U.S. meat protein supplies continue to expand

U.S. meat protein supplies continue to expand, but product flow remains good and freezer inventories are only marginally higher than last year, an indication that meat demand remains in good shape, analysts said in the Daily Livestock Report, published by The Steiner Group.

The combined inventory of beef, pork, chicken and turkey in cold storage at the end of December was about 2.18 billion pounds, 2.4 percent higher than a year ago and 8.6 percent higher than the five-year average.

With more meat products going into export markets, it is reasonable to expect cold storage stocks to increase over time, the report noted.

Beef

Total beef inventories at the end of December were 489.5 million pounds, 13.8 percent less than last year and just 0.7 percent higher than the five-year average.

“The main reason we see the beef inventory number as positive or bullish for the market is because overall beef production and imports increased during December while exports were slightly lower,” the analysts said.

Pork

USDA reported that there were 491 million pounds of pork in cold storage at the end of December, 3.2 percent more than a year ago but still about 6.7 percent less than the five-year average. Normally pork stocks decline in December as retailers draw down ham stocks for Christmas features.

This year stocks declined 2.3 percent, not as much as last year but still ahead of the five-year average pace of 1.7 percent. “We generally view the overall pork inventory number as neutral for that reason,” the analysts said.

Chicken

“Chicken supplies remain heavy even as strong exports have allowed producers to quickly deplete the inventory of leg quarters. The supply of breast meat in cold storage remains burdensome,” the analysts said.

Total breast meat stocks were 188 million pounds, 1 percent less than last year but 23 percent above the five-year average. Leg quarter stocks fell 18 percent from last year and 19 percent from the five-year average.

NASS significantly reduced the U.S. hay yield per acre for 2017

Based on producer surveys, USDA's National Agricultural Statistics Service (NASS) significantly reduced the U.S. hay yield per acre for 2017, compared to earlier estimates, as reported in the Crop Production 2017 Summary released January 12th. That decline translated into a 1% drop in 2017’s national production estimate. At 131.5 million tons, U.S. total hay production was the smallest since 2012’s drought devastated crop, and was the third lowest since 1988.

The NASS monthly Crop Production report (released January 12, 2018) contained their survey-based hay stocks as of December 1, 2017. At 86.2 million tons nationally, hay stocks were smaller than expected. U.S. stocks were 10% below a year earlier and the lowest since December 1, 2012, when severe drought limited hay production and increased late summer and fall usage. Note that the December 1, 2017, stock level was the second lowest since 1976. Year-over-year declines in stocks were associated with states impacted by drought, wildfires, and hay destroyed by hurricanes (flooding).

The arctic air mass that settled over much of the U.S., and in recent weeks even brought significant snow to southern states, likely causing much more hay to be fed to beef cattle than typical. Combining that with a cowherd that is larger than a year ago, resulted in the Livestock Marketing Information Center (LMIC) estimate of U.S. hay stocks to begin the new-crop year (as of May 1, 2018) as the smallest since 2013’s.

National alfalfa hay prices have posted year-over-year increases since the current crop-year began last May, and in November averaged $148.00 per ton, up $18.00 year-over-year (latest data available per NASS Agricultural Prices report). As of November, NASS reported the national “Other Hay” price was $118.00 per ton, down $2.00 from a year earlier. Hay price increases compared to 2017’s are likely this year. Helping keep a lid on hay prices are the values of other feedstuffs which are depressed (soybean meal, corn, etc.).

NASS reported new U.S. alfalfa seedings during 2017 were below 2016’s (down 3%). With normal growing conditions in 2018, U.S. hay production should increase compared to 2017’s. Still, total supply (May 1 stocks plus 2018 production) looks to remain historically tight, especially against a backdrop of more cattle.

That suggests higher national average hay prices well into 2018. Of course, hay is a regional crop, so not all states may see price gains. The LMIC projects that the national All Hay price in 2017/18 will average about $135.00 per ton, up $5.50 (about 4%) year-over-year. For the 2018/19 crop-marketing year, the preliminary LMIC forecast is for the national All Hay price averaging just over $150.00 per ton, the highest since 2014/15 ($172.00). Farmers that sell hay, especially high-quality types, may find that crop to be one of the few turning a profit in 2018.

