7 September USDA’s Farm Income Report Adds Urgency to Farm Bill Talks - Hil Anderson, Roach Ag Daily Grain Plan September 7, 2023 By John Roach General 0 Members of Congress will soon be making their way back to the Beltway after the latest USDA outlook for farm revenues has added some fresh urgency to negotiations over the unfinished Farm Bill. The USDA’s 2023 Farm Sector Income Forecast was released just as the nation adjourned for the Labor Day weekend. It had projected a 23% drop in net farm income this year, a dizzying decline that should increase the focus on crop insurance and other basic financial support for farmers once the House and Senate agriculture committees get back to business later this month. “Combined with weather uncertainty and a high cost of capital to operate their businesses, farmers and ranchers will be forced to adapt as they always have,” said Danny Munch, an economist with the American Farm Bureau Federation. “Part of being able to adapt means having clarity on rules that impact their businesses’ ability to operate, having access to comprehensive risk management options and being given a resounding voice during formulation of vital legislation such as the Farm Bill.” Lawmakers were on the trail in late summer to shake hands and hear from their rural constituents about the stresses and strains of agriculture policy, although serious discussions of the Farm Bill will likely have to wait behind legislation to continue funding the government before taking center stage. The current Farm Bill’s appropriations expire on Sept. 30 with FY 2024 beginning Oct. 1. Political observers in Washington are confident that an extension of the Farm Bill will be granted this fall, although many farm organizations urge Congress to press forward so that growers will have a greater level of certainty as they make plans for the 2024 growing season. The USDA report was densely packed with the usual volume of comprehensive statistics; however, the bottom line shows the nation’s net farm income totaling $141 billion this year compared to $183 billion in 2022. Munch noted the August report finalized the 2022 income total and increased it around $20 billion from estimates made eight months ago. The declines in 2023 were tied to lower cash receipts for crops and livestock, higher production costs and a 19% decline in government support outlays from 2022. “Direct government payments are forecast to fall by $2.9 billion from 2022 to $12.6 billion in 2023,” the report said. “This decrease is expected largely because of lower supplemental and ad hoc disaster assistance in 2023 relative to 2022.” Analysts agreed that 2022 was an unusual year in which commodity prices were pushed higher by inflation and significant drought in the United States and by Russia’s disruption of Ukraine’s grain trade. The weather has improved in many areas this year while wheat prices no longer carry much of a war premium and the world seems in general to be adequately supplied. The declines come mainly from lower prices for the major commodity crops while cattle and vegetables should fare better, the USDA said. The impact on individual farming households will be varied since, the report said, most farm families hold outside jobs. The USDA projected a 3.8% increase in median household income to $98,148 this year, although much of the increase will be canceled out by inflation. Further downstream, the USDA projected working capital for farmers to fall 5.5% from last year to just under $122 billion, the first decline since 2016 and the lowest level since 2014. Munch said, “Lower levels of working capital often suggest that many U.S. farmers have just enough capital to service their short-term expenses and debt, which becomes more difficult as interest rates rise.” A likely point of friction for farmers is the increasing rental price for farmland, a rising cost that University of Illinois economists warned last week could make it even tougher for aspiring young farmers to establish their own operations. An August 31 report urged Farm Bill negotiators to be well aware of the impact that increased reference prices could have on the rents farmers pay to landowners. “For this reason, increasing government payments may benefit farmers in the short-term but hurt them over the long term,” the paper said, adding: “This is a problem that no amount of reference price increase in 2023 will help. These are matters that should weigh heavily on the congressional mind as reauthorization of these policies is undertaken.” Further reading: The USDA’s Farm Sector Income & Finances report is at: https://www.ers.usda.gov/topics/farmeconomy/farm-sector-income-finances/ The Farm Bureau analysis by economist Danny Munch can be found at: https://www.fb.org/market-intel/usda-forecasts-23-drop-from-2022-farm-income-levels The University of Illinois analysis is available at: https://farmdocdaily.illinois.edu/2023/08/farm-bill-2023-is-there-bad-medicine-in-base-acresand-reference-prices.html. Related Posts Report: Ethanol May Have to Wait Longer for Sustainable Aviation Fuel - Hil Anderson, Roach Ag Daily Grain Plan Ruling The ethanol industry and the nation’s corn growers may have to wait until the end of the year, rather than later this month, to find out if the U.S. Department of Treasury will make it easier for them to qualify for tax credits and subsidies that will lead to the expanded use of ethanol to produce sustainable aviation fuel (SAF). “At issue is a requirement in last year’s Inflation Reduction Act that SAF producers seeking tax credits must demonstrate with an approved scientific model that their fuel generates 50% less greenhouse gas emissions over its lifecycle than petroleum fuel,” Reuters said. 