Category: Meats

21 Feb 2022

Funding Food To Feed The World

How Financial Institutions and Insurance Companies Play an Essential Role in Feeding the World

The cost of farming has grown over the years, which means financial institutions are amping up their reviewal process for loans and increasing insurance deductibles for protection to reduce their loss risk. What does this mean to supporting food production for the world? Well, as part of our “What It Takes To Feed The World” series, we are diving into critical agriculture sectors and bringing awareness to their roles in the food production cycle.

Financial institutions and insurance companies are the starting point in the process and are essential in providing the necessary funds to farmers on through to commercial entities. For farmers, they help finance EVERYTHING from the seed and chemical to hedge lines for farmers to help manage their price risk and everything in between. For commercial and end user entities, financing includes loans to build and maintain infrastructure and logistics to short term bridge loans to buy directly from farmers on to their own hedge lines of credit to support carrying of positions both pre and post harvest.

What financial and insurance options are available to the agriculture industry, and how are they beneficial to farmers, commercials, and end users? We’ll discuss the answers to these questions and more below.

 

Farmer Direct Loans

Farm direct loans are loans that the government makes available via the Farm Service Agency, while banks provide similar farmer direct loans. In 2021 the FSA reported loan obligations of $6.67 billion. Meanwhile, in 2020, U.S. farm banks loaned $98.6 billion. The American Bankers Association defines farm banks as banks whose ratio of domestic farm loans to total domestic loans is greater than or equal to the industry average. These amounts show just how much money is needed to produce the U.S. crop each year before farmers even harvest and sell the crop. These loans range from rent payments to fertilizer costs to machinery. But farm banks aren’t just offering loans to the agriculture sector. In 2020 total bank lending reached $174 billion in farm and ranch loans (including the $98.6 billion). These banks play a significant role with billions in small farm loans and even microloans. Small farm loans are less than $500,000, and microloans are less than $100,000. These two categories alone totaled over $55 billion in 2020.

 

Hedge Margin Lines

Banks also help finance hedge margin lines to help farmers manage their price risk. By financing the hedge lines, banks allow farmers to place hedge positions in a brokerage account, protecting against adverse price movements that could lessen the value of their crop. When banks loan out money, they expect to be paid back; hedge credit lines are a tool banks use to help support the farmer being able to do so.  If your bank is NOT willing to extend a hedge line – please give us call!

By financing hedge margin lines, banks support the farmer and themselves. With loans comes default risk and hedging is one tool to help mitigate the price risk that ultimately will be how the farmer pays back the loan.

 

Banks and the Rest of the Sector

There’s no question that banks are involved in the food production supply chain. When you think about it, commercials, end-users, and other units that touch grain utilize bank loans to enhance their businesses. Like feed yards and elevators, end-users use banks to improve their infrastructure by adding more storage or drying systems, using short-term loans to purchase grain and make other improvements to their business. These improvements ultimately improve the efficiency of the entire system and potentially lead to  reduced costs of the final product, which helps the end consumer, people. Just like improvements to city and towns infrastructure are necessary, through the support of bank financing, these improvements are necessary to the health of the agriculture industry’s infrastructure.

Farming is not getting any cheaper, and more capital is required to produce excellent crops year after year. Banks’ loaning capacities play a major role already, but if we are going to keep up with growing demand in a growing world, their role will be even more critical going forward.

 

Crop Insurance

Crop insurance brings continuity to the industry year-over-year as the ups and downs of weather and prices can cost farmers millions of dollars if unprotected. There are two types of insurance for major field crops: yield-based, which pays an indemnity (covers losses) for low yields, and revenue that ensures a level of crop income based on yields and prices.

Insurance offerings and prices vary on where you are located and your land, but like other forms of insurance in your life, it is better to have it and not need it than need it and not have it. While the listed above are the main types of insurance, others can be purchased, like drought insurance for pastureland and hail insurance if your crop gets damaged by an ice storm. These are more specific to your geographic location but play an essential role.

Like banks, insurance companies help with the continuity of the agriculture sector. These companies along with government subsidy programs, provide the opportunity to continue farming when disaster strikes and threatens the financial stability of a farm.

