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Your Pro Farmer newsletter is now available... USDA’s updated balance sheets in Friday’s Supply & Demand Report reflected adjustments to old-crop demand forecasts based on June 1 stocks and new-crop acreage figures. USDA also issued its first all-wheat production estimate. With corn and soybean futures continuing to track the 2014 performance and ample ending stocks projected in the new-crop marketing year, it could be difficult for bulls to gain traction barring a serious summer weather scare. But there is one major difference between this year and 2014. Funds held net long positions a decade ago and are near record short now. While La Nina is no longer expected to develop during summer, funds could cover some shorts with even a modest weather threat. A new study warned the reliability of U.S. economic data is at risk due to shrinking budgets, declining survey response rates and potential political interference. This prompted us to check on response rates to USDA’s National Agricultural Statistics Service (NASS) reports. We cover all of these items and much more in this week’s newsletter, which you can access here.
Corn firms after USDA’s July crop reports... USDA surprised traders by cutting old-crop corn ending stocks, which basically offset the rise in acres for the 2024-25 marketing year and also reduced that carryover outlook. That triggered a light round of short-covering in the corn market. But with forecasts calling for generally favorable conditions and ending stocks still expected to be plentiful, the upside will be limited unless funds decide to actively cover short positions. USDA modestly lowered soybean ending stocks for both 2023-24 and 2024-25, though both are still plentiful. The wheat market got bearish surprises, as production and projected new-crop ending stocks both rose more than anticipated. Click here to view our full report reaction.
U.S. producer prices higher than expected in June... The producer price index (PPI) rose 0.2% last month after being unchanged in May. On an annualized basis, PPI increased 2.6% after advancing 2.4% the previous month.
Higher-than-anticipated wholesale prices came after tame consumer inflation data on Thursday and could influence the Fed’s decisions as it balances the need to control inflation with supporting economic growth.
U.S. consumer sentiment falls to eight-month low on high prices... U.S. consumer sentiment unexpectedly declined to the lowest level in eight months, based on preliminary readings from the University of Michigan’s Survey’s of Consumers. The Index of Consumer Sentiment fell 3.2% from the previous month and 7.7% from last year. The Current Conditions Index dropped 2.7% on a monthly basis and 16.2% from last year. The Index of Consumer Expectations declined 3.4% from June and 1.6% from last year.
Surveys of Consumers Director Joanne Hsu said: “Nearly half of consumers still object to the impact of high prices, even as they expect inflation to continue moderating in the years ahead. With the upcoming election, consumers perceived substantial uncertainty in the trajectory of the economy, though there is little evidence that the first presidential debate altered their economic views.”
Year-ahead inflation expectations fell for the second consecutive month, reaching 2.9%. Long-run inflation expectations also came in at 2.9%, down from 3.0% last month.
Brazil soybean expansion expected to be slowest in almost two decades... Brazilian farmer will plant 47.33 million hectares (117 million acres) to soybeans this year, up 1.9% from 2023, consulting firm Safras & Mercado forecasts. That would be the smallest percentage growth since 2006, when Brazil’s soybean planted area shrank. Lower prices have eroded farmers’ profit margins, disincentivizing them to aggressively expand soybean plantings.
USDA awards $110 million to expand independent meat processing... USDA Secretary Tom Vilsack announced nearly $100 million in new grants to enhance local and regional meat and poultry processing capacity. This funding, part of two initiatives, includes over $83 million for 24 projects in 15 states under the Meat and Poultry Processing Expansion Program (MPPEP) and $26.9 million through the Local Meat Capacity (Local MCap) grant program for 33 projects in 23 states.
Responding to concerns from House Ag Chair Glenn “GT” Thompson (R-Pa.) about new EPA regulations, Vilsack noted USDA has collaborated with EPA to minimize any impact on processing capacity, suggesting that concerns about the regulations are exaggerated.
Argentines switch to cheaper chicken... Argentina, known for its high beef consumption, is shifting towards cheaper chicken as households seek to maximize their shrinking paychecks. According to a report by the Rosario Board of Trade, beef demand is expected to drop below 45 kilograms (99 lbs.) per person this year, the lowest level since records began in 1914. This would mark the first time that Argentina’s beef consumption is nearly equal to its demand for chicken, reflecting a global trend towards increased chicken consumption.
Panama Canal expected to return to more normal traffic later this summer... Increased rainfall is helping to alleviate the severe drought conditions that had forced restrictions on ship passages through the Panama Canal. The Panama Canal Authority (APC) announced it will increase the number of daily booking slots for vessels to 35 in August, up from the previous limit of 24 crossings per day imposed in November 2023. This increase includes 10 Neopanamax crossings (larger locks) and 25 Panamax crossings (smaller locks). Higher rainfall at Gatún Lake, the principal water source for the canal’s operations, has allowed for the easing of restrictions. Water levels are expected to continue improving during the rainy season, which typically lasts from May to December.
The drought-induced limitations had significantly affected global trade routes, with some ships forced to take longer alternative routes. The restrictions led to higher global shipping rates and disruptions in supply chains. APC expects more rainfall during the current rainy season due to an anticipated La Niña event this summer. This could potentially result in a return to normal operations by late summer or early fall.
A recent court ruling has opened the possibility for constructing a new $1.6 billion reservoir to supplement the canal’s water supply. However, this project could take up to six years to complete and requires approval from local communities. Despite the improvements, water levels in Gatún Lake are still lower than historical averages for this time of year.
Europe may disinvest in China... President Joe Biden announced that European allies would reduce their investment in China if Beijing keeps providing “indirect help to Russia.” This statement came at the end of the NATO summit in Washington. In response, China denied supporting Russia’s defense industry and criticized NATO’s claims, stating that blaming China for the Ukraine crisis is “ill-motivated” and harms Beijing’s relations with Europe.