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FarmDoc estimates corn yields and production based on end of June crop conditions... Based on USDA’s June acreage estimate and crop condition ratings as of June 30, Farmdoc Daily estimates the corn crop at 14.99 billion bu., with a range of 14.58 billion bu. to 15.40 billion bushels. The national average corn yield is estimated to be 179.7 bu. per acre, with a range of 174.8 bu. to 184.6 bu. per acre.
FarmDoc used USDA’s crop condition ratings in the top 18 production states to predict yield and production. Because the yield per acre from the individual states can’t be summed together, the yield was calculated from the total production divided by the total harvested acres. Total U.S. corn production was calculated by adjusting the production from the 18 leading corn states upward based on the historic relationship between U.S. production and those states.
FarmDoc noted, “It is still early in the growing season. Readers should expect changes to the estimates as the season progresses and perhaps even significant changes depending on the amount of rain received over the growing season. Also, as noted by [Scott] Irwin and [Darrel] Good, the earliest estimates probably tend to overestimate yields.”
India to surpass China as leading driver of global food demand... India is set to surpass China as the leading driver of global food demand over the next decade, according to the United Nations’ Food and Agriculture Organization (FAO). FAO and the Organization for Economic Cooperation and Development (OECD) project agricultural product consumption, including animal feed and fuel, will grow by an average of 1.1% annually in calorie terms through 2033. Nearly 94% of this additional consumption is expected in middle and low-income countries, such as India, Southeast Asia and sub-Saharan Africa.
China accounted for 28% of the demand increase in the past decade, but its share is forecast to drop to 11% in the next decade. Conversely, India’s share is predicted to rise from 13% to 20% and sub-Saharan Africa’s from 10% to 18%. For staple foods like wheat, China is expected to consume 147 MMT in 2033, a modest 2.6% increase from the 2021-2023 average. In contrast, India’s wheat consumption is expected to jump 27.7% to 137 MMT, nearly matching China. Rice consumption in China is projected to remain steady, while Indian demand is set to rise significantly.
These forecasts are driven by population decline and stagnating incomes in China, contrasted with population growth and rising living standards in India. Although China and India have similar populations, China’s annual meat consumption is about 12 times higher. India’s predominantly vegetarian population suggests a small increase in meat consumption, but any shift due to economic growth could significantly impact global supply and demand, including for animal feed.
Food consumption is expected to rise faster in emerging and developing countries than in developed ones. Africa’s population, projected to grow from 1.49 billion to 1.8 billion by 2033, will see wheat, corn and rice consumption surge by 22% to 42%.
Whether global food supply can meet this demand remains uncertain due to geopolitical tensions, plant and animal diseases and the impacts of climate change. The European Environment Agency warns climate change could render around 10% of arable land unusable by mid-century. Reducing food loss is emphasized as a key strategy to stabilize global food supply. Halving supply chain losses and waste by 2030 could increase food intake by 10% in low-income countries and 6% in lower-middle-income countries, reducing the number of undernourished people worldwide by a quarter.
Powell comments of monetary policy, economic landscape... Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee provided several key insights into the current economic landscape and potential future monetary policy actions. Here are the main highlights:
Powell noted a noticeable cooling in the jobs market, with the unemployment rate rising to 4.1% in June. Despite this, hiring remains solid, indicating a slowdown rather than a halt in economic activity. He also mentioned a general deceleration in economic growth following a period of robust expansion last year.
Powell emphasized that while significant progress has been made in controlling inflation, it remains above the Fed’s 2% target. This persistent inflation, coupled with the slowing job market, has led to discussions about the potential for interest rate cuts soon. Powell’s testimony suggested a shift from the Fed’s previous focus on combating inflation to a more balanced approach that also considers economic growth and employment.
Market participants and economists are anticipating a possible interest rate cut at the Fed’s Sept. 17-18 meeting. Powell’s remarks bolstered these expectations, with many interpreting his statements as a signal the Fed is open to adjusting rates to support the economy. But when asked when the Fed would cut, Powell replied: “I’m not going to be sending any signals about the timing of any further actions.”
The testimony comes at a politically sensitive time, with the presidential campaign season underway. Voters’ dissatisfaction with high prices has put additional pressure on the Fed’s decisions. Powell’s cautious approach aims to balance economic needs without appearing to influence political outcomes. His emphasis on avoiding delayed policy adjustments that could harm economic activity and employment was well-received by the markets.
