Evening Report | October 25, 2024

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Your Pro Farmer newsletter is now available... The recent flurry of global end-user buying of U.S. corn and soybeans continued, signaling both markets are at value levels. But the price response in futures has been relatively muted. As export activity picks up, there were more restrictions on Mississippi River barge traffic due to the expanding drought. That will slow transit times and could push up shipping costs. The drought footprint across winter wheat country continues to expand and intensify, now covering 58% of the crop’s area. That suggests USDA’s first winter wheat crop ratings will come in below average. Much like the corn and soybean markets, wheat hasn’t responded to supportive news. On the biofuels front, the Treasury Department released updated guidance on the 40B credit, which expires at the end of the year, but nothing yet on the 45Z credit that will take effect Jan. 1, 2025. The uncertainty is causing problems and concerns with biofuels investment. Our News page 4 feature this week looks at updated forecasts for global economic growth from the International Monetary Fund. Both IMF and U.S. Treasury Secretary Janet Yellen warned recent Chinese stimulus measures aren’t enough to rejuvenate the world’s second largest economy. We cover all of these items and much more in this week’s newsletter, which you can access here.

Feedlot supply virtually unchanged from year-ago... USDA estimated there were 11.600 million head of cattle in large feedlots (1,000-plus head) as of Oct. 1, virtually unchanged from last year. August placements declined 1.9%, while marketings rose 2.0% from year-ago levels.

Placements declined in the three lightest weight categories, with lightweights (under 600 lbs.) down 6.5%, 6-weights down 7.0% and 7-weights down 3.1%. Placements increased in the three heaviest categories, with 8-weights up 1.5%, 9-weights up 5.2% and heavyweights (1,000-plus lbs.) up 5.3%. By state, placements declined 40,000 head in Texas and 10,000 head in Colorado versus September 2023. Kansas and Nebraska placed the same number of calves into feedlots as last year. “Other states” increased placements 8,000 head.

The Oct. 1 feedlot inventory consisted of 7.0 million steers (up 0.5%) and 4.6 million heifers (down 0.9%). That hints that the industry may be in the very early stages of some herd rebuilding, though it is far from active.

The data is relatively neutral and should have limited market impact on Monday.

Mildly negative meat stocks data... USDA’s Cold Storage Report showed beef stocks climbed more than average during September, while pork stocks increased slightly versus the normal small decline. The data has mildly negative demand implications.

Beef stocks totaled 413.8 million lbs. at the end of September, up 25.2 million lbs., whereas the five-year average was a 15.1-million-lb. increase for the month. Beef inventories declined 7.1 million lbs. (1.7%) from year-ago and were 49.9 million lbs. (10.8%) below the five-year average.

Pork stocks increased 4.9 million lbs. during September to 460.1 million lbs., whereas the five-year average was a nearly 1-million-lb. decline during the month. Pork stocks declined 1.5 million lbs. (0.3%) from last year and were 46.5 million lbs. (10.1%) below the five-year average.

E. coli outbreak linked to McDonald’s Quarter Pounders expands... An E. coli outbreak linked to McDonald’s Quarter Pounders has increased to 75 cases in 13 states, the Centers for Disease Control and Prevention said. Officials continue to investigate the source of the outbreak, though it’s believed to be slivered onions used on the sandwiches. The outbreak has led to 22 hospitalizations and one previously reported death of an older adult in Colorado.

USDA raises 2024, 2025 food price forecasts... USDA forecasts all food costs this year will rise 2.3%, up from 2.2% in September, with grocery prices expected to climb by 1.2%, up from 1.1% last month. Restaurant prices are still forecast to rise 4.1%. For 2025, food costs are projected to increase 2.4%, with expected rises of 1.6% for grocery prices and 3.4% for restaurant prices.

Beef prices are expected to rise 5.5% this year and 2.2% in 2025. Pork is forecast to increase 1.7% this year and 2.2% next year. Egg prices continue to show volatility, with 2024 costs projected to rise 8.8%. The 2025 egg price increase was revised even higher to 10.5%, a sharp jump from the 4.7% projected in September. USDA noted highly pathogenic avian influenza outbreaks have significantly reduced the U.S. egg-layer flock, contributing to the price surge.

