Evening Report | September 26, 2024

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Drought covers half of U.S. winter wheat areas... As of Sept. 24, the Drought Monitor showed 73% of the U.S. was covered by abnormal dryness/drought, up three percentage points from the previous week. USDA estimated 50% of the U.S. winter wheat crop was experiencing drought conditions.

In HRW areas, dryness/drought covered 91% of Kansas (no D3 or D4), 43% of Colorado (no D3 or D4), 74% of Oklahoma (7% D3, no D4), 63% of Texas (7% D3 or D4), 81% of Nebraska (no D3 or D4), 70% of South Dakota (1% D3, no D4) and 93% of Montana (9% D3 or D4).

In SRW areas, dryness/drought covered 71% of Missouri (no D3 or D4), 93% of Illinois (no D3 or D4), 100% of Indiana (1% D3, no D4), 98% of Ohio (36% D3 or D4), 50% of Michigan (no D3 or D4), 94% of Kentucky (3% D3, no D4) and 93% of Tennessee (19% D3, no D4).

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French wheat crop small, low quality... France’s wheat production is forecast to be the smallest in 40 years due to excessive rainfall throughout the growing season. Crop quality is also poor, with just over 40% of the crop having a protein content above 11.5%. That limits exportable supplies of milling-quality wheat and also creates obstacles for domestic starch makers. The four starch companies in France, which include French producers Tereos and Roquette, along with Cargill and Archer Daniels Midland, have decided to lower their standards and accept smaller grains that would have been rejected in a normal year.

Hogs & Pigs Report: Near-term market hog inventory bigger than expected... USDA’s Hogs & Pigs Report estimated the Sept. 1 U.S. hog herd at 76.480 million head, up 347,000 head (0.5%) from last year and 195,000 head more than the average pre-report estimate implied. The breeding herd declined 135,000 head (2.2%) to 6.044 million head. The market hog inventory increased 483,000 head (0.7%).

The summer pig crop declined 265,000 head (0.8%) from last year to 35.030 million head, as a 1.7% drop in sow farrowings more than offset a 0.9% increase in the number of pigs per litter, which were a record 11.72 head.

Producers indicated they would throw the brakes on expansion, as fall and winter farrowing intentions are down 0.1% and 0.9%, respectively. However, if litter size keeps running at a record clip as it has for many quarters, it would likely continue to more than offset the smaller breeding herd and reduced farrowing intentions.

The data implies slaughter will run around 3.5% above year-ago through fall and early winter before tapering off to around 1.5% under year-ago during late winter/early spring.

USDA boosted its estimates of both the June 1 hog population and the number of market hogs by 725,000 head to 75.211 million and 69.204 million head, respectively. USDA also revised the March 1 hog inventory by 370,000 head to 74.691 million and the market hog total by the same amount to 68.676 million. The spring pig crop was revised upward by 102,000 head, while the winter crop was boosted 609,000 head.

The report data was mostly neutral compared to pre-report expectations, aside from expected near-term market hog inventories, which could weigh on nearby contracts.

Cold Storage Report: Supportive for meat demand... USDA’s Cold Storage Report showed beef stocks declined contra-seasonally during August, while pork stocks rose less than average. Both imply meat demand more than kept pace with supplies last month.

Beef stocks totaled 395.2 million lbs. at the end of August, down 7.4 million lbs. from July, whereas the five-year average was a 5.1-million-lb. increase for the month. Beef inventories slipped 216,000 lbs. (0.1%) from last year and were 53.5 million lbs. (11.9%) less than the five-year average.

Pork stocks totaled 453.6 million lbs., up 175,000 lbs. from July, less than the five-year average increase of 5.3 million lbs. for the month. Pork inventories dropped 15.6 million lbs. (3.3%) from last year and were 54.0 million lbs. (10.6%) under the five-year average.

East, Gulf Coast port employers seek NLRB intervention as strike looms... Port employers have filed an Unfair Labor Practice complaint with the National Labor Relations Board (NLRB) against the International Longshoremen’s Association (ILA) for refusing to negotiate a new master contract. With 45,000 union workers set to strike when the current contract expires Tuesday, the employers are seeking immediate injunctive relief to force the union back to the bargaining table. The dispute centers on wages, benefits and automation technology at East and Gulf Coast ports. NLRB’s response timeline is unclear and the strike deadline remains unaffected.