 

How RCM Ag Services Partners Financial Institutions & Insurance Companies

For our Farmer Direct customers, RCM Ag Services partners with banks and insurance companies to provide our mutual customers daily expert market knowledge and advice. We are firm believers that the long term health and growth of our local farming communities requires a team approach that starts with the farmers and their banking and insurance teams.

For our commercial and end user customers, we are focused on evaluating profit margins and the cost of capital for managing the current and futures market risks.  Our Ag Services team is working directly with lenders, 3rd party credit suppliers, as well as USDA government programs to support the long-term financial health of the commercial business sector.

Along with market knowledge, our brokerage services allow us to establish hedge accounts that banks can fund with a credit line, as discussed above. Our brokers have over 150 years of combined experience in the market that helps them provide hedge advice that is customized to each operation, not cookie-cutter advice. Take advantage of these benefits and call one of our knowledgeable ag specialists today at 888-875-2110 or email agsupport@rcmam.com

 

03 Feb 2022

WHAT IT TAKES TO FEED THE WORLD

As of 2022, there are 7.9 billion people in the world, which is anticipated to hit 10 billion by 2050

Did you know that by 2050, the world is expected to feed almost 2 billion more people than we do today? As the global population continuously rises, a significant amount of food will need to be produced over the next 30 years.

But before you get to overwhelmed with that thought, it’s imperative to know that the need for more production creates opportunities. In fact, in 2020 alone, 19.7 million jobs were related to the agriculture and food sectors. We cover these areas in this What It Takes To Feed the World infographic. So, let’s take a closer look into how each of these categories work together to help pave the way to feeding 25% more of the population over the next couple of years. Here’s everything you’ll need to know:

What-It-Takes-To-Feed-The-W

Download the Infographic

FINANCIAL INSTITUTIONS / INSURANCE

Due to inflation (we cover farm inflation here) and superior advancements in farming technology (seed, equipment, etc.), the cost of doing business is extraordinary.

As a result, banks and other financial institutions have become the pillar of the agriculture community. From financing farmers, purchase of seeds and chemicals to providing insurance to protect the farmers on through to commercial lending and trade finance programs; without banks, agriculture, as we know it today, does not exist. As a standalone example, consider that in the U.S. alone, during 2020, farm bank’ lending was $98.6 billion despite the global economic slowdown. As the demand to produce continues to grow, there is minimal question that the need for capital will grow along with it.

Source: Federal Deposit Insurance Corporation & American Bankers Association Analysis

 

SEED / CHEMICAL:

Before the farmers can get to work, they need seeds and, subsequently, fertilizers (watch our fertilizer forecast here) to reach the full potential of every acre of land. From the genetics to the production to the distribution companies, one could argue that continued innovation of this industry is vital to the future of agriculture.

In 2020, the commercial seed market alone reached an estimated $44.9 billion in annual revenue. With the global pressure on to produce, the world can no longer afford to have underperforming years of production, placing even more pressure on this sub-sector of agriculture to continue to develop treatments on both the organic and GMO sides (watch The Future of Feeding the World Podcast here).

Source: IHS Markit – @2021 IHS Markit

EQUIPMENT

With the growing demand for food-producing land due to the world’s growing population, advances in technology have seamlessly made the farming process more efficient, profitable, and undoubtfully safer. Modern farms and agriculture equipment have significantly evolved by incorporating sophisticated technologies like sensors and GPS to driverless equipment with new autonomous machinery.

These enhancements to heavy equipment are essential to farmers, allowing them to no longer apply certain things uniformly, like fertilizing or watering the field. But instead, farmers can use minimal effort to target specific areas of their fields. Let’s look at some of these added benefits due to technology:

  • Farmers have higher crop productivity.
  • There is a reduction in the overuse of water, fertilizer, and pesticides.
  • The price of food production is at a lower rate due to less manual labor.
  • Improves the safety of farmworkers and machine operators due by incorporating the use of drones and various software. Check out this podcast with Dr. Steve Irwin on technical platforms here.
  • Groundwater and rivers are experiencing less runoff of chemicals.


Undoubtedly, innovation of this business sector will continue to evolve and play a major role in the necessary production increases ahead.

GRAIN PRODUCERS

One hundred fifty years ago, work was hard for grain producers, but the job was simple – till the land, plant the seed and let mother nature do her job. As time passed and our global population grew and the demand for our arable land has grown exponentially; all of which, leads to the grain producers of today having the most important job in the world.

