Evening Report | November 18, 2024

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Winter wheat conditions improve more than expected... USDA rated 49% of the winter wheat crop as “good” to “excellent,” as of Sunday, up five percentage points from last week. Analysts expected a two-point increase. The “poor” to “very poor” rating declined three points to 15%.

The winter wheat crop was 94% planted (96% average) and 84% emerged (84%).

Cotton harvest passes three-quarters level... USDA reported cotton harvest advanced six points over the past week to 77%, five points ahead of the five-year average. Harvest stood at 72% in Texas (64% average) and 69% in Georgia (68%).

China, Brazil expected to sign ag deal... Brazil’s Agriculture Minister Carlos Favaro said the Brazilian government will announce farm agreements with its biggest trade partner China on Wednesday, ahead of scheduled meetings with Chinese President Xi Jinping. Favaro noted the export deals will potentially cover fruit, beef and pork, as well as mentioning an updated list of Brazilian meatpackers that could be approved to export to China.

Neiffer comments on Stabenow’s farm bill details... In a post this morning, Paul Neiffer of Farm CPA Report includes a preview of the items that jumped out at him relative to the farm bill details finally released by Senate Ag Chairwoman Debbie Stabenow (D-Mich.).

Reference Prices. The House proposal raised reference prices by approximately 10-20%. The Senate proposal appears to raise reference prices by a flat 5% (rounded). Although it appears that cotton only went up by 4% instead of 5%.

Increase in Base Acres

· Only underserved and disadvantaged farmers may increase base acres

· Based on average of 2018-2022 plantings

· Includes prevent planted acres

· Maximum increase of 160 acres per farm

· If disadvantage farmer does not farm acres during 2025-2029, then increased base acres are eliminated

Special 2023 and 2024 ARC/PLC election. Automatic election to be paid the highest amount for 2023 and 2024 crop year even if the farmer originally elected ARC or PLC.

Limit on PLC Payment. The maximum amount of payment for PLC will be 15% of the effective reference price.

As example, assume a farmer has a PLC yield of 200 bushels for corn and the effective reference price is $4.30 and the final corn harvest price is $3.50. Under the old PLC rules, the farmer could receive 200 bushels times 80 cents per bushel or $160. Under this proposal, the farmer is limited to 65 cents or $130 per acre.

Partial PLC Payments. Instead of waiting until after Oct. 1 to collect a PLC payment, the farmer, in certain situations may elect to receive up to 50% of the crop beginning Feb. 1. This is based on firm projections by USDA that the final harvest price will be below the effective reference price. If USDA pays too much, then the farmer must pay it back.

Agricultural Risk Coverage. As expected, the bill increases the guarantee from the current 86% to 88%, less than the 90% in the House bill. However, not expected, the bill increases the maximum payment to 12.50% of benchmark revenue, matching the House bill and makes this retroactive to the 2024 crop. 2023 crop remains at 10%.

Partial ARC Payments. Provides same mechanism for partial payments as under PLC.

Increase to Marketing Loan Rates. For 2025 crops and subsequent years, the loan rate will be the lesser of 110% of current loan rates or an adjustment based on current input costs versus a five-year average.

Sugar Program. Increase sugar cane payment to 24 cents per pound for 2025-2029. Sugar beet growers will receive 136.5% of sugar cane payment rate.

Permanent ERP. Emergency Relief Program would be made permanent (at least until next farm bill). Payment limits of $500,000 for specialty crops and $250,000 for all other crops. Terms appear similar to old ERP programs, but it does not mandate how USDA will administer it, etc. Also, no extra payment limit if you can prove you are a farmer. This may still be messy for CPAs to help farmers calculate their claim. Also, requires farmers to insure all acres.

Adjusted Gross Income (AGI) limits. AGI limits dropped from $900,000 to $700,000. Increases AGI limits to $1.5 million for specialty and high-value crops. What happens if a farmer grows both. The Bill does not address this, other than likely leave it up to USDA to come up with rules. Waiver of AGI rules available to economically distressed producer.

It appears that no payments will be allowed if the land is owned by someone or an entity whose AGI is over $700,000. This means that a farmer who is cash renting that ground will not qualify for any payment on that ground. Under current rules and the House Farm Bill proposal, any farmer who is cash renting the ground and their AGI is under the limit will qualify for a payment. This is a major change and will create the law of unintended consequences. They seem to want to not have an incentive for wealthier individuals to purchase land since their high AGI will not qualify them for any payments but under current rules they get no payment anyway.

Increase in CCC Scoring. Section 1708 indicates that for purposes of CBO scoring, the restrictions on utilizing CCC funds shall be $6.7 billion per year for 2024-2033. The last scoring by CBO was $400 million per year.