Farm Bureau warns of severe impact on agriculture from potential East Coast, Gulf port strike... The American Farm Bureau Federation in a report said it is deeply concerned about the potential impact of a looming U.S. East Coast port strike on American agriculture. This labor dispute between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) could have far-reaching consequences if an agreement is not reached before the contract expires on Sept. 30. Highlights of Farm Bureau’s report:

Impact on agricultural exports:

· The stakes for American farmers and ranchers are incredibly high. In 2023, over 70% of U.S. agricultural exports by value, totaling more than $122 billion, were transported through ocean ports.

· A strike would primarily affect containerized agricultural exports, which make up about 30% of U.S. waterborne agricultural exports by volume.

East Coast ports at risk:

· Approximately 46% of containerized agricultural exports, or 16.6 MMT, depart from East Coast ports.

· Nine major ports account for nearly 94% of all East Coast containerized agricultural exports, with Norfolk and Savannah leading the way.

· Economic Impact: Over a one-week period, the potential value of disrupted containerized agricultural exports is estimated at $318 million.

· Commodities at risk. While bulk grain shipments are largely protected from disruption, several key agricultural products face significant risks:

· Soybeans: 2.67 MMT of soybeans were exported through East Coast ports in containers in 2023, representing 6% of U.S. waterborne soybean exports.

· Poultry: Nearly 80% of waterborne poultry exports could be jeopardized, potentially lowering prices for poultry producers.

· Other products: Hay, cotton, red meat, vegetables, dairy products and edible nuts would also face significant disruptions.

Impact on consumers:

· Over 1.2 MMT of bananas arrive annually at ILA-handled ports, supplying over a fifth of the nation’s supply.

· Nearly 90% of imported cherries, 85% of canned foodstuffs and 82% of hot peppers come through these ports.

· 80% of imported beer, wine, whiskey and scotch, and 60% of rum arrive at East and Gulf coast ports.

Potential solutions and challenges:

While redirecting exports through unaffected West Coast ports could provide some relief, this strategy faces several challenges:

· Infrastructural limitations on how many containers ports can process.

· Increased transportation costs and logistical hurdles for producers farther from West Coast ports.

· Potential vulnerabilities in certain regions lacking access to efficient transportation options.

Bottom line: The report emphasizes that a port strike would create significant backlogs of exports, denying farmers access to higher prices in the world market. This could lead to domestic oversupply, driving down prices for key commodities and further eroding farm profitability. As the agricultural sector braces for potential rising operational costs and supply chain shifts, U.S. farmers find themselves in an increasingly precarious position.

House lawmakers see farm bill as priority in lame-duck session... More than half of House Republicans signed a letter urging leadership to bring the GOP’s Farm, Food, and National Security Act of 2024 to the floor during the upcoming lame-duck session. The bill passed out of the Agriculture Committee in May but has faced delays due to concerns about support. High-profile GOP lawmakers, including several committee chairs, signed the letter, calling the farm bill “must-pass” legislation. House GOP leadership may opt for a short-term extension of the current farm bill instead.

House Democratic Leader Hakeem Jeffries (D-N.Y.) placed the farm bill third on his post-election must-pass list, behind averting a government shutdown and ensuring military preparedness. With Democrats hoping to regain control of the House, Jeffries emphasized the importance of supporting farmers, addressing public nutrition and combating the climate crisis.

Of note: Former agriculture secretaries Ann Veneman and Dan Glickman, who served, respectively, under George W. Bush and Bill Clinton, signed a letter to the leaders of the Senate and House Agriculture committees offering the help of the Bipartisan Policy Center (BPC) “to build the consensus necessary to usher a bipartisan bill through Congress this year.” Meanwhile, the board of directors of the National Association of State Departments of Agriculture, meeting in Indianapolis, passed a resolution urging “expeditious passage of a comprehensive bipartisan farm bill in 2024.”

Harris may support limiting gain deferrals for like-kind real estate exchanges... Vice President Kamala Harris could support curbing the gain deferral allowed under like-kind exchanges of real estate, a provision viewed by some Democrats as a tax loophole benefiting businesses and the wealthy. The Biden administration’s 2025 budget proposal includes a plan to cap the amount of deferred gain from such exchanges at $500,000 per taxpayer ($1 million for joint filers), with gains above these limits being taxed immediately. This aligns with broader efforts to close perceived tax breaks for high earners.