The work of the few is to feed the many. Since the post-WWII era, the number of farms has steadily been reducing, placing even greater pressure on those in production areas to continue managing their operations, focusing on profit margins, and working the inherently volatile world of commodity prices.

Imagine a 5,000-acre farm producing trendline yield corn of 180 bushels per acre. Quick raw math based on today’s price per bushel of $6.00 puts gross revenue at 5.4 Million dollars. Noting the rapidly rising costs of inputs (seed and chemical), labor and energy prices, a return to August 2020 prices of $3 would be a massive hit and likely take down such an operation.

All of this is to say that today’s job requires greater collaboration with others in the business than ever before (see section below on intermediaries and risk management).

 

INTERMEDIARIES/RISK MANAGEMENT

Commodity markets are highly unique in that both end-users and physical producers of a product can proactively buy and sell their input and or production in an open market before being produced via a forward contract or hedge.

To hedge is to manage risk and, in most cases, lock in or protect the profits margins. As discussed above, grain production is a highly volatile business, just like the purchase side (see end-users and commercials below).

Through intermediaries and risk management experts, farmers and end-users gain timely market information, access to markets, and ultimately execute the majority of their forward pricing. Whether through the use of futures, options, swaps, or even physical contracts developing and coordinating a risk management plan is essential to the long-term health of our global commodity infrastructure.

The CME Group is the world-leading commodity exchange, and their global branding says it best – “CME Group, where the world comes to manage risk.”

RCM Ag Services also falls into this category. We provide full-service risk management and advisory solutions to our local area producers and commercial agriculture operations around the globe.

TRANSPORTATION/LOGISTICS

COVID introduced unexpected stresses on global food systems, creating many immediate and rapid challenges to secure food availability. If a worldwide pandemic taught us anything, we know that supply chain management and transportation play a vital role within the agriculture industry. Agriculture logistics ensure that items like food, machinery, and livestock from all over the world are transported with a continuous, optimal flow from the manufacturers and suppliers to the producers and ultimately delivered to consumers.

Some of the most imperative agriculture supply chain and logistics management activities include production, acquisition, storage, handling, transportation, and distribution. Effective logistics is critical for guaranteeing customer satisfaction and meeting demands on time with high-quality products. In addition, logistics should also meet specific standards and operational objectives for efficiency in agriculture policies like:

  • Protection of the environment
  • Sustainable distribution practices
  • Food safety and security
  • Animal welfare (for transporting livestock)


With the growing population largely expected in developing countries, most of which have poor infrastructure, we can expect the need for massive investments into transportation and logistics operations in the years ahead (this is NOT a stock tip!).

 

COMMERCIAL AND END USERS

The penultimate step of the process is grain reaching a commercial elevator before going on to the end-user to be converted to a final product. Some producers deliver straight to the end-user in areas where that is an option.

Traditionally, commercial elevators accept farmers’ grain and then ship it to the end-user, either by rail, barge, or other means.

With the continued upward trends of production, it is no surprise, that grain storage capacity has consistently grown.  In fact, it is on pace with increases in crop production over the last 20 years and by all accounts is likely to continue to grow.

Source: Farmdocdaily

Along with the enormous capacity, commercials and end users also carry a tremendous amount of of price / volatility risk requiring a proactive and disciplined risk management approach to maximize the margins of their operation and keep the system moving forward.

In 2018, $139.6 billion worth of American agricultural products were exported worldwide, with elevators playing a significant role in that process. The commercials and end-users are essential for getting the product from the farm into your home on the table.

 

FEEDING THE WORLD IN THE FUTURE

Bringing awareness to how the agriculture industry is vital to feeding the rapidly growing world is pivotal as we continue to face unprecedented challenges in global food security. However, there is a silver lining. We already know what must be done; it is figuring out how to do it that could be problematic. The world must unite and understand that each of these areas highlighted in the infographic is very complex, employs millions of people worldwide, and is vital to the growth of the agriculture industry as well as producing the necessary food for the future.

Download the Infographic

CONTACT AN AG SPECIALIST TODAY

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact us today to speak with an ag specialist at 888-875-2110!

