Evening Report | November 20, 2024

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Livestock producers: Extend corn coverage... Seasonal patterns for corn futures in years when there’s an early harvest low such as this year tend to see price strength through winter. Unless soybeans rally, however, the upside is likely limited. We advise livestock producers to extend corn-for-feed coverage another two weeks in the cash market through mid-December. Be prepared to further extend coverage if corn futures post an upside technical breakout above the fall highs.

Brazil, China sign wide-ranging deals, including agricultural products... Brazil and China signed 37 deals covering agriculture, tech cooperation, trade and investments, infrastructure, industry, energy and mining, among other areas. Brazil received permission from China to export domestically-grown sorghum, grapes, sesame as well as fish products to Chinese buyers, Brazil’s agriculture ministry announced. The announcement was part of several deals signed during Chinese President Xi Jinping’s state visit to Brasilia, where he held talks with President Luiz Inacio Lula da Silva on the sidelines of the G20 summit.

For agriculture, the sorghum deal is most notable. Brazil produced only 4.4 MMT of sorghum in 2023-24, though this deal could help fuel greater production. Brazil only has a 0.29% share of the international sorghum market. China imported $1.83 billion of sorghum last year, mostly from the U.S., Brazil’s agriculture ministry said.
Brazilian negotiators have also tried to secure the export of other agricultural products, such as pork and beef offal and distillers dried grains. Since trade in these categories requires updated health protocols, however, progress is expected to be delayed until 2025.

Brazil decided last month not to join China’s Belt and Road Initiative (BRI), citing concerns about potential repercussions for its relationship with Washington. But Brazil signed a protocol with China regarding “synergies” related to BRI, China’s overseas infrastructure investment strategy and Xi’s signature foreign policy plan, launched in 2013. The two leaders also announced the formation of two task forces dedicated to financial cooperation and productive, sustainable development. These groups will have a two-month deadline to identify priority Brazilian projects eligible for belt and road financing.

Brazil’s BRF signs deal to acquire processed foods factory in China... Brazilian pork and chicken processor BRF said it has signed a binding agreement to acquire a processed foods factory in China’s Henan province for $43 million. BRF said in a securities filing it will invest approximately $36 million in expanding the plant and added that it expects the factory to start operating under BRF management in the first quarter of 2025. BRF expects to double the factory’s capacity to 60,000 MT per year.

Costa challenges Scott for leadership of House Ag Democrats... California Rep. Jim Costa announced his bid to replace Rep. David Scott (D-Ga.) as the top Democrat on the House Ag panel, a key role in shaping the multi-trillion-dollar farm bill negotiations projected to continue into next year. Costa’s challenge raises questions about Scott’s ability to lead amid ongoing concerns about his health and the stalled farm bill, which Republicans plan to extend for one year. This marks Costa’s second attempt at the position after losing to Scott in 2020.

Feedlot inventories expected to be slightly below year-ago... Analysts expect USDA’s Cattle on Feed Report on Friday afternoon to show the large feedlot (1,000-plus head) inventory down 0.1% from year-ago at 11.944 million head as of Nov. 1. The report is expected to show a 3.8% increase in the number of cattle moved into feedlots last month, while marketings are anticipated to be up 5.2% from October 2023.

U.S. businesses brace for potential Trump tariffs... American companies are accelerating inventory orders ahead of President-elect Donald Trump’s inauguration, fearing the implementation of his proposed tariffs on imports. Trump has suggested levies of 10% to 20% on all imports and up to 60% on Chinese goods. Firms are also strategizing for potential impacts, including price adjustments and diversifying away from Chinese manufacturers, the Wall Street Journal reports.
Walmart acknowledged it would probably raise prices on some goods if Trump moves forward with plans to enact sweeping tariffs. Walmart’s CFO John David Rainey stated that prices on some items may increase but it is uncertain which products might see price hikes due to the tariffs. A Walmart spokesperson indicated that any price changes are speculative, but future tariff-induced costs could burden price-sensitive shoppers.

