Evening Report | September 5, 2024

Top stories for Sept. 5, 2024

Pro Farmer's Evening Report
Pro Farmer’s Evening Report
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USDA forecasts less bleak outlook for farm income... USDA forecasts net farm income at $140.0 billion in 2024. While that would be down $6.5 billion (4.4%) from last year, it’s a stark improvement from the $40 billion (25.5%) plunge forecast in February. Net cash farm income is expected to fall 7.2% to $154.1 billion. In February, USDA projected a $121.7 billion (24.1%) plunge in net cash farm income. The new forecasts would still mark the largest two-year drop in net farm income and net cash farm income after record levels in 2022.

Cash receipts from the sale of agricultural commodities are forecast to decline $9.8 billion (1.9%) to $516.5 billion. Total crop receipts are expected to decrease $27.7 billion (10.0%) from 2023, led by lower receipts for corn and soybeans. In contrast, total animal/animal product receipts are expected to increase $17.8 billion (7.1%), following increases in receipts for eggs, cattle/calves, milk and broilers.

USDA forecasts direct government payments will fall $1.8 billion (15.1%) to $10.4 billion, largely because of lower Dairy Margin Coverage Program payouts and lower supplemental and ad hoc disaster assistance in 2024.

Farm sector equity is expected to increase 5.3% to $3.68 trillion in 2024. Farm sector assets are forecast to increase 5.2% to $4.22 trillion in 2024 following expected increases in the value of farm real estate assets. Farm sector debt is expected to increase 4.2% to $540.8 billion. The debt-to-asset ratio for the sector is projected to improve modestly from 12.93% last year to 12.81%. Working capital is forecast to fall 4.2%.

Pork export rebound with a July record... The U.S. exported 566.7 million lbs. of pork during July, a record for the month. Pork shipment increased 42.6 million lbs. (8.1%) from June and 62.0 million lbs. (12.3%) from last year, driven by a surge in business to Mexico. Through the first seven months of the year, pork exports totaled 4.134 billion lbs., up 173.3 million lbs. (4.4%) from the same period last year.

U.S. beef exports totaled 257.7 million lbs. in July, down 5.8 million lbs. (2.2%) from June but up 18.4 million lbs. (7.7%) from last year. Through July, beef exports totaled 1.772 billion lbs., down 52.5 million lbs. (2.9%) from the same period last year.

Brazil’s soybean exports slow, corn shipments pick up in August... Brazil exported 8.042 MMT of soybeans last month, according to ag ministry data. Shipments declined 2.848 MMT (25.3%) from July and 345,000 MT (4.1%) from last year.

Brazilian corn exports totaled 6.063 MMT in August, up 2.509 MMT (70.6%) from July but 3.3 MMT (35.2%) less than last year.

Argentine oilseed workers, crushers reach wage increase agreement... The Argentine Oilseed Crushers Union (SOEA) reached an agreement to increase wages for workers in the oilseed industry in Argentina by 26%. The new deal, along with the 76.25% increase obtained by the workers’ trade union in agreements signed with industry representatives in January and April, represents a 122% wage increase this year.

Beige Book: Economic conditions weakening in an increased number of districts... Nine out of 12 Federal Reserve districts now report flat or declining economic activity, up from five districts in the previous report. Only three districts (Boston, Chicago and Dallas) reported slight growth. This widespread slowdown suggests the economy may be losing momentum. The Fed’s Beige Book reported the following key points about agricultural conditions:

· Prospects for 2024 farm income declined.

· Crop prices, including corn, soybean and wheat, were lower. This led to farmers being slow to sell crops from storage and hesitant to forward sell this year’s crop.

· Despite some spring flooding, corn and soybeans recovered in much of the Midwest, and overall crop conditions were better than recent years.

· An early wheat harvest allowed for an earlier planting of second-crop soybeans.

· Milk and egg prices were higher, while hog prices declined. Cattle prices remained flat at a high level.

· In the Southern U.S. crop and pasture conditions generally remained favorable, though hot and dry conditions put strain on certain areas.

· Hurricane Beryl caused some flooding along the coast in the Southern region.

Bottom line: Farmers, especially smaller producers, were facing tough financial situations. Some contacts reported that if this year doesn’t turn out to be profitable, it could put a segment of growers out of business.

New coalition of airlines, biofuel producers lobby for expanded SAF tax incentives... The SAF Coalition has formed, representing nearly 40 major airlines, airports, manufacturers and biofuel producers, lobbying Congress to provide a larger and longer-lasting tax incentive for sustainable aviation fuel (SAF).

Currently, there are two SAF-related tax credits from the Inflation Reduction Act:

1. The 40B tax credit, which expires at the end of 2024.

2. The 45Z clean fuels tax credit, which starts in 2025 and lasts for three years.

The coalition argues that the 45Z credit has two main issues:

· It doesn’t last long enough.

· Depending on the carbon intensity of the fuel, it may not be as valuable as the expiring 40B credit.

In a letter to the House Ways and Means Committee, the coalition is calling for:

· Extension of the 45Z credit beyond its current three-year duration.

· Enhancement of the credit’s value to support long-term investment in U.S. SAF leadership.

The coalition believes these changes are necessary to accelerate the development and deployment of sustainable aviation fuels.

House to vote on bill restricting foreign ownership of U.S. Farmland, targeting China... The House is preparing to vote next week on legislation aimed at restricting foreign ownership of U.S. agricultural land, particularly targeting purchases by entities connected to China.

Rep. Dan Newhouse (R-Wash.) introduced the “Protecting American Agriculture from Foreign Adversaries Act” on Aug. 30. Newhouse, who chairs the Congressional Western Caucus and serves on the House Select Committee on the Chinese Communist Party, has made Chinese land acquisitions a key focus of his work. The bill would:

· Add the Secretary of Agriculture as a member of the Committee on Foreign Investment in the United States (CFIUS)

· Require the USDA Secretary to report to CFIUS any purchase of U.S. agricultural land by “foreign adversaries” that may pose national security risks.

This legislation aims to make permanent similar provisions included in the FY 2024 Agriculture-FDA appropriations package passed in March 2024, which are set to expire at the end of September. The vote is part of the House’s “China Week” legislative lineup, reflecting growing concerns about Chinese land purchases in the U.S. There are concerns that some foreign investments in U.S. agricultural land, especially near military installations, may have national security implications.

Current foreign ownership landscape

· As of 2021, foreign investment in U.S. agricultural land totaled approximately 40 million acres, a 40% increase since 2016.

· Canada owns the largest share (32%) of foreign-held U.S. agricultural land, followed by the Netherlands (12%), Italy and the United Kingdom (6% each) and Germany (5%).

· China’s ownership interest in U.S. agricultural land is relatively small at 0.9%.

CFIUS is an interagency committee that reviews certain foreign investments in the U.S. for national security implications. Currently, USDA is not a permanent member of CFIUS but participates as a voting member when Treasury determines a transaction involves agricultural issues.