Evening Report | Winter wheat conditions decline ahead of expected rains

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Winter wheat conditions decline as expected... USDA rated the winter wheat crop as 47% “good” to “excellent” as of Sunday, down one percentage point from last week and in line with analysts’ expectations. The portion of crop rated “poor” to “very poor” declined two points to 19%.

USDA reported 8% of the winter wheat crop was headed, equal to the five-year average. The crop was 30% headed in Texas (33% average) and 7% in Oklahoma (7%). None of the Kansas crop was headed, which is typical for this time of year.

Corn planting slips a little behind average... USDA reported corn planting was 4% done as of Sunday, one point behind the five-year average. Across the Corn Belt, planting stood at 1% in Illinois (4% average), 2% in Iowa (2%), 11% in Kansas (10%), 1% in Minnesota (1%), 9% in Missouri (12%), and 1% in Nebraska (1%). Planting had not started in Indiana, Michigan, North Dakota, Ohio or Wisconsin.

Soybean planting off to average started... USDA reported soybean planting was 2% completed, equal to the five-year average. Planting was either just started or not yet begun across the Corn Belt.

Spring wheat seeding remains average... USDA reported 7% of the spring wheat crop was seeded, equal to the average pace for mid-April. North Dakota was 3% planted, equal to its average pace for the date.

Cotton planting remains behind average... USDA reported cotton planting advanced just one point to 5%, three points behind the five-year average. Planting stood at 8% in Texas (13% average) and 1% in Georgia (1%).

Tariffs as strategy, not solution... The latest analysis from Michael Drury, Chief Economist of McVean Trading & Investments, suggests the Trump administration’s 10% tariffs on U.S. allies are likely to be absorbed or mitigated through ongoing negotiations — either by opening up foreign markets to American firms or by securing pledges to build new factories in the United States. However, Drury does not expect it will be a swift resolution. “The finish line will be delayed again, and again, but it will be sold as every journey begins with a single step,” he writes in a research note.

The expectation is that these tariffs — while not finalized within 90 days or even a year — will generate enough projected revenue to allow President Trump to propose new tax cuts. But there’s a catch: Under Congressional Budget Office (CBO) rules, tariff revenue raised via executive order cannot be counted toward the 10-year budget outlook. This sets up a choice, Drury notes: either Congress rewrites the rules or the tariffs must be codified into law — effectively validating the policy direction.

While allied nations may yield, Drury says China is unlikely to blink. The current view is that Beijing will endure the economic strain and instead weaponize the tariffs to advance its own geopolitical ambitions. “We do not think China will blink — but rather choose to eat bark.” Despite economic headwinds, Drury says Chinese leadership believes it has already weathered the first round of Trump-era tariffs. The result? A slowed economy, yes — but also expanded influence over Russia and Vietnam, effectively treating them as economic satellites.

The question now: Which countries will China target next? Many U.S. analysts argue China is now economically weakened, but Beijing sees the Trump tariffs as a strategic opportunity, not a fatal blow.

Bottom line, according to Drury: Tariffs on allies may generate domestic political capital and open new doors for U.S. industry, but progress will be slow and incremental. Tariffs on China, by contrast, may harden geopolitical divides and accelerate China’s strategic realignment, not force economic submission.

Timeline for ag disaster aid... There has been no official word from USDA on timing of the $21 billion in ag disaster aid approved by Congress on Dec. 21, 2024, but sources signal May or June, after rulemaking is complete. The disaster aid framework is expected to be more farmer friendly versus the bewildering approach taken by the Biden administration.

• Scope of aid: The nearly $21 billion in disaster aid targets agricultural losses from natural disasters in 2023 and 2024, including droughts, hurricanes, floods, wildfires and other extreme weather events. The funds are intended to cover losses in revenue, production quality, and infrastructure for crops, livestock and timber.
• Distribution mechanism: Most of the aid is expected to be administered through USDA’s Emergency Relief Program (ERP), which has been used for similar disaster relief in previous years. However, with a new administration, the program’s title could be change and as noted will likely include a more farmer-friendly approach than the Biden administration’s implementation of the last ag disaster funds.

