Pro Farmer Evening Report: Dec. 15, 2021

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Wheat hedgers: Add defensive hedges for 2021-crop… Wheat futures have eroded technically, with bears now holding the strong upper hand. Violation of the uptrend that’s been in place since summer opens additional sharp downside risk as it will likely encourage more fund selling. We advise wheat hedgers to hedge 20% of 2021-crop in short March SRW wheat futures. Our fill was $7.57. Along with previous cash sales, coverage now stands at 90% for 2021-crop.

Fed to increase bond tapering, signals quicker timeline for interest rate increases... Starting in mid-January, the Federal Reserve will double the pace of its monthly bond tapering program with it scheduled to end in March. The U.S. central bank also points to three quarter-point interest rate hikes in 2022 and three more in 2023.

In his press conference, Fed Chair Jerome Powell said any interest rate increase will be after the end of the bond purchase taper.  While there is currently no decision when interest rates will be increased, Powell said it could come shortly after the bond buying program has ended. After today’s meeting, interest rate futures priced in the first hike in May and two more before end of 2022.

All 18 policymakers indicated at least a single rate increase would be appropriate before the end of 2022. Officials at the median projected the Fed’s benchmark overnight interest rate would need to rise from its current near-zero level to 0.90% by the end of 2022, with continued increases in 2023 to 1.6% and in 2024 to 2.1% required to pull inflation back to the central bank’s 2% target. But any eventual rate hikes would hinge solely on the path of the jobs market.

In new economic projections released following the end of a two-day monetary policy meeting, officials forecast that inflation would run at 2.6% next year, compared to the 2.2% projected as of September, and the unemployment rate would fall to 3.5%. The economic projections signal GDP of 5.5% this year (down from 5.9% in September) and falling to 4.0% in 2022 (up from the 3.8% projection in September).

NOPA November crush lower than expected… Members of the National Oilseed Processors Association (NOPA) reported soybean crush of 179.5 million bu. in November, down 4.5 million bu. from October and 1.6 million bu. below year-ago. The crush pace was below average trade estimate of 181.6 million bu. from a Reuters survey.

NOPA data implies the full crush at 192.0 million bu. for November. If that is confirmed in the Jan. 3 USDA report, it would exceed 191.0 million bu. last year and set a record for November. For the first three months of 2021-22, soy crush totaled 553.1 million bu., down 1% from the same period last year. USDA projects crush will rise 2.3% in 2021-22 to a record 2.91 billion bushels.

NOPA soyoil stocks totaled 1.832 billion lbs., down 2 million lbs. from October and lower than expected give the smaller-than-anticipated crush. 

FAQs on SMHPP program... We are receiving a lot of questions from Members regarding USDA’s Spot Market Hog Pandemic Program (SMHPP). Here is USDA’s page on answers to frequently asked questions. Here is the Federal Register page on the program with program specifics.

EPA still aims to finalize post-2022 RFS plans before end of 2022... EPA is still formally planning to release its proposed rulemaking on setting Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) for 2023 and beyond yet this year and finalize those regulations by November 2022. Interestingly, EPA noted that by statute, it is required to establish volumes 14 months ahead of the first applicable year — 2023; the RFS statute only has target volumes for renewable fuels through 2022.

However, the proposed rule from EPA on this topic has not yet gone to the Office of Management and Budget (OMB) for review, so the timeline laid out in the Autumn Regulatory Agenda released this week will not be met. OMB had the EPA proposed rule setting 2020, 2021 and 2022 RFS levels on review from Aug. 26 through Dec.7, and EPA announced those levels on Dec. 7.

No EV charging stations at rest areas... The Federal Highway Administration (FHWA) has issued a series of questions and answers on electric vehicle (EV) charging, including a reminder that EV charging stations and other commercial activities at rest areas are prohibited. EV charging stations within the Interstate right of way (ROW) are covered under law, “which prohibits automotive service stations or other commercial establishments on the Interstate ROW.”

The clarification was welcomed by NATSO, the national organization representing truck stop and travel centers, and the Society of Independent Gasoline Marketers of America. “This clarification represents a small but important step toward enhancing the business case for off-highway investments in EV charging stations,” the groups said in a joint statement, noting the prohibition on commercial operations at rest areas “has been in place since the advent of the Interstate Highway System.”

USDA trio of Packers and Stockyards Act rules seen in early 2022... USDA’s Agricultural Marketing Service (AMS) is planning on publishing three proposed rules in early 2022 that would address issues under the Packers and Stockyards Act (P&SA). Proposed rules on a Poultry Grower Ranking System, one to provide clarity under the P&SA on what is considered unfair trade practices and another to outline what would be considered unfair, unjustly discriminatory, or deceptive practices regardless of whether those actions are “likely to harm competition.”

The Autumn Regulatory Agenda lists January 2022 as the expected release of the notice of proposed rulemaking. The agency acknowledges there are hosts of differing views within the industry, but stated that they believe they can “resolve some of the controversy by being proactive and transparent with the industry to allow for critical discussions and decisions on the rule.”

These will be three controversial rules when they are released, which is not likely be to January 2022 as laid out in current regulatory plans. And finalizing the rules will take time and will likely be subject to legal challenges.

Proposal outlining new WOTUS definition planned for February...  As EPA officials work on restoring the pre-2015 definition of Waters of the U.S. (WOTUS), they are planning to publish a notice of proposed rulemaking to establish a new definition in February 2022.

“This second rule proposes to include revisions reflecting on additional stakeholder engagement and implementation considerations, scientific developments, and environmental justice values,” EPA said.

EPA noted in the Autumn Unified Agenda that the anticipated costs and benefits and potential risks from the new WOTUS definition were “to be determined.” However, the February timeline laid out in the Autumn Regulatory Agenda is not likely to be met as EPA is still in the process of holding public meetings that are now to be in early 2022 on the new definition. Then the proposal will have to be reviewed by the Office of Management and Budget (OMB) before it can be released.

Most of Yara’s European ammonia production back online... After fertilizer prices increased due to the higher cost of gas, Yara has most of its European ammonia back in production. The company had cut its fertilizer production by 30% from September to November in response to higher natural gas prices.

“The price of finished nitrogen fertilizer has risen in the quarter to a level where it has been profitable for us to start up production and, in addition, the global ammonia price has also risen,” a Yara spokesperson said.

The company said it aimed to keep supplying customers, but it would not rule out cutting back ammonia production again if necessary.

Other fertilizer companies including CF Industries Holdings have also reduced production.

McDonald’s likely to expand plant-based burger.... After selling enough plant-based burgers at eight restaurants starting in November, two Wall Street analysts expect the trial to expand into 2022.

Peter Saleh, BTIG analyst, predicts the fast-food chain will offer the Beyond Meat burger in 700 restaurants across several regions as a limited-time offer in February and March. A national rollout is could come in 2023.

Michael Lavery, Piper Sandler analyst, predicts the McPlant burgers could be launched nationwide late in the first quarter of 2022, earlier than previously anticipated.

Argentina to cut organic grain export taxes... The export tax cuts will include organic wines, sauces, fruits and vegetables. Organic corn and wheat will see rates cut to 7% from 12% previously, while organic soybeans and soymeal will see cuts to 28% and 25%, respectively, from 33% and 30% now.

“This aims to align Argentina to the world market trend and increase the amount of products exported with organic certification,” Argentina’s economy ministry said in a statement.

“We are the second country in the world with the largest number of hectares planted with organic products, with more than 3.7 million hectares, only behind Australia,” the ministry said. “However, organic production represents only 2.5% of the total hectares planted in the country.”

The country also cut export tariffs on some “regional products,” without giving an explanation.