France’s Danone cuts out Brazilian soy imports... French dairy giant Danone has stopped sourcing soy from Brazil and now buys from countries in Asia, its finance chief told Reuters, ahead of a European Union rule requiring companies to prove they are not sourcing from deforested land. The EU Deforestation Regulation, covering imports of commodities like cocoa, coffee and soy, was scheduled to come into effect on Dec. 30, though the EU Commission this month proposed a 12-month delay.

Montreal dockworkers plan new strike, disrupting Canada/U.S. trade... Labor unrest at Canada’s busiest Atlantic port is escalating as dockworkers at the Port of Montreal prepare for a 24-hour strike on Oct. 27. The second walkout this month aims to pressure employers to resolve a year-long negotiation stalemate over a new collective agreement, according to the Wall Street Journal. The ongoing dispute is drawing comparisons to a similar standoff in 2020 that required government intervention with back-to-work legislation. Shippers are already diverting cargo to avoid disruptions, a move that could impact trade flows along the St. Lawrence Seaway and into the U.S. Midwest. The prolonged labor impasse threatens to create broader supply chain challenges for Canadian importers and exporters, as the Port of Montreal plays a critical role in linking Atlantic trade routes with North American markets.

Carbon pipeline law faces crucial vote in South Dakota... South Dakota voters will decide the future of a controversial $8.9 billion carbon-capture pipeline project during the Nov. 5 elections. The referendum will determine whether to keep or repeal a recently passed law that critics say favors pipeline developers, particularly Summit Carbon Solutions. A repeal would mark a significant setback for the 2,500-mile pipeline, which would run through multiple states including Iowa, Nebraska and Minnesota.

Opponents argue the law centralizes pipeline approval at the state level, undermining local control and ignoring concerns over eminent domain. Meanwhile, Summit insists it will continue pursuing the project regardless of the vote outcome, emphasizing the pipeline’s importance for keeping corn-based ethanol competitive as cleaner fuel technologies rise.

Supporters, including the South Dakota Chamber of Commerce and ethanol producers, highlight the law as a way to ensure that landowners are treated fairly while helping the ethanol industry evolve.

Bottom line: If the law is repealed, Summit’s ability to proceed with the project could be jeopardized, as South Dakota is a critical part of its five-state plan.

U.S. approves Nevada lithium mine to boost domestic EV supply chain... The U.S. has approved Australian producer Ioneer’s Rhyolite Ridge lithium-boron mine in Nevada, the first lithium mine approved under the Biden administration. Set to quadruple U.S. lithium production by 2028, the project aims to reduce reliance on China for critical minerals. The $1.2 billion mine, supported by a $700 million federal loan, will produce enough lithium to power 370,000 electric vehicles (EVs) annually. Despite environmental concerns over the endangered Thiem’s buckwheat flower, regulators approved the project after agreeing on a conservation plan. The mine is part of broader efforts to incentivize domestic lithium production through tax credits and federal support.

Of note: There is no shortage of lithium in the United States. This week the U.S. Geological Survey said it found between 5 MMT and 19 MMT of lithium reserves located beneath southwestern Arkansas, potentially enough to meet projected 2030 world demand for car battery lithium nine times over. Meanwhile, several lithium producers have announced plans to open new U.S. mines and processing plants amid an attempt to tap incentives in the Inflation Reduction Act (IRA/Climate Act). Oil producers ExxonMobil and Occidental are among several companies pursuing pilot lithium projects in Arkansas and California, respectively.

Bloomberg survey: Economists raise U.S. growth forecasts, predict Fed rate cuts... Economists have slightly raised projections for U.S. economic growth through early 2025, driven by resilient consumer demand and expectations of limited inflation, according to Bloomberg’s latest survey. Forecasts now indicate average growth of around 2% from the third quarter of 2024 through the first quarter of 2025.

The survey also showed optimism about recession risks, with forecasters lowering the odds of a downturn to 25% — the lowest since March 2022. Economists expect inflation to remain close to the Fed’s 2% target, allowing policymakers to lower interest rates in November, December and by an additional 1.25 percentage points next year.

The labor market is projected to cool slightly, with monthly payroll growth expected to average 125,000 in 2025, down from 200,000 this year. The unemployment rate is forecast to rise modestly to 4.3% from the current 4.1%.