CRP Rentals Limit Increased to $125,000 from current $50,000

Crop Insurance Changes. Increases subsidies for beginning and veteran farmers and ranchers to essentially match House proposal. Increases SCO to allow for payment at 88% instead of 86% of guarantee. House was at 90%. Increases premium subsidies.

Makes improvements to Whole Farm and Micro Farm insurance plans.

Neiffer’s bottom line: “This is our first preview of the Senate Farm Bill Proposal. There appears to be some benefit to production Ag, however, many of the proposals seem to penalize production ag such as the following:”

· Very limited increase in base acres

· Restriction on payments due to ownership of farmland by higher AGI individuals or entities

· Reduction in AGI limits

· No change to definition of farm income

· Possible limit on PLC payments

Items that may benefit production ag include:

· Permanent ERP (although this is a very messy program)

· Partial advance payments of ARC and PLC

· Automatic 2023 and 2024 ARC or PLC decisions

Boozman, NPPC chime in on Stabenow’s farm bill proposal... Senate Ag Committee ranking member John Boozman (R-Ark.) on X wrote: “An 11th hour partisan proposal released 415 days after the expiration of the current farm bill is insulting. America’s farmers deserve better.”

Meanwhile, the National Pork Producers Council (NPPC) issued the following statement:

“Though America’s pork producers appreciate Chairwoman Stabenow’s efforts to publish Farm Bill text, this is simply not a viable bill, as it fails to provide a solution to California Prop. 12,” said NPPC President Lori Stevermer, a pork producer from Easton, Minn. “Pork producers have continually spoken up about the negative impacts of this issue, and it is a shame these conversations were disregarded.”

In May, NPPC secured 100% of pork producers’ priorities in the House Agriculture Committee-passed bipartisan 2024 Farm Bill. In June, producers once again secured all policy priorities in Senate Agriculture Committee Ranking Member John Boozman’s 2024 Farm Bill framework.

NPPC said it urges both chambers of Congress to swiftly consider and pass a farm bill this year that includes a fix to California Proposition 12, a state law that places arbitrary housing standards on the pork industry, creating uncertainty for pork producers as they look to continue their operations to the next generation.

White House pushes for nearly $100 billion in emergency aid for disasters... The Biden administration is asking Congress to approve $98.4 billion in emergency aid for disasters, including $24 billion for ag disasters. That funding would also go toward a permanent overhaul of pay for federal wildland firefighters and emergency food support programs, like the Special Supplemental Nutrition Programs for Women, Infants and Children or WIC, according to a fact sheet. The request is for the government’s response and recovery efforts following a series of natural disasters, including Hurricanes Helene and Milton that devastated parts of Southeastern states. The Federal Emergency Management Agency ($40 billion) and USDA would receive the bulk of the funding request, if lawmakers approve it in full, though they can increase, decrease, or ignore whatever they wish.

Other disaster aid levels:
• $12 billion for the Department of Housing and Urban Development for Community Development Block Grant Disaster Recovery programs.
• $8 billion for the Department of Transportation to repair roads and bridges throughout 40 states and territories that were “seriously damaged by natural disasters or catastrophic failures from external causes.”
• $4 billion for the Environmental Protection Agency for “long-term water system upgrades” as well as hazardous waste and debris clean up.
• $3 billion for the Health and Human Services Department, which Young said would help “build supply chain capacity and resilience for IV fluids and other critical medical products that became scarce during recent hurricanes.”
• $2 billion for the Small Business Administration for low-interest disaster loans.
• $2 billion for the Commerce Department for flexible economic development grants and to buy three “hurricane hunter” aircraft.
• $1 billion for the Education Department to aid schools in affected areas.
• $1 billion for the Energy Department to “support grid rebuilding, modernization and future hardening efforts in areas hardest hit by Hurricanes Helene and Milton and funding to implement energy recovery efforts in communities affected by the Maui wildfires,”
• $500 million for the Army Corps of Engineers to reimburse the cost of cleaning up wreckage after a ship crashed into the Francis Scott Key Bridge in Baltimore, Maryland.
• $300 million for the State Department to “address the need for additional water infrastructure to prevent and reduce sewage flows and contamination at the South Bay International Wastewater Treatment Plant” in California.
• $200 million for the Interior Department for several programs, including a permanent overhaul of federal wildland firefighter pay, repairing siphons on the St. Mary Canal in Montana and mapping hazard impacts.
• $200 million for the Department of Labor’s Dislocated Worker National Reserve.
• $100 million for the Legal Services Corporation for legal assistance for low-income disaster survivors.
• $100 million for AmeriCorps for disaster recovery projects.