22 Feb 2021

2021 Ag Markets Outlook

2020 was a notably difficult year for commodities – oil went negative, coronavirus halted trade and decreased demand, and overall turmoil in the markets sent investors fleeing. Though the first quarter was rough, commodities did their best to rally in the last three quarters of the year and did so as well as they could. So, what of 2021? Are we going to see major rallies in the grain markets with dry weather and Chinese consumption? What about the cotton markets? Are we looking for a steady year or will cotton continue to trend down?

Because there’s so much to talk about, we’ve broken this episode down into two parts:

Part I: Cotton & Grains
In the first part, we’re joined by our Cotton expert – Ron Lawson, and our Grains expert – Jody Lawrence to talk about the outlook for these markets into 2021.

Part I Links:

 

Part II: Meats
In part II, we’re talking meats with our in-house meat specialists Tom Chaves and Kevin Bost.

Part II Links:

21 Jan 2021

Ag Markets Update: January USDA Report

In this monthly segment on The Hedged Edge, RCM Ag Services pros Jody Lawrence, Ron Lawson, Kevin Bost, and host Jeff Eizenberg come together to provide expert knowledge on important markets including cotton, meat, and grains following the USDA Report. Watch the whole episode below!

 

If you’d rather listen – click on the links below to find your preferred platform:

17 Dec 2020

Ag Market Updates: December USDA/WASDE Report

In this monthly segment on The Hedged Edge, RCM Ag Services pros Jody Lawrence, Ron Lawson, Kevin Bost, and host Jeff Eizenberg come together to provide expert knowledge on important markets including cotton, meat, and grains following the USDA Report.

During today’s episode we’re talking about reporting back from farmers on the recent USDA report, labor shortfalls,  taxes and tariffs, commodity price inflation, adjusting planting intentions, feed prices affecting hog/cattle prices, calorie reports, corn vs beans,  and more from the report and looking towards the end of 2020.

 

 

Find the full episode links below:

 

04 Dec 2020

Risk Management, Research Writing, and International Protein with Simon Quilty

International meat trade (including Kangaroo!), years of writing and thousands of subscribers, risk management consulting and more – today’s guest really is a jack of all (ag) trades. Simon Quilty, global meat trader and analyst with Global Agritrends is on today’s podcast to take a deeper dive into his risk management background (with tips for operations of all sizes), the background on how he became one of the world’s leading researchers on international protein markets, and more crazy stories that fit his entertaining personality.

Follow along with Simon at the Global Agritrends website.

From the episode: Man punches a kangaroo in the face to rescue his dog

Chapters:

00:00-01:13 = Intro

01:13-11:53 = World Traveler, Lobbyist / From trading the physical to exploring China’s economy

11:54-36:36 = Potential for Ag Markets / China’s 2 speed economy & Hog pressure concerns

36:37-43:10 = Favorites

 

Find the full episodes here:

And last but not least, don’t forget to subscribe to The Hedged Edge on your preferred platform, and follow us on TwitterLinkedIn, and Facebook.

22 May 2020

AG MARKETS UPDATE: MAY 16-22


Farmers in the Midwest are saying what we’re all thinking – “enough of the rain already!” There has been major rainfall, and even flooding, across most of the Midwest including Michigan, Illinois, and Southern Ohio over the past month, and without a drier outlook over the next week, there’s the potential for planting to be pushed back up against the “prevent plant deadline” in those states. Across the rest of the country, planting is still on a good pace and flat prices week-over-week show little news in the markets. Ethanol production ticked up last week but will need a much larger demand to use up the massive amounts in storage. With exports falling within expectations trade looks to remain calm as we head into Memorial Day weekend and the start of summer.

U.S. Soybean planting, like corn, has continued its good start in most areas except for North Dakota. Bean prices took a big hit on Thursday despite a 22-week high in sales of 1.205 MMT with 738k tonnes going to China. The possibility of increased political tensions as President Trump fired off more tweets criticizing China pulled the markets lower after a good week. Along with Australia’s wanting the WHO to investigate the origins of the coronavirus outbreak, Trump’s tweets are another thing in a long line of issues that could come between the U.S. and China’s phase 1 trade agreement.