Powell highlighted the importance of monitoring economic indicators closely to avoid past mistakes of delayed responses to inflation. Thursday’s release of the Consumer Price Index for June is expected to show a slight decrease, further indicating a gradual moderation in inflation.
Bottom line: Powell’s testimony underscored a cautious optimism regarding inflation control, a recognition of a cooling job market and a potential shift toward interest rate cuts to support the economy amidst evolving conditions.
Federal budget deficit down from year-ago, but likely to be significantly higher... The federal budget deficit was $1.3 trillion in the first nine months of fiscal year (FY) 2024, the Congressional Budget Office (CB0) estimates — $118 billion less than the deficit recorded during the same period last fiscal year. The full fiscal year deficit is likely to be significantly higher once the remaining three months are accounted for. Despite the slight year-over-year improvement, the deficit remains at concerning levels that contribute to the growing national debt.
Several factors contributed to the decrease in the federal budget deficit compared to last year:
Increased revenues:
• Total revenues increased by $140 billion in the first six months of FY2024 compared to the previous year.
• There was a $72 billion (6%) increase in individual income and payroll tax revenue.
• Corporate income taxes increased by $44 billion (35%), largely due to delayed business tax receipts from areas affected by natural disasters.
Reduced discretionary spending:
• The Fiscal Responsibility Act and the Further Continuing Appropriations and Other Extensions Act, 2024 led to a reduction in projected discretionary outlays.
Timing shifts in outlays:
• Certain payments were shifted into March 2023 due to April 1, 2023, falling on a weekend, which affected year-over-year comparisons.
• Adjusting for timing effects, outlays in March 2024 were down $49 billion compared to March 2023.
Decreased spending in specific areas:
• The Federal Deposit Insurance Corporation spent $27 billion less in March 2024 compared to March 2023.
• Department of Education spending decreased by $29 billion due to changes in student loan repayment costs.
• Spending related to the Covid-19 pandemic decreased by $26 billion.
• Emergency funding for the Supplemental Nutrition Assistance Program ended, reducing spending by $24 billion.
Changes in tax refunds:
• There was a $19 billion (28%) decrease in individual income tax refunds, which increased net receipts.
• This decline reflects slowing Employee Retention Tax Credit refunds, which have been subject to an IRS moratorium since September
Iowa regulators approve public meetings for Summit Carbon Solutions’ pipeline expansion... State utility regulators in Iowa have approved a public meeting schedule starting in late August, where Summit Carbon Solutions will present its proposed expansion for its carbon dioxide pipeline system. Summit’s initial 690-mile pipeline network in Iowa was recently approved by the Iowa Utilities Commission, but construction cannot begin until they receive permission to build in North Dakota and South Dakota. The system aims to capture carbon dioxide at ethanol plants in five states and transport it to North Dakota for underground storage. The expansion in Iowa includes an additional 340 miles of pipeline to connect more ethanol plants, following new agreements with producers after Navigator CO2 abandoned a similar project. Summit now has agreements with 30 of Iowa’s 42 ethanol plants. Public meetings for the expansions will be held in 23 counties, after which Summit can negotiate land easements and petition for pipeline permits.
China investigating transportation of cooking oil... China’s State Council has initiated an investigation into reports that fuel tanker trucks were used to transport cooking oil without proper cleaning, following an investigation by Beijing News. The investigation revealed that some tanker trucks were transporting edible oils immediately after carrying chemicals, such as coal-based oils, without adequate cleaning, posing significant health risks.
The practice of using the same tankers for both chemicals and edible oils is reportedly a cost-cutting measure employed by companies, exacerbated by the lack of stringent regulations mandating separate tanks for different substances. This has led to widespread public outrage and calls for thorough investigations and stricter regulations to ensure food safety.
Sinograin, a state-owned entity overseeing China’s grain and oil reserves, has announced an internal investigation and promised to terminate contracts with carriers found violating regulations. The company has also vowed to report significant transgressions to regulatory authorities and take strict disciplinary actions against subsidiaries and employees involved. Despite these assurances, public skepticism remains high due to past food safety scandals and the perceived lax enforcement of regulations.
The controversy has reignited concerns about food safety in China, highlighting the need for robust regulations and enforcement to protect consumers and maintain the integrity of the food supply chain.