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The odds that “strong” El Niño conditions would dominate the Northern Hemisphere this fall bumped up from around 66% in last month’s forecast to 71% on Thursday. The CPC noted August water temperatures along the Equator increased during July both on the surface and below. “Tropical atmospheric anomalies were also consistent with El Niño,” Thursday’s report said. “Over the east-central Pacific, low-level winds were anomalously westerly, while upper-level winds were anomalously easterly.” After an unprecedented three years of La Niña conditions brought nagging drought to the Plains and California, El Niño is expected to shift the warm, dry conditions north into the upper Plains and most of the Midwest during the winter months while allowing cooler temperatures and welcome precipitation to slide into the Southwest and Texas. While no two El Niños are exactly ... Mississippi Barge Rates to Challenge 2022 - Hil Anderson, Roach Ag Daily Grain Plan A dry fall will do wonders for the pace of the harvest in the Mississippi River watershed, but it could also lead to a repeat of last year when historically low water levels snarled barge traffic and caused freight rates to soar. Water levels along the Mississippi are reportedly already low enough to force operators to carry lighter loads, which won’t make it any easier or less expensive to haul newly harvested corn and soybeans to their downriver destinations. Tuesday’s reading at St. Louis was a little over -3 feet. USDA statistics showed downbound barge rates turning sharply higher in late August and were basically doubled by the middle of September. The latest sampling pegged the acreage rate at Memphis at 817, virtually equal to the price some 800 miles to the north at Twin Cities. St. Louis rates, which were seen around 354 on Aug. 1, catapulted to nearly 721 last week. Barge rates at different locations are used to calculate the final dollar price per ton for the trip. Last fall saw rates that worked out to a record ... Sept 2021 USDA Quarterly Grain Stocks and Annual Small Grains Summary Reports More corn and beans, less wheat Stocks The USDA reported bigger corn and bean stocks than traders expected. As you can see from the numbers below, corn and wheat stocks were within the range of trade estimates, but the USDA found more beans than anybody expected. USDA Summary Based on an analysis of end-of-marketing year stock estimates, disappearance data for exports, and farm program administrative data, the 2020 corn for grain production is revised down 71.0 million bushels from the previous estimate. Corn silage production is revised down 54 thousand tons. Planted area is revised to 90.7 million acres, and area harvested for grain is revised to 82.3 million acres. Area harvested for silage is revised to .71 million acres. The 2020 grain yield, at 171.4 bushels per acre, is down 0.6 bushel from the previous estimate. The 2020 silage yield, at 20.5 tons per acre, remains unchanged from the previous estimate. A table with 2020 acreage, yield, and production estimates by States is included on pages 17 and 18 of the Stocks report. Soybean stocks stored on farms totaled 68.1 million bushels, down ... March 2021 USDA Quarterly Grain Stocks and Prospective Plantings Farmers tell USDA, “We are not planting as many corn and bean acres as traders expected.” The quarterly stocks were slightly smaller than expected for corn and slightly larger on beans and wheat. No surprises in the Stocks report. Source: USDA, Reuters, StoneX Although corn acres are up less than 0.5%, four out of the top five states cut corn acres. Farmers decided to plant 5.4% more soybeans nationally and increased acres in each of the top five bean states. The surprise came in the wheat complex, where acreage was up 3.4% from the last estimate and a whopping 8.8% from last year. The bullishness in today’s reports is a little surprising, since acreage can certainly increase between now and the June report. By boosting the prices, traders will encourage the additional corn and bean acres the marketplace wants. How about the Buy Signals on soybeans, meal, and wheat this morning? Our strategy is to make an increment of sales on the next Sell Signal, which should be just around the corner. Source: All Slides from the USDA Executive Summary For full USDA reports, click on links below. Grain ... September Quarterly Grain Stocks & Small Grains Summary Corn stocks under the smallest trade estimate. Bean stocks larger than expected. Wheat exactly as expected. Source: StoneX, Reuters The smaller than expected corn stocks drove corn prices up through the 20-day moving average, with Friday’s high (at this writing) nearly reaching the September price peak. Technical traders will view today’s performance as a positive event as well as fundamental traders that have smaller beginning stocks for the crop year. Corn prices have been in a relatively narrow trading range during the month of September and Friday’s report could give us the price thrust up to a Sell Signal. Bigger supplies of soybeans to start the new crop year prevented beans from clearing the green line 20-day moving average Friday. Beans have been in a broad trading range since early August and next week, prices will be back down challenging support and adding days to our Buy Signal. There is a gap left on the November bean chart at $13.50, which will likely be a downside target for technical traders. The just finished wheat harvest was estimated to be smaller than the ... 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