Specific allocations:

• $2 billion is earmarked for livestock losses due to droughts, wildfires and floods.
• $220 million will be distributed through block grants to smaller agricultural states with limited farm income and acreage.

Delays in implementation: While economic aid applications for a separate $10 billion package were opened by March, lawmakers have expressed frustration with the lack of clarity and urgency regarding the $21 billion disaster aid. USDA officials have promised a simple and fast process but have yet to finalize payment structures or open applications for disaster relief.

Pressure from lawmakers: A bipartisan group of senators has urged USDA Secretary Brooke Rollins to accelerate the distribution process, emphasizing that farmers impacted by disasters are at risk of downsizing or shutting down operations without timely assistance. Some bankers have now authorized new-crop farmer loans without knowing more about the disaster aid to impacted producers.

GOP faces internal rift over climate credits in reconciliation push... As Republicans catch their breath after passing a budget resolution — clearing the first hurdle in their reconciliation agenda — tensions are mounting behind the scenes over what comes next. At the center of the GOP’s internal storm: whether to repeal hundreds of billions in climate tax credits embedded in Democrats’ Inflation Reduction Act (IRA).

A major sticking point is the future of clean energy tax credits, which have spurred investment in wind, solar, biofuels and battery manufacturing — particularly in Republican-led states. House Budget Chair Jodey Arrington (R-Texas) said Friday that rolling back those credits could unlock $600 billion to $700 billion in savings, calling them an “obvious place” for offsets.

“Most Republicans — if not all of us — are very motivated to get as many of the provisions on the tax policy side permanent as we possibly can,” Arrington told reporters. “In order to do that, we have to have that offsetting outcome.”

Of note: Rep. Chip Roy (R-Texas) is leading the charge for full repeal, and sources say President Trump has personally urged GOP leaders to eliminate all of the IRA’s climate incentives and that would mean 45Z credits (sustainable aviation fuel).

But not everyone is on board. Moderate Republicans are urging caution. A bloc of GOP senators — Lisa Murkowski (Alaska), John Curtis (Utah), Thom Tillis (N.C.), and Jerry Moran (Kan.) — released a letter Thursday calling for a more measured approach. Their argument: these tax credits have already fueled economic growth in rural and red-state districts, especially among farming and energy sectors. In some cases, projects are already underway based on the assumption that these credits would last, and reversing course could spark backlash from local businesses and voters.

Sensing a threat, renewable energy advocates are going on the offensive. American Energy Action, a pro-renewables group, launched a new ad blitz in GOP strongholds. One spot airing in South Dakota targets Senate Majority Leader John Thune (R-S.D.), urging constituents to pressure him to defend the tax credits that “create jobs and power communities.”

Outlook: House GOP leaders had planned for a May 5 markup by the Ways and Means Committee on the reconciliation tax bill, but that timeline is slipping. According to Punchbowl News and others, they are now prioritizing alignment with Senate counterparts, whose instructions diverge sharply from the House. Meanwhile, the debt limit clock is ticking. The “X date” — when the government runs out of borrowing capacity — is still uncertain, hinging on final IRS revenue numbers as tax season ends this week. Estimates from the CBO point to August or September, but some warn it could arrive as soon as late May or June if revenues fall short.

ADM reduces China domestic crops trading... Archer-Daniels-Midland Co (ADM) is shrinking its operations in China as part of a company-wide restructuring effort following a downturn in profits and a bruising accounting scandal. Citing a “challenging environment,” the company said on Monday it is phasing out domestic trading at its Topefer Shanghai unit. Thin margins in China, the world’s top commodities consumer, pushed the company to make the reductions, people familiar with the matter told Bloomberg. The company said that other operations at its Shanghai office are unaffected. “ADM remains deeply committed to China,” it said in the statement.

StoneX to acquire R.J. O’Brien... StoneX Group Inc. announced it has entered into a definitive agreement to acquire R.J. O’Brien, the oldest futures brokerage in the U.S., for an equity value of approximately $900 million. The purchase price will be paid in a combination of cash and shares of StoneX common stock. StoneX will also assume up to $143 million of RJO debt.