From a livestock (cattle and sheep) market perspective, feedstuffs overall are likely to remain abundant in 2018. But, hay is a key ruminant animal feed and any impacts of drought in 2018 on pastures and/or hay production would be magnified by limited carry-over stocks, and could even cause some regional breeding herd/flock adjustments.

Washington Insider: Administration Farm Bill Principles

Well, it is early in a farm-bill year and the administration is offering an outline for reauthorization, Bloomberg says. And, to no one’s surprise, the administration is proposing to “push some food-stamp recipients back to work,” Bloomberg says.

It is reporting that a four-page document released by the USDA on Wednesday calls for supporting “work as the pathway to self-sufficiency, well-being and economic mobility for individuals and families” on food stamps. The administration didn’t specify how it would change the law or whether it wants to cut funds for the program.

The department said it wants to discourage “subsidies that make farmers dependent on the government.” And, it also called for cutting regulations, as well as improved monitoring of how other countries may impede agriculture exports. The outline was released Tuesday in advance of a trip by Agriculture Secretary Sonny Purdue to Pennsylvania, where he’ll discuss the proposals.

The bill, whose cost has topped $100 billion in previous years, re-authorizes programs overseen by USDA, including payments to growers of corn and soybeans and funds to prevent forest fires, among many other things. The current law ends Sept. 30, after which current programs begin to phase out.

The outline--described by the administration as a statement of principles--is intended to guide legislation being considered in Congress, Perdue said. He also noted that the White House is “ready” to get more deeply involved if lawmakers veer far from the administration’s approach.

"You will see more of an evolution than a revolution" in this year’s law, Perdue said. "There are some things that we can do and will propose to do in the farm bill that can be helpful."

Recommendations for the Supplemental Nutrition Assistance Program are being watched especially closely because the expensive bill requires broad support for passage, and because a partisan dispute over that issue nearly derailed the previous farm law that ultimately passed in 2014. Nutrition initiatives, including SNAP, account for most of the bill’s costs.

"The only ugly issue on the scene is the food fight between the nutrition people and the crop-agriculture people," said Harwood Schaffer, an agricultural economist at the University of Tennessee at Knoxville. "If we don’t have to steal from nutrition to make the commodity programs work, we may be able to avoid any major problems."

Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said that while some food stamp rules may be tightened, changes to the program aren’t likely to be dramatic, given a need to attract Democratic votes in the Senate. Perdue also has said the administration wouldn’t be pushing for radical change to the program.

Many people who receive food stamps already work, Bloomberg notes. In 2015, USDA found that 57% of working-age adults in the program either had a job or were looking for one; another 22% did not work because of a disability.

Farm-bill leadership has traditionally fallen to Congress, with the USDA in an advisory role, though different administrations have tried different approaches. George W. Bush’s administration advanced a very detailed policy statement in 2002 which was largely ignored. Bush vetoed Congress’s final plan in 2008, but that veto was overridden.

President Barack Obama’s administration played little role in drafting the 2014 law. Trump recently told the American Farm Bureau Federation that he will work with Congress "to pass the farm bill on time so that it delivers for all of you."

Bloomberg added a note of caution concerning the $1.5 trillion tax cut Congress passed last month which may make approval of farm legislation more difficult. In addition, cotton and dairy farmers “likely will seek larger subsidies,” Bloomberg says, and may argue there’s more money that could be made available to them as spending on food stamps falls because of an improving economy. In 2017, spending on food stamps fell 15%, to $68 billion, from its peak four years earlier.

Roberts and House Agriculture Committee Chairman Michael Conaway, R-Texas, have both said they’d like a bill in their chambers early this year. Neither has revealed a plan.

So, we will see. Farm bills typically are costly and nowadays involve economic and social issues far beyond agriculture. The result has increasingly been bitter, prolonged national debates and this year is unlikely to be an exception. It will, of course, be yet another debate producers should watch closely as it emerges, Washington Insider believes.