(Food Business News)

Wheat has seen a boost this week as the Russian wheat crop yield appears similar to last year. The excess rain in parts of the US with SRW has lead to some worries about the crop and the possibility of worsening conditions. There has been a pickup in domestic demand as mills around the country are opening back up and demand ramps up. Keep an eye on Russian Wheat as another big cut to their yield would be supportive of U.S. wheat prices along with further weather problems domestically.

There’s been a lot going on in the meats sector – specifically when it comes to COVD-19 impacting American production plants.

COVID-19 has infiltrated America’s meatpacking plants causing them to slow processing speeds, or close all-together… Converting livestock into the cuts that get to your plate requires massive facilities, intensive labor, and working in tight quarters which makes it difficult, if not impossible, to control the spread of a contagious disease. Without the ability to “socially distance”, thousands of plant workers have become ill, some have died, while many others are too afraid to go to work. The repercussions of the Covid-19-related plant disruptions will impact our food system for years to come. Once the smoke clears, owners of large meat packing plants may look to create smaller, regional facilities meaning consumers can expect higher prices, and fewer choices in the coming weeks and months.

Check out more short-term and long-term repercussions in the rest of our blog here.

 

CFAP Relief Package
The USDA came out with more information this week about the CFAP Relief Package. The CFAP had scheduled payment of 32 cents per bushel from the original CARES Act and a CCC payment of 35 cents per bushel on the lower of 50% of last year’s production or 50% of your unpriced corn on January 15th. That works out to potentially receiving 67 cents on half of last year’s corn crop. The soybeans payment works the same with payments of 45 cents and 50 cents for a potential payment of 95 cents per bushel on 50% of last year’s bean crop. The math is not clear nor why January 15th was chosen, but those are the guidelines. Livestock is also covered in the payment and information on that from the USDA website can be found here. Sign up starts next Tuesday the 26th at your local FSA office. For more information on how to sign up, check out this video.

Via Barchart.com

14 May 2020

Where’s the beef? (& pork)

In 1984, Wendy’s debuted their iconic “Where’s the Beef?” commercial, starring Clara Peller as an old lady demanding more beef on her hamburger. Fast forward 36-years, and Wendy’s is once again asking, “Where’s the beef?”, but this time it’s about the literal beef…. Last week, a survey of online menus revealed 18% of the Wendy’s franchise listed beef items as out of stock – and if the largest fast food chains are being affected by lack of supply, what about your local stores?

via GIPHY

The American meat industry is the envy of the world and has evolved over the past few decades into the most productive and efficient system in the world and because of that, consumers give little thought to how meat is produced until their abundant supplies of steaks, burgers and bacon are suddenly at risk. Unfortunately, the structure that delivers so much culinary and economic benefit to American consumers has proven vulnerable to a once in a life-time pandemic.

COVID-19 has infiltrated America’s meatpacking plants causing them to slow processing speeds, or close all-together, and logistically it makes sense. Converting livestock into the cuts that get to your plate requires massive facilities, intensive labor, and working in tight quarters which makes it difficult, if not impossible, to control the spread of a contagious disease. Without the ability to “socially distance”, thousands of plant workers have become ill, some have died, while many others are too afraid to go to work. The repercussions of the Covid-19-related plant disruptions will impact our food system for years to come. Once the smoke clears, owners of large meat packing plants may look to create smaller, regional facilities meaning consumers can expect higher prices, and fewer choices in the coming weeks and months.

Short-term Repercussions
In the short-term, slaughter rates have plunged; the number of cattle and hogs slaughtered weekly fell by as much as 40% compared with the same period last year before recovering modestly. For the week ending May 9, hog slaughter was 1,775,000, down from 2,332,000 last year. (USDA)

(WSJ)

The sudden drop in slaughter punched a gaping hole in meat supplies which caught end-users off guard, as risk models could not have predicted the Covid-19 Black Swan event. Wholesale beef and pork prices skyrocketed as fast food chains and retailers scrambled to secure supplies: pork bellies priced near $30 cwt at the end of April, traded as much as 600% higher near $220 cwt, and 73% lean ground beef is up more than 330%. There’s no doubt substitution is occurring, but if you’re Wendy’s and your business is selling hamburgers, there is no substitution for ground beef – you either pay up or close your stores.