Congress is expected to begin vetting the supplemental spending request this week before departing on a one-week Thanksgiving break. It’s likely lawmakers and staff will release an emergency spending bill in early December when both chambers return for a three-week session.

“It is absolutely critical that these communities know that their government has not forgotten them,” White House budget director Shalanda Young said Monday.

Expert warns U.S./China rivalry is already a new cold war, calls for careful management... Robin Niblett, a distinguished fellow with London-based think tank Chatham House, offers a sobering assessment of the current state of U.S./China relations in an exclusive interview with the South China Morning Post. He argues we are not merely approaching a new cold war between these global powers but are already in the midst of one. “I believe we’re in a new cold war. We’re not going toward it. We’re not in the foothills. We’re in it,” Niblett states.

He identifies several key indicators of this cold war dynamic:

· Military Competition: China’s nuclear arsenal expansion and the U.S. response.

· Ideological Divide: A clash between top-down and bottom-up governance systems.

· Global Influence Contest: The formation of new blocs, with China and Russia on one side, and the U.S. with its allies on the other.

Of note: Niblett explains that the recent meeting between Presidents Xi Jinping and Joe Biden has not fundamentally altered this trajectory: “Things will get worse before they get better, or before they get even worse.”

Regarding Europe’s position, Niblett notes that while European nations share some concerns with the US about China, their approach differs in key areas. He states, “Europe is aligned with America for now, but it has different emphases.”

The Ukraine conflict has been a significant factor in aligning European and U.S. positions on China.

Looking ahead, Niblett sees both challenges and opportunities in this new cold war dynamic. He suggests that developing nations may find opportunities to leverage the rivalry between major powers for their benefit. However, he emphasizes the critical importance of keeping this conflict “cold”: “We need to be clearer about its boundaries, [and] try to work out arms control agreements that will soften its rough edges, whether in the South China Sea or on nuclear modernization plans. We need to keep trade and investment open in those areas that are not inside the tent of each side’s security.”

Bottom line: Niblett stresses the necessity of managing this new cold war carefully to prevent it from escalating into a hot conflict, a scenario that would have devastating global consequences.

Proposed 60% tariffs on goods via Chinese-operated ports in Latin America... Mauricio Claver-Carone, a key adviser to President-elect Donald Trump’s transition team, has proposed that goods shipped through Chinese-owned ports across Latin America be subjected to the same 60% tariffs as imports from China, Bloomberg reports. This plan particularly targets a new Chinese-owned port in Chancay, Peru, recently inaugurated by President Xi Jinping and Peruvian President Dina Boluarte.

The proposed tariff would extend to all goods transiting through Chinese-controlled ports in the region, potentially affecting trade hubs from Mexico’s Manzanillo to Argentina’s Buenos Aires and even ports near the Panama Canal. Claver-Carone, known for his firm stance on Beijing during the first Trump administration, characterized the measure as a warning shot to countries partnering with China on maritime projects.

This proposal could impact regional trade optimism, especially for nations like Peru and Mexico, where Chinese port investments are prominent. Claver-Carone argues that such goods should be treated as if they originate from China due to Beijing’s influence on maritime infrastructure.

Corteva, BP to develop SAF production... Corteva plans to partner with BP to develop low carbon intensity bio-feedback sustainable aviation fuel (SAF) production, signing a non-binding memorandum of understanding to form a joint venture with the aim of eventually reaching delivery of 1 MMT per year of biofuel feedstocks for SAF production by the mid-2030s. Corteva said it plans to contract with farmers in North America, South America and Europe to grow its proprietary mustard seed, sunflower and canola feedstocks well-suited for SAF production.

The joint venture would aim to introduce new cropping systems to produce oil that meets EU RED III criteria, and qualifies for U.S. Low Carbon Intensity policy incentives, while creating a new revenue stream for farmers, the Corteva said.

Summit Carbon Solutions sues Bremer County, Iowa, over pipeline regulations... Summit Carbon Solutions has filed a lawsuit against Bremer County, Iowa, over local ordinances attempting to regulate the company’s planned carbon dioxide pipeline. This marks the third Iowa county Summit has taken to court, following a December 2023 federal ruling that permanently blocked similar ordinances in Story and Shelby counties. Summit argues Bremer County’s regulations, enacted in September 2024, mirror the previously invalidated rules. The company seeks declaratory and injunctive relief, claiming that Bremer County’s actions threaten project compliance and progress on its planned 2,500-mile multi-state CO2 pipeline network.