metrics
- Debt-to-asset ratios: Increasing debt levels relative to assets may suggest financial strain on farms.
- Credit conditions: Weakening credit conditions, such as tightening lending standards or increased loan delinquencies, can indicate economic troubles.
- Farmland values: Falling farmland values often accompany agricultural recessions.
Sentiment and surveys
- Farmer sentiment indices: Measures like the Purdue University/CME Group Farmer Sentiment Index can provide insights into the sector’s economic health. For example, the index hit an 8-year low in August 2024, indicating pessimism among farmers.
- Economist surveys: Polls of agricultural economists can offer expert assessments of the sector’s condition. In a recent Farm Journal Ag Economists’ Monthly Monitor survey, more than half of the economists believed the U.S. agricultural economy was in a recession.
Dr. Joe Glauber, former USDA economist, on whether there is an ag recession underway: “Not an easy question to answer. The aggregate measure (net farm income, net cash income, debt-to-asset, etc.) would not suggest a recession, but aggregates are often meaningless in such a homogenous sector.Animal agriculture looks to be doing ok — higher product prices, lower feed costs and that seems to be driving the aggregate net cash income numbers. But no question, row crop agriculture is seeing lower prices the past couple of years (particularly when the benchmark is record high (nominal) prices seen in 2022-23).Input costs have come down, but we won’t really know how much people paid in 2024 until next July when NASS releases the farm expenses report.”
Of note: The ag economy can be in recession even if the broader U.S. economy is not, due to sector-specific factors like weather, trade policies and global market conditions. Additionally, different segments of agriculture (e.g., crops vs. livestock) may experience varying economic conditions simultaneously as is currently the case with crop incomes down and most livestock and dairy incomes up.
Bottom line: At least two of the financial metrics are not being met — farmland values have not declined (in some states and regions they have) and the 2024 debt-to-equity and debt-to-asset ratios declined versus 2023. And ag industry sentiment has improved with the prospect of the Trump administration since they want fewer regs for the ag industry.
Supreme Court to weigh California’s vehicle emission standards authority... The Supreme Court agreed to hear a pivotal case that could reshape California’s ability to set stricter vehicle emission standards under the Clean Air Act. This comes as EPA is reportedly planning to grant California a waiver enabling the state to ban the sale of new gas-powered vehicles by 2035. Since 1967, California has received over 75 EPA waivers, granting it the authority to set stricter standards than federal regulations. EPA reinstated a prior waiver in 2022, after its revocation during the Trump administration. The Clean Air Act uniquely empowers California to implement these regulations due to its significant air pollution challenges.
Fuel producers argue the regulations exceed EPA authority and risk economic harm to the fossil fuel sector. The ruling could influence (1) Other states’ ability to adopt California’s standards, (2) The pace of the automotive industry’s shift to electric vehicles and (3) State and federal climate policies.
Key economic observations from Dr. Malanga... November’s labor market report highlighted a recovery from October’s weather-affected downturn, with “a rebound expected after hurricanes and work stoppages biased the October data downward.” Despite this, Dr. Vince Malanga, president of LaSalle Economics, noted, “employment as measured by the Household survey fell in November and was at the same level recorded in May.” This mixed signal raises questions about the overall strength of the labor market.
Malanga also discussed potential economic activity drivers in the coming months, emphasizing the influence of inventory adjustments ahead of possible tariff implementations. “If tariffs bring about reciprocal agreements, they could even be deflationary,” he remarked, balancing this against his expectation of declining oil prices. “Our bet is that inflation will head lower during 2025,” he added.
Turning to fiscal policy, Malanga highlighted the ambitious goals of DOGE, calling it “a presumed attack on the administrative state.” He contrasted these efforts with past approaches like the Gramm-Rudman-Hollings Act, noting that this time, “the whole of government and the regulatory state” are targeted while Medicare and Social Security remain untouched. Public sentiment, he observed, might support such measures, pointing to “a general revulsion to fiscal excess gaining steam globally.”
Finally, Dr. Malanga identified deregulation and its impact on public sector payrolls as a critical indicator. “Reversing steady public sector growth since Covid would be a firm straw in the wind,” he concluded.
Freeland resigns from Trudeau’s cabinet... Canadian Finance Minister Chrystia Freeland announced she was resigning from Prime Minister Justin Trudeau’s cabinet, hours before the federal government was to deliver the fall economic statement. Freeland said she resigned after Trudeau informed her on Friday that he no longer wanted her to be his top economic minister due to a difference of opinion on how to prepare for the Trump administration.
In her resignation letter, Freeland wrote: “Our country today faces a grave challenge. We need to take that threat extremely seriously. That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”