Evening Report | October 21, 2024

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Corn harvest roughly two-thirds done... Corn harvest advanced 18 percentage points over the past week to 65% as of Sunday, 13 points ahead of the five-year average. Each of the top 18 production states were at or ahead of the average pace for the third week of October.

Soybean harvest remains well ahead of average... Soybean harvest advanced 14 percentage points over the past week to 81%, 14 points ahead of the five-year average. Each of the top 18 production states were at or ahead of the average pace for the third week of October.

Cotton conditions improve... USDA rated 37% of the cotton crop as “good” to “excellent” as of Sunday, up three points from last week. The “poor” to “very poor” rating declined one point to 33%, despite a four-point increase in the bottom category.

USDA reported 94% of the crop had bolls open, three points ahead of average. Harvest advanced 10 points to 44%, six points ahead of average.

Winter wheat planting, emergence slightly behind average... USDA reported winter wheat seeding reached 73%, three points behind the five-year average. Planting stood at 65% in Texas (68% average), 55% in Oklahoma (71%) and 78% in Kansas (79%). The crop was 46% emerged, four points behind average.

Details about the FARM Act... The Farmer Assistance and Revenue Mitigation Act (FARM Act) introduced by Rep. Trent Kelly (R-Miss), a member of the House Ag Committee, would provide emergency assistance to producers of eligible commodities for which the expected revenue in crop year 2024 is below the projected per-acre cost of production. Kelly says this assistance will be critical in helping farmers pay down debt relative to the 2024 crop and assist them in obtaining financing for the 2025 crop year.

Key features include:

· Eligibility: Crops such as barley, corn, cotton, dry peas, grain sorghum, lentils, chickpeas, oats, peanuts, rice, soybeans, other oilseeds and wheat. (Some combination of purchases, block grants or per-acre payments for non-PLC/ARC eligible crops.)

· Payment formula: (Projected Cost/1 – Projected Returns/2) X Eligible Acres/3 X 60% = Total Payment/4

1. Projected cost is the per acre cost published by the Economic Research Service (ERS) for corn, soybeans, wheat, cotton, rice, sorghum, oats and barley. The projected cost for other eligible commodities will be determined by the Secretary in a similar manner.

2. Projected returns for corn, soybeans, wheat, cotton, rice, sorghum, oats, and barley are determined by multiplying the projected 2024 marketing year average price published in the WASDE by the 10-year national average yield for the eligible commodity. The Secretary will be responsible for calculating a projected return for eligible commodities for which WASDE does not publish a projected price.

3. Eligible Acres consist of 100% of the acres planted to an eligible commodity, plus 50% of the acres prevented from being planted to an eligible commodity in crop year 2024, as reported to FSA by the producer.

4. Subject to payment limitations.

With the exception of alternative limitations, existing provisions relative to attribution of payments, actively engaged in farming, and other regulations apply. Payment limitations based on income derived from farming, ranching, or forestry.

· Persons or entities that derive less than 75% of their income from farming, ranching, or forestry are subject to an overall limitation of $175,000 in assistance under this Act.

· Persons or entities that derive 75% or more of their income from farming, ranching, or forestry are subject to an overall limitation of $350,000 in assistance under this Act.

The FARM Act has garnered endorsements from various agricultural organizations, including the American Farm Bureau Federation, American Soybean Association, National Association of Wheat Growers, National Barley Growers Association, National Cotton Council, National Sorghum Producers, National Sunflower Association, U.S. Canola Association, U.S. Peanut Federation, USA Dry Pea & Lentil Council, USA Rice, and Western Peanut Growers Association. Rep. Kelly is currently seeking co-sponsors for the measure, with a deadline of 9 a.m. ET, Friday, Oct. 25, for original co-sponsorship.

How Paul Neiffer of Farm CPA Report, sizes up the FARM Act proposals. He concludes it may make large payments for some 2024 crops. He has calculated some estimated amounts per acre that might result if the Act is passed. Link.

As previously noted, total payments would be limited to $175,000 per person / per entity. If more than 75% of Adjusted Gross Income (AGI) is from farming, then the payment limit would double to $350,000. Neiffer says if you are an LLC, corporation or other legal entity, you will be limited to one payment. If you are general partnership or qualified joint venture, the payment will be limited to the number of owners based on ownership percentages.

Acres are based on 2024 planted acres with prevent plant acres qualifying at the 50% level. Other acres lost to natural causes such as hurricanes, etc. would also qualify at the 50% level.

Neiffer’s estimated payments are based on the current 2024-25 mid-year average price. For estimated production, Neiffer simply took the average of 2019-2021 yields and used that number. “The actual number might be a little lower but could be higher too but should not vary materially,” Neiffer says. He then inputted the current cost of production numbers from USDA and subtracted that from estimated revenues. The payment per acre is 60% of this number and that provided an estimate for 1,000 acres for each crop.

