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Hog producers: Add 4th, 1st-qtr. hedge coverage... Lean hog futures have posted a strong contra-seasonal rally from their summer lows. While the market could have more near-term upside potential if the cash index continues to strengthen, the rally presents an opportunity to lock in a price floor in case of a sharp seasonal decline. We advise hog producers to hedge 50% of fourth-quarter production in December $84.00 put options and 50% of first-quarter production in February $84.00 puts. Our fills were $2.075 for the December puts and $3.35 for the February puts.
Winter wheat drought footprint continues to expand, rains should help... As of Oct. 29, the Drought Monitor showed 87% of the U.S. was covered by abnormal dryness/drought, up eight percentage points from the previous week. USDA estimated 62% of the U.S. winter wheat crop was experiencing drought conditions, up four points from last week. Rains across areas of the Plains and Midwest this week should improve drought conditions, but they won’t remove them.
In HRW areas, dryness/drought covered 98% of Kansas (4% D3, no D4), 60% of Colorado (3% D3, no D4), 92% of Oklahoma (42% D3, no D4), 91% of Texas (16% D3 or D4), 100% of Nebraska (8% D3, no D4), 100% of South Dakota (10% D3, no D4) and 85% of Montana (14% D3 or D4).
In SRW areas, dryness/drought covered 95% of Missouri (18% D3, no D4), 100% of Illinois (no D3 or D4), 100% of Indiana (no D3 or D4), 87% of Ohio (20% D3 or D4), 99% of Michigan (virtually no D3, no D4), 82% of Kentucky (no D3 or D4) and 73% of Tennessee (virtually no D3, no D4).
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EU cuts wheat production, export estimates... The European Commission cut its forecast for usable wheat production in the European Union by 2 MMT to 112.6 MMT, 10% below last year. The 2024-25 wheat export forecast was lowered 1 MMT to 26 MMT.
The commission also cut its production forecasts for corn and barley.
Uncertainty over La Niña arrival complicates winter weather forecasts... Weather forecasts face uncertainty as the Pacific remains between El Niño and La Niña, complicating predictions. La Niña, typically associated with cooler, wetter weather in the Pacific Northwest and drier conditions in the southern U.S., is now expected to arrive later and be weak, possibly allowing other weather patterns like the North Atlantic Oscillation to dominate.
Soyoil use for biofuels rises in August... Soybean oil used to produce biofuels in the U.S. rose to 1.217 billion lbs. in August, up from 1.139 billion lbs. in July, according to the Energy Information Administration. That was up 2.1% from last year and the third highest monthly tally behind June of this year and July 2023. Biofuel usage included 636 million lbs. by biodiesel plants and 581 million lbs. by renewable diesel facilities. Usage for biodiesel plants declined 6 million lbs., while renewable diesel plants used 84 million lbs. more soyoil after a sharp drop in July.
Big Oil sees Brazil becoming major global hub for SAF... A global push to decarbonize air travel has groups from Big Oil to sovereign wealth funds betting on Brazil to become a top global center for sustainable aviation fuel (SAF), Bloomberg reports. Brazil is becoming a magnet for investment as countries race to grab a share of what promises to be a fast-growing market.
Agriculture powerhouse Brazil has an abundance of cheap crops to make biofuels, providing the nation a leg up on competitors including the United States. Many of Brazil’s supplies also rank better in terms of carbon emissions, key to meeting requirements for SAF production.
SAF is one of the few pathways the aviation industry has at its disposal to curb its carbon footprint, which accounts for about 2.5% of global emissions. Interest in green jet fuel is picking up, driven by policy support, particularly in the European Union and U.S., but demand far exceeds available supply and is forecast to continue growing.
Production of green aviation fuel in Brazil has the potential to reach around 50 billion liters (13.2 billion gallons) by 2030 with further investments in agriculture, according to preliminary data from a study carried out by Airbus, LATAM Airlines Group SA and the Massachusetts Institute of Technology. That’s similar to the America’s potential output, but Brazil is set to be a bigger exporter, with U.S. production being consumed domestically.
According to data by the International Civil Aviation Organization, Brazilian sugar cane ethanol has lower carbon emissions compared to other SAF ingredients such as soybean oil or U.S. corn-based ethanol. That means Brazilian-produced SAF would likely be more efficient in helping airlines reach targets to reduce their carbon emissions.
Brazil is already shipping ethanol to U.S. plants that turn it into SAF. Now it wants to make its own aviation fuel plants. While many Brazilian SAF projects are still in their infancy, equipment supplier Honeywell International Inc. believes about four to five new plants could “come to the market very soon,” said Ken West, the company’s CEO of energy and sustainability solutions.
USDA issues $235 million in disaster relief to farmers... USDA announced $235 million in payments to producers affected by natural disasters, including $143 million in crop insurance indemnities for Florida farmers impacted by Hurricane Milton and $92 million for livestock producers who were forced to buy feed because of drought and wildfire losses from 2022.
USDA finalizes 2022 ELRP payments with 7.25% adjustment... USDA will issue a second payment under the Emergency Livestock Relief Program (ELRP) 2022. USDA initially used the 2022 Livestock Forage Program (LFP) to calculate ELRP 2022 payments, basing those on the 2022 LFP payment multiplied by a factor of 90% for underserved producers and 75% for all other producers, and then those levels were multiplied by a 25% factor to stay within budget. The final payment will be 7.25%. This is in part due to a court case challenging the increased payments for socially disadvantaged farmers. USDA said the second payment will not include any increased payments for socially disadvantaged producers.
No action is required by producers to receive the second payment.
Corporate Transparency Act deadline looms... Thousands of U.S. farmers risk steep fines and potential jail time if they fail to file Beneficial Ownership Information (BOI) with FinCEN by Jan. 1, 2025, the American Farm Bureau Federation (AFBF) warns (link). The Corporate Transparency Act of 2021 mandates registration to combat money laundering, impacting over 230,000 farms structured as c-corporations, s-corporations or LLCs. Currently, less than 11% of eligible businesses have filed. AFBF President Zippy Duvall highlighted the challenge for small farms to comply due to limited staff and unclear guidance. Penalties include fines up to $10,000, daily civil charges and potential felony charges with prison time.
PCE inflation rises slightly, matches expectations... The U.S. personal consumption expenditure (PCE) price index rose 0.2% on a monthly basis in September, matching expectations, following a 0.1% increase in August. The core PCE index, excluding food and energy, rose 0.3%, the highest in five months. Annually, PCE inflation fell to 2.1%, its lowest since February 2021, down from 2.3% in August, while the core rate held at 2.7%.