Evening Report | October 10, 2024

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USDA’s October crop reports out Friday... USDA will update production forecasts for corn, soybean and cotton at 11:00 a.m. CT on Friday. Analysts expect slightly smaller crops, with the average pre-report estimates at 15.155 billion bu. for corn (15.186 billion bu. September), 4.579 billion bu. for soybeans (4.586 billion bu. in September) and 14.270 million bales for cotton (14.512 million bales in September). Final wheat production was set at 1.971 billion bu. in the Small Grains Summary at the end of September. The new production forecasts, along with changes to usage projections, will drive changes to projected new-crop ending stocks. The following estimates are from a Reuters poll; Bloomberg for cotton.

Russia doesn’t cut wheat crop as much as expected... Russia lowered its final grain and wheat crop production estimates but the figures were higher than analysts expected. Deputy Prime Minister Dmitry Patrushev estimated Russian grain production at 130 MMT, including 83 MMT of wheat. Those figures are well above private crop forecasters.

Patrushev said Russia’s domestic grain consumption is estimated at 85 MMT to 87 MMT. The remainder of the supplies could be exported.

As we reported in “First Thing Today,” Russia’s ag ministry called the country’s major grain exporters to a meeting on Friday, presumably to discuss grain (primarily wheat) export levels for 2024-25.

War insurance costs surge for Ukraine grain ships amid intensified Russian attacks... The cost of insuring vessels transiting Ukraine’s Black Sea shipping corridor has surged above 1% of a ship’s value after Russia ramped up attacks on key ports, Bloomberg reports. This marks an increase from around 0.75% last week, raising costs by $125,000 per voyage for a $50 million ship. Despite ongoing risks, vessel traffic remains resilient, though continued attacks could deter shipowners. “There have been new requests from clients for war risk insurance in Ukraine,” said Maksym Dubovoy, co-owner of Atria Insurance Brokers, as concerns grow for Ukraine’s vital grain exports.

HRW drought footprint continues to expand... As of Oct. 8, the Drought Monitor showed 75% of the U.S. was covered by abnormal dryness/drought, up four percentage points from the previous week. USDA estimated 47% of the U.S. winter wheat crop was experiencing drought conditions, up three points from last week. Drought continued to spread across HRW areas. Northern SRW areas saw an expansion of drought, while improvement was noted in southern states, especially through the Tennessee River basin.

In HRW areas, dryness/drought covered 94% of Kansas (virtually no D3, no D4), 68% of Colorado (no D3 or D4), 84% of Oklahoma (23% D3, no D4), 83% of Texas (11% D3 or D4), 96% of Nebraska (virtually no D3, no D4), 100% of South Dakota (3% D3, no D4) and 84% of Montana (11% D3 or D4).

In SRW areas, dryness/drought covered 71% of Missouri (3% D3, no D4), 69% of Illinois (no D3 or D4), 92% of Indiana (no D3 or D4), 83% of Ohio (20% D3 or D4), 98% of Michigan (virtually no D3, no D4), 4% of Kentucky (no D3 or D4) and 57% of Tennessee (virtually no D3, no D4).

Click here to view related maps.

Farm debt rises in latest quarter... The Kansas City Federal Reserve’s latest Ag Finance Update showed farm debt has risen, but delinquencies are low. Details:

Farm operating debt at commercial banks has seen a significant increase:

• Non-real estate farm debt grew by approximately 10% compared to the previous year during the second quarter of 2024.

• The increase was even more pronounced at agricultural banks, where non-real estate debt rose by about 15% year-over-year.

• Real estate farm debt also increased, though at a slower pace - about 2% overall and 6% at agricultural banks.

This rise in farm debt is attributed to several factors, including a softening agricultural economy, lower farm sector liquidity and higher financing needs among farmers.

While debt has increased, credit conditions have shown signs of tightening: The loan-to-deposit ratio for farm lenders reached its highest level since 2020; Agricultural bank liquidity has declined from record levels; There’s increased competition for deposits, leading to greater use of alternative funding sources at community banks.

Despite the rise in debt, delinquency rates on farm loans remain low. About 1% of real estate and non-real estate farm loans were past due by at least 30 days in the second quarter, representing a slight increase from record low levels a year ago. Approximately half of the increase was due to newly delinquent loans past due 30 to 89 days.

While the increase in farm debt is significant, there are some positive indicators: Capital levels at agricultural banks have improved slightly; USDA projects only a small increase in the bankruptcy rate among farmers this year compared to last year, with 2022 and 2023 having record low levels.

Southern Ag Today: USDA farm income projections misinterpreted, masking sector disparities... USDA’s latest Net Farm Income (NFI) projection for 2024, at $140 billion, reflects a 4.4% decline from 2023. Southern Ag Today economists Joe Outlaw and Bart Fischer note that as critics argue, this broad measure often leads to misconceptions about the state of U.S. agriculture. “It is widely used in Washington D.C. as a measure of how well farmers and ranchers are doing,” but the NFI doesn’t reflect individual realities across sectors.

The report highlights a deeper issue: while overall NFI fell by 6.7%, “significant losses in crop agriculture are being masked by the recent boom in livestock profitability.” Wheat farmers, for instance, face a projected 50% decline in their net cash farm income (NCFI), which renders the overall NFI figure misleading for them. The analysis warns against celebrating the aggregate NFI without recognizing the “complete misuse of the data” for struggling sectors like crop producers.

Consumer inflation slows but slightly above expectations... U.S. consumer prices rose slightly more than expected in September, but the annual increase in inflation was the smallest in more than 3-1/2 years. The consumer price index increased 2.4% from year-ago, down from a 2.5% rise in August and the smallest annual gain since February 2021. Economists expected a 2.3% increase. Core inflation, minus food and energy prices, rose 3.3% from last year, up from a 3.2% gain in August.

Food prices rose to 2.4% above year-ago in September, up from a 2.1% increase the previous month. Food at home (grocery) prices increased to a 1.3% annual gain (up from 0.9% in August) while food away from home (restaurant) costs eased to 3.9% above year-ago (down from 4.0%).

The Fed had been scrutinized for cutting interest rates 50 basis points in September after last month’s jobs data strengthened. Even with the stronger-than-expected consumer inflation, markets signal investors still expect the Fed to cut interest rates 25 basis points in November.

USDA offers livestock disaster aid amid wildfire losses in North Dakota... Following recent wildfires in western North Dakota, USDA’s Livestock Indemnity Program (LIP) offers assistance to ranchers for livestock deaths beyond normal mortality due to adverse weather. “Documentation of loss is critical,” emphasized Mary Keena of NDSU Extension, urging producers to record inventory and loss data before disposal. Beau Peterson of USDA added, “LIP permits the use of contemporaneous records for proof of inventory and death losses.” Approved carcass disposal methods include burial, composting and incineration, with specific guidelines for each.

USDA’s Farm Service Agency (FSA) has current information detailing the disaster assistance programs available to ranchers specific to livestock death (link).

World Bank upgrades South Asia’s 2024 growth forecast, citing strong domestic demand... The World Bank raised its growth forecast for South Asia to 6.4% in 2024, up from its previous 6% estimate, driven by stronger domestic consumption in India and faster recoveries in Bhutan, Nepal and Sri Lanka. Despite these upgrades, growth forecasts for Bangladesh and Maldives were downgraded due to policy uncertainties and debt concerns. Inflation in the region is expected to moderate as currency depreciation and supply issues ease, but vulnerabilities remain, particularly in fiscal and climate-related risks.