Russian wheat exports are expanding further across the globe as the world’s biggest shipper edges out competitors

In the latest example, its shipments to Sudan have jumped 87 percent so far this season, turning the African country into the seventh-largest customer for Russian wheat, Institute for Agricultural Market Studies figures show.

Sudan imported no Russian wheat until 2014, when millers decided the grain met their quality requirements, according to the country’s embassy in Moscow.

Such shifts among consumers, along with a third straight bumper crop and a weakened ruble, have allowed Russia to send wheat grown in the Black Sea region to markets as far away as Indonesia. That’s cut into the market shares of traditional suppliers including the U.S., the European Union and Australia.

“Competitiveness of Black Sea origin is the main reason why Russian wheat has displaced Aussie origin into Sudan,” said Tom Basnett, general manager at commodity consultant Market Check in Sydney. “Australia has exported nothing over the last few years into Sudan, and will no doubt do nothing this year.”

Russia was Sudan’s biggest supplier in 2016-17, followed by the EU, according to Market Check. Australia held the top spot as recently as 2012-13, shipping more than 800,000 metric tons, it said. Since this season began in July through December, Sudan already bought 821,000 tons from Russia, IKAR data show.

The African country is set to be the continent’s fifth-largest importer of wheat this season, data compiled by the U.S. Department Agriculture show. Some of the flour made from Sudan’s imported wheat is smuggled across the border to landlocked African nations, according to its Moscow embassy.

New York Times: How NAFTA Shapes Beer, Bacon and Blue Jeans Trade

The New York Times recently outlined what the North American Free Trade Agreement means for three items notorious for their association with American culture. Combined, what should be considered for a country song title, the article details the cross-border trade of beer, bacon and blue jeans. The article notes that a change in trade policy could change the future of the three American icons. Mexico relies on the U.S. to ship beer making ingredients across the border to brew up a batch, that then returns to the U.S. as Mexico’s biggest agricultural export to the United States. More than half of the barley exported from the United States goes to Mexico, and most of the hops that Mexico imports come from the United States. As for bacon, many feeder pigs are born in Canada, then shipped to the U.S. for farmers to “finish,” and ultimately, lead to bacon. Under World Trade rules, neither the U.S. nor Canada charges a tariff on imported pork. But, U.S. pork would face a tariff of 20 percent when moving into Mexico. Finally, blue jeans made in Mexico use U.S. cotton from 17 states. A no-NAFTA future would mean jeans made in Mexico and bound for the U.S., would also face a steep tariff.

Partnership Formed to Improve U.S. Water Quality

A new partnership seeks to assess agricultural practices and strategies to further improve water quality in the United States. The Department of Agriculture’s Natural Resources Conservation Service, along with the Sand County Foundation, the Noble Research Institute and Farm Foundation, launched the National Agricultural Water Quality Practice Assessment this week. The groups say the assessment seeks to better understand how effective agricultural management practices are at improving water quality. According to a joint statement, the year-long project will define current baseline knowledge about managing agricultural lands to improve conservation outcomes. The report will also identify critical gaps in knowledge, as well as strategies to advance agricultural conservation adoption and effectiveness. A key goal of the assessment is to help agricultural producers identify effective management practices that have the potential to yield environmental results while supporting the economic viability of farms.

Senator Says RFS “Must be Fixed” Following Refiner Bankruptcy

Republican Senator Pat Toomey of Pennsylvania said earlier this week that U.S. biofuel policy “must be fixed,” referring to the Renewable Fuel Standard as the primary cause for a Pennsylvania refiner filing Chapter 11 bankruptcy. In a statement, Toomey outlines his conversations regarding the RFS with President Trump and his colleagues, which would include Texas Republican Ted Cruz, in an attempt to change the policy. In announcing its intention to file for Chapter 11 bankruptcy, Philadelphia Energy Solutions LLC blamed the RFS, saying the company has spent more than $800 million on credits to comply with the law. In response, Renewable Fuels Association President and CEO Bon Dinneen told energy industry publication Platts that the bankruptcy had little to do with the biofuel policy. Dinneen says: "Like other refiners, PES could have made investments in blending more renewable fuels. It chose a different course, slavishly pursuing a change in the law that fit its flawed business model."