Trump taps Vought to lead budget office in second term... Trump is expected to appoint Russ Vought as director of the Office of Management and Budget (OMB), according to CBS News. Vought, who previously served in the same role during Trump’s first term, is a staunch advocate for an assertive presidency and a key architect of the Heritage Foundation’s Project 2025, a conservative blueprint for federal governance. As OMB director, Vought would play a pivotal role in advancing Trump’s priorities, including immigration reform, government restructuring and healthcare policy, leveraging Republican majorities in Congress. Vought’s leadership at the Center for Renewing America further underscores his alignment with Trump’s “America First” agenda.

Trump team eyes first White House crypto role... Trump’s transition team is considering the creation of a dedicated White House position to oversee cryptocurrency policy, marking a potential first for the administration. This role, if established, could elevate the crypto industry’s influence in Washington. Bloomberg says the discussions, held at Mar-a-Lago, include proposals for a “crypto czar” to liaise with Congress and federal agencies, including the SEC and CFTC. Key industry executives, such as former Coinbase executive Brian Brooks and Coinbase CEO Brian Armstrong, have met with Trump this week.
Trump’s campaign emphasized deregulation and support for the crypto industry, including plans to replace SEC Chair Gary Gensler and form a crypto advisory council. This initiative aligns with Trump’s personal ventures in cryptocurrency, such as NFT collections and new financial ventures.

Musk, Ramaswamy unveil bold federal workforce overhaul via DOGE... Elon Musk and Vivek Ramaswamy, leading the Department of Government Efficiency (DOGE), have presented an ambitious strategy to transform the federal workforce. Highlighted in a Wall Street Journal op-ed, their plan emphasizes a strict return-to-office mandate aimed at reducing government spending and optimizing workforce efficiency. Key points of the DOGE plan:

• Return-to-office mandate: Federal employees would be required to work in the office five days a week, anticipating voluntary resignations to trim the workforce. (USDA has far less than 50% of its huge workforce coming into USDA buildings in DC.)
• Taxpayer advocacy: Describing remote work as a “Covid-era privilege,” they argue taxpayers should no longer bear the cost of such arrangements.
• Workforce optimization: DOGE plans to evaluate and maintain only the staff needed to meet constitutional and statutory obligations.
• Volunteer leadership: Musk and Ramaswamy will serve in unpaid, volunteer capacities.

The proposal has sparked intense debate and is likely to encounter resistance:

• Employee pushback: Federal unions and workers are expected to raise concerns about work-life balance and productivity.
• Recruitment challenges: Experts warn the policy could deter skilled professionals from joining the public sector.
• Economic ripple effects: Communities with large federal worker populations, like D.C., may face economic consequences.
• Implementation barriers: Legal challenges and existing telework policies present significant hurdles.

Bottom line: This initiative mirrors Trump-era goals to streamline government and reduce its footprint. It reignites debates on the role of telework, government efficiency and employee welfare, setting the stage for a contentious policy battle with far-reaching effects.

Virginia court blocks Youngkin’s exit from regional carbon market... A Virginia circuit court has ruled Governor Glenn Youngkin’s attempt to withdraw the state from the Regional Greenhouse Gas Initiative (RGGI) unlawful, marking a victory for environmental activists. Circuit Judge C. Randall Lowe stated that only the General Assembly has the authority to repeal the RGGI regulation, deeming the governor’s unilateral action “null and void.” The Southern Environmental Law Center, representing environmental groups, brought the lawsuit. Democrats in the General Assembly praised the ruling, emphasizing the program’s benefits in funding flood mitigation, home weatherization and low-income energy aid. Youngkin, who views RGGI as a hidden tax inflating utility bills, plans to appeal the decision.

OMB schedules additional meetings over cellulosic biofuel waiver proposal... The Office of Management and Budget (OMB) has scheduled three meetings regarding EPA’s proposed rule to partially waive 2024 cellulosic biofuel volume obligations and extend the compliance deadline.
Meetings:

• Nov. 22: American Fuel and Petrochemical Manufacturers, who petitioned for the waiver.
• Dec. 2: Policy Nexus Advisors on behalf of Marathon Ashland Petroleum Company.
• Dec. 5: Sessions with NATSO (truck stops/travel centers trade group) and SIGMA (fuel marketers/chain retailers).

Of note: No meetings have been scheduled with biofuel advocates, such as the Renewable Fuels Association. EPA’s proposal is not anticipated to significantly lower the 2024 Renewable Volume Obligations (RVOs) for cellulosic biofuels.