In all cases there will be a payment, however, barley has a very low payment while cotton has the highest payment with oats not far behind. Corn is the other crop that might see more than $100 per acre payment. Neiffer cautions these estimates “are based on our reading the Act and final 10-year production numbers will be provided by USDA and price and cost numbers will not be applicable until the Act is passed.”

He also warns: “Not mentioned in the Act is whether these payments will reduce any possible ARC/PLC payments for this year.”

SCOTUS to decide venue for challenges to EPA refinery exemption decisions... The Supreme Court agreed to hear a case that will determine the appropriate venue for challenges to EPA’s small refinery exemption decisions under the Renewable Fuel Standard (RFS) program. This decision comes amid legal battles surrounding the implementation of the RFS and the granting of exemptions to small refineries.

Currently, there is a debate over which courts have jurisdiction to hear challenges to EPA decisions regarding small refinery exemptions:

· D.C. Circuit Court of Appeals: Some argue that all challenges should be heard exclusively in this court.

· Other federal appeals courts: Others contend that challenges should be allowed in regional appeals courts.

The outcome of this case could have significant impacts:

· It may affect the ability of refineries and biofuel producers to challenge EPA decisions in courts closer to their operations.

· Limiting cases to the D.C. Circuit could lead to more consistent interpretations of the law.

· The venue can influence the outcome of cases, as different circuits may have varying precedents or interpretations of environmental laws.

Renewable fuels groups have expressed support for the Supreme Court’s decision to hear this case, viewing it as an opportunity to clarify the legal landscape surrounding small refinery exemptions.

The Supreme Court’s decision to hear this case is part of a larger debate about the venue for challenging EPA rules. The Court will consider whether critics of environmental rules that aren’t “nationally applicable” can sue in courts they might consider more favorable to their positions.

Texas allows farmers to tap Rio Grande amid drought and Mexico water delays... Texas Agriculture Commissioner Sid Miller on Oct. 17 issued an executive order allowing Texas farmers and ranchers to tap into the Rio Grande for irrigation purposes. This decision comes in response to a severe drought situation exacerbated by delayed water deliveries from Mexico, which are required under the 1944 Water Treaty between the United States and Mexico.

Commissioner Miller stated, “Enough is enough. We’re done sitting around waiting for someone else to act. There is no reason the water overflow south of the Amistad and Falcon international reservoirs should go down the Rio San Juan to the Rio Grande and be wasted.”

Malanga analyzes inflation trends, economic outlook and policy risks... Dr. Vince Malanga, president of LaSalle Economics, acknowledges the challenges ahead, noting that inflation has been trending lower throughout the year due to various factors:

· China’s export policy

· Federal Reserve’s restrictive policy

· Strong productivity growth

· Declining commodity prices

· Favorable calendar effects

“China’s policy of exporting its surplus capacity to the world amid weak activity was surely an important factor,” Malanga states, highlighting the global impact of China’s economic strategies. Malanga emphasized the positive impact of productivity growth on unit costs and corporate pricing flexibility. Malanga observes, “Strong productivity growth is keeping unit costs in check and is enabling companies to adopt more flexible pricing. This has benefited the quality as well as the quantity of profits.”

Looking ahead, Malanga identified several factors that could influence the economic landscape:

· Changing calendar effects

· Moderating shelter component in price indexes

· Volatile oil prices due to Middle East tensions

· Agricultural commodity supply conditions

· China’s monetary and fiscal policy initiatives

· OPEC production dynamics

He expressed concern about potential geopolitical risks, stating, “A direct confrontation between Israel and Iran is a worry as is the potential Saudi response to it.” Despite the challenges, Malanga remains cautiously optimistic about inflation in the near term. He concludes, “Looking out over the next six months, our guesstimate is that while further reductions in the inflation rate may be difficult to achieve, any measurable upward tilt is unlikely.” This outlook suggests a potential stabilization of inflation rates in the coming months.

Malanga’s comments suggest the current economic conditions may allow for further policy adjustments by the Federal Reserve. However, Malanga warns that bond investors will be closely monitoring these developments, particularly considering concerns over the fiscal outlook. He notes, “This is scary because recent interest rate declines have done little to boost residential and commercial activity,” highlighting the complex relationship between monetary policy, interest rates and economic activity.

Canada’s tariff exemptions raise hopes for eased canola trade with China... Canada’s move to temporarily exempt certain Chinese imports from tariffs has sparked optimism that China might ease or delay its antidumping investigation into Canadian rapeseed. The Canadian finance ministry Friday said that relief would be granted under specific and exceptional circumstances to “ensure that Canadian industry has sufficient time to adjust supply changes.”