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Your Pro Farmer newsletter is now available... Corn and soybean futures rallied to close out 2024 as funds added to long positions in corn and covered shorts in soybeans. The stock market faded in late December, counter to the traditional Santa Claus rally, and could be in store for further declines to kick off the new year. On the policy front, Congress passed fresh farmer aid as 2024 wound down, including $10 billion in market assistance, which will be paid out in the first quarter of 2025. Our News page 4 feature looks at some of the most important factors that could impact your farming operation. We cover all of these items and much more in this week’s newsletter, which you can access here.
Johnson reclaims House speakership in dramatic first-ballot vote... Speaker Mike Johnson (R-La.) achieved a decisive first-ballot victory to retain the gavel in the House of Representatives, overcoming internal GOP tensions on the opening day of the new Congress. Initially lacking full 218-vote support due to dissent from hardline Republicans, Johnson secured the necessary votes after strategic negotiations on the House floor. The re-election is a major win for both Johnson and President-elect Donald Trump, who endorsed him and rallied GOP members to avert potential delays in congressional operations.
Johnson’s victory highlights his political maneuvering and ability to unite a fractious Republican majority, though challenges remain. He faces pressure to balance Trump’s priorities with those of his caucus, as fiscal debates and intra-party divisions loom. The Speaker’s renewed term sets the stage for contentious policymaking in a narrowly divided Congress.
Heat starting to damage Argentine crops... Hot, dry conditions are starting to cause damage to Argentina’s corn and soybean crops, the Buenos Aires Grain Exchange said. For corn, the exchange said “symptoms of water stress are beginning to be observed, such as yellowing of the basal leaves with possible yield losses.” For soybeans, the percentage of crop with adequate/optimal soil moisture declined seven percentage points to 81%. The exchange noted crop development is still generally favorable after abundant moisture in late 2024.
Biden administration awards $306 million for bird flu monitoring, preparedness... The U.S. Department of Health and Human Services said on Friday it would award $306 million in funds to help with monitoring of highly pathogenic avian influenza as the virus continues to spread.
The U.S. Administration for Strategic Preparedness and Response will award about $183 million in funding for regional, state and local programs for hospital preparedness and pathogen treatment centers, among others. The Centers for Disease Control and Prevention will award about $111 million to help monitor the disease as well as manufacture, store and distribute additional influenza diagnostic test kits for surveillance. The National Institutes of Health will award about $11 million for additional research into potential medicines for the disease.
Significant potential impact of tariffs, trade retaliation on U.S. ag sector... A new economic study paints a troubling picture of the potential results a renewed U.S./China trade war could have on farmers and the ag sector. The study was commissioned by the American Soybean Association and the National Corn Growers Association and conducted by the World Agricultural Economic and Environmental Services.
Soybean and corn exports
- Under a scenario where China reverts to previous tariff levels, U.S. soybean exports to China could fall by 14 MMT to 16 MMT annually, a 51.8% decline from expected baseline levels
- Corn exports to China could decrease by about 2.2 MMT annually, an 84.3% decline from baseline expectations.
- In a more severe scenario with a 60% retaliatory tariff, soybean exports to China could drop by over 25 MMT, and corn exports could fall by nearly 90%.
Price declines
- Under a 60% tariff scenario, U.S. soybean prices could fall by nearly $1 per bushel on average, while corn prices could drop by $0.13 per bushel.
- These price declines would occur at a time when costs remain at record levels and commodity prices are already falling.
Production value losses
- U.S. corn and soybean farmers could lose billions of dollars in annual production value.
- In a worst-case scenario, with Chinese tariffs rising by 60% and other countries increasing tariffs by 10%, projected export decreases could reach $15.8 billion for soybeans, $4.4 billion for corn, $2.3 billion for beef and $2.5 billion for wheat.
Regional economic impact
- States heavily reliant on agricultural exports, such as Iowa, Illinois, and Kansas, could be particularly affected. In these three states alone, GDP losses totaled $3.8 billion through 2019 during the previous trade war.
Input costs
- Farmers reliant on imported machinery, fertilizers and other inputs may face higher costs, further squeezing already tight margins, according to a USDA trade outlook report.
Market share loss
- Brazil and Argentina could increase their exports and gain valuable global market share, potentially difficult for U.S. farmers to reclaim in the future.
- While tariffs could encourage greater investment in domestic manufacturing and agriculture, they also risk destabilizing existing trade agreements like the U.S.-Mexico-Canda Agreement.
Both consumers and farmers could experience inflationary pressures as retailers warn of price increases tied to rising import costs.
Bottom line: The potential for a new trade war poses significant risks to the U.S. ag sector, with wide-ranging impacts on exports, prices and rural economies. The previous trade war’s disruption of around $10 billion per year in exports underscores the magnitude of the threat, and current projections suggest the impact could be even more severe if new tariffs are implemented and retaliation occurs.
Egg prices skyrocket to new high amid bird flu crisis... Midwest egg prices hit $6.07 per dozen, breaking the previous record of $5.46 from December 2022. Eggs remain a key marker for food inflation and economic trends. Highly pathogenic avian influenza outbreaks and holiday demand have tightened supplies, leading to soaring prices and reports of shortages. Some stores are limiting purchases as the situation persists.