(USDA)

Long-Term Repercussions
The long-term impact on supplies is evolving. Plant disruptions are leaving a large number of producers without a destination for their livestock, leading to a steep drop in hog and cattle prices. Out of necessity, animals are being kept on feed longer, and fed slow-grow rations, but bottlenecks are backing up an extraordinary number of animals.

Out of sheer desperation, some farmers are being forced to destroy market-ready animals that have grown too large for modern slaughterhouses to manage. On-farm capacity is also a problem, because finished animals cannot be pushed through the processing system to make space for incoming feeder stock. In addition to putting down market ready animals, chaos in the supply chain is causing farmers to liquidate breeding stock, abort sows and euthanize piglets. The result of this activity will be a tightening supply of animals going forward. Expectations are for hog and cattle slaughter to remain in a pandemic driven slow-down, 15%-20% below kill capacity, for the remainder of 2020.

At the end of the day, we are moving from an oversupply of meat in the U.S. to a period of a persistent undersupply – and the severity of that will be determined by how well the Covid-19 situation is managed. The Covid-19 disruption to the food service industry will continue to be a drag on the meat markets, but thankfully, grocery and retail is picking up some of the slack.


(Farm Bureau)

(Slate)

The Covid-19 threat to the food supply chain is a global phenomenon, and not isolated to the U.S. In the big picture, supplies globally are shrinking and there remains a historic global protein deficit as a result of African Swine Flu. With some states domestically and countries abroad opening back up, there is slight hope that the demand will come a little closer to meeting the production of meat, but how long it will take to fully recover is only a guessing game.

PS:  don’t forget to check out RCM’s ‘What Moves Commodity Markets’ infographic.

 

 

08 May 2020

Ag Markets Update: May 1-7

Corn planting continued at a great pace around the country in the last week as weather has stayed favorable in some of the largest corn growing states. Weather looks good into the end of May for planting in most areas which would be bearish for the market. The next USDA report comes out on May 12th which will give some more insight into the supply and demand for the rest of the year. If you’re looking for any positive corn news in the short term, keep an eye out for updates on ethanol production, crude oil demand, and unexpected weather issues.

 


U.S. Soybean markets are keeping their eyes on Brazil and China as the U.S. continues to battle it out against Brazil for Chinese Soybean purchases. With increased political tensions, record Brazilian exports, and lagging demand, it’s looking like China will struggle to meet the Phase 1 agreement. Soybean planting continued over the week and is off to a great start at 23% planted and with a good weather outlook for the week should continue.

 

Crude oil storage & oversupply continues to make the market unstable; to help offset that risk, FCM’s have begun to add precautionary measures to reduce and eliminate speculative risk to customers in the front month by restricting to high net worth investors. June crude oil has rallied 269% since its low on April 21 at $6.50, while December crude has rallied 20.4% since its low on April 22nd. This shows that the major risk for prices is in the short run while further off markets have stayed calm. In addition the largest oil ETF, USO had a reverse stock split 1:8 and has diversified the funds exposure out across the curve. USO represents roughly 6% of the oil market with open interest of over 2 million as of May 7.


(eia)

 

The government is looking at intervening in the meat packing industry as struggles continue. Foreign interests in both ends of the process has the U.S. government looking to make sure we have control of the process and it is fair. The biggest focus in the meats industry is the plant closures and disruptions in the supply line from COVID-19.

Some U.S. meatpacking plants shut down because so many people were out sick they couldn’t function, or were ordered to close so public health investigators could make sure the workplace was safe…. The meat industry must balance consumer demand with worker safety, when historically the industry’s concern — from the design of plants to employee protocols — prioritizes mass production.” – Green Bay Gazette

 

Relief Package
The House will be debating a bill to add another $38 billion to the Commodity Credit Corporation (CCC), brining available funds to $68 billion. The USDA allocate this money to fund MFP3, direct commodity purchases, and other programs like WHIP+. Both sides are arguing about oversight of the distribution of the funds, but the bill is expected to pass later this spring.

DOW
After a historic rebound in the month of April, the Dow seemed to come back to earth to start May as we saw a 680-point drop last week. There is a lot of uncertainty about a possible second wave of shutdowns as the country begins to open back up, along with concerns about how China will respond to U.S. politicians calling for accountability in their transparency, or lack thereof, in the early stages of the COVID-19 crisis.

Via Barchart.com

30 Apr 2020

Ag Markets Update: April 22-30

Corn planting has accelerated in the last week with planted acres now at 27% complete. This is 7% ahead of the normal pace and well ahead of where we were at this time in 2019. Still ahead of last year’s pace, the acres planted in the Eastern Corn Belt is lagging behind the rest of the country as they are stuck in a wet and cool weather pattern slowing their efforts to get in the field. As you can see from RJO’Brien’s U.S. Corn Planting Progress, the leading corn planted states are:

      • MN at 40%
      • IA at 39%
      • IL at 37%
      • NE at 20%

 

With parts of the country set to reopen this week, it will be important to keep your eye on what happens in the oil markets. If consumers start buying more gas and getting back to normal travel, look for ethanol demand to crawl back. There is no quick fix to these markets, any positive COVID-19 news remains the biggest boosts for these markets.

 

The biggest news in beans is that there is little to no news. Outside of some sales to China and Mexico, beans have been at the mercy of COVID-19 and Brazil. Soybean planting progress came in at 8% this week (average is 4%) as weather in a lot of areas was good over the weekend. U.S. bean prices continue to be competitive with South America, however SA beans are higher quality, leading them to be the preferred option:

U.S. soybean sales last week of 1.078 MMT (39.6 million bushels) fell in line with market expectations of 700k-1.2 MMT, but were the highest in 19 weeks. This comes with the return of Chinese buying with purchases of 618k tonnes for the week giving beans a much welcome price boost.

 

Crude Oil is still feeling the effects of last week’s historic day. While it has rebounded from the lows and is now trading in the $15 range, the outlook is still grim. As U.S. and World stocks are getting close to capacity, there are oil tankers anchored in place around the world’s oceans as they await instructions on where to deliver. The best case for oil prices comes with the world economy opening and consumers reverting back to normal means of consumption and any positive COVID-19 treatment news would be bullish for crude moving forward.

 

The COVID-19 pandemic has wreaked havoc on a number of critical U.S. industries, but none more strategically important than food production. In the livestock industry, the biggest concern is keeping processing plants staffed. Line speeds have slowed considerably, and in some cases, plants shuttered completely. U.S. beef production fell from 565 million pounds the week of March 23rd to 414 million pounds last week, down -27% from a month ago. Pork production is also dropping sharply with hog slaughter down nearly 650,000 head on a weekly basis. The backlog is forcing producers to destroy millions of market ready animals, break eggs, abort sows, and euthanize piglets. Meat supplies are contracting, pushing wholesale beef prices to record highs. Pork bellies that were being rendered a few weeks ago have tripled in price. Shortages in meat cases are imminent unless something changes quickly.

On April 28th, President Trump attempted to address this situation by invoking the Defense Production Act, which will require meat packing plants to remain open. A key component of the ACT releases packing plant owners (Tyson, Cargill, Smithfield, JBS et al) from liability if workers fall ill from COVID-19.  The announcement got immediate pushback from workers and labor unions representing 80% of the packing industry workforce.

 

Relief Package
The $19 Billion farm relief package that was announced a couple of weeks ago will touch most sectors of agriculture. Of the $19 Billion, $3.9 Billion will be direct payments for grain and soy growers, while the largest chunk of the money will be $9.6 Billion ($5.1 Billion for beef, $2.9 Billion for dairy and $1.6 Billion for hogs) to livestock producers that have been undercut by processing plant closures and logistic problems. Distribution of these funds will be made quickly according to various Senate sources.

“This aid will help keep food on Americans’ tables by providing a lifeline to farm families already hit by trade wars and severe weather.” – Zippy Duvall, President of the American Farm Bureau (USA Today)

Dow Jones
The Dow is up again this week on news from the Fed promising support for the economy, while also pledging to keep interest rates near zero and possible treatments for COVID-19. After a miserable February and March, April has been a good month for the market as continued hope of a light at the end of the tunnel along with strong responses by the Fed have pushed markets higher.

What-It-Takes-To-Feed-The-W

Did you know that by 2050, the world is expected to feed almost 2 billion more people than we do today? As the global population continuously rises, a significant amount of food will need to be produced over the next 30 years.