IN THE KNOW
AG UPDATE
OCTOBER 29, 2024 | AG BANKING
The next Fed meeting is November 7. As of October 24th, the CME Fed Watch tool predicts a 95% chance of a 25 bps reduction in the fed funds rate and a 71% chance of another 25 bps decrease in December. Given the upcoming election, Fed decisions will be highly politicized and second guessed by many political pundits. The general consensus is that a 25 bps decrease will occur, not necessarily based on economic data but for the Fed to “save face.” If they hold rates steady, it might indicate that the September cut was too aggressive, and another 50 bps decrease could send a message that rates were held too high for too long.
Perhaps the most newsworthy rate information is the 10-year treasury yield. This yield was 3.65% on September 17th, the day before the first rate cut. In the 37 days, the rate has increased 56 bps. This is a substantial increase for this rate and the 2 yr to 10 yr treasury yield curve continues to widen. The increase in the 10 yr has driven up mortgage rates and rates for long-term business loans. Home sales are on track for the worst year since 1995 and the number of sales has dropped to the lowest level since 2010.
USDA confirmed a large US corn and soybean crop with their Supply & Demand report on October 11th. The national average corn yield was increased to 183.8 bu/acre and the soybean crop was held nearly steady at 53.1 bu/acre. Overall, USDA expects 2024-25 new crop carryover to be 1,760 mb of corn and 342 mb of soybeans. New crop carryover inventory projections were lower thanks to greater old crop disappearance since the last report.
With the general downward trend in grain prices over the past several months, it comes as no surprise that USDA is forecasting a material decline in Net Farm Income for 2024. Based on estimates released on September 5, 2024, USDA is projecting a decline in Net Cash Farm Income of 7.2% from 2023.
- • Net cash farm income reflects farmer cash income minus cash expenses.
- • Net Farm Income is more of an accrual basis accounting for the year.
This would mark the second consecutive decline in income for the farm sector since hitting a peak income level in 2022.
While increases in livestock sales and a decrease in feed costs were positives for net income in 2024, the downsides were declines in corn and soybean prices. As shown in the below chart, corn revenues are expected to be down 20.0% and soybean income down 14.6% from 2023 levels
As of October 23rd:
- • Corn DEC $4.19
- Bull: Cheap US corn is stimulating demand. Relatively higher cost of corn from Ukraine/Brazil/Argentina makes US corn more appealing on international market. Middle-East hostilities create uncertainty in energy markets.
- Bear: October USDA crop report again confirmed large 2024 US crop.
- • Soybeans NOV $9.97
- Bull: First quarter of marketing year is off to a good start on exports. Lower interest rates should be bearish for US dollar and supportive for exports.
- Bear: : What would Trump Administration do on tariffs and how would that impact Chinese purchases of US beans?
- • KC Wheat DEC $5.85
- Bull: Black Sea region weather and export logistics have not been friendly to wheat production and exports, but may be price friendly.
- Bear: : US weather conditions remain overall accommodating for crop. River levels and transportation bottlenecks for US crop have not impacted crop movement, yet.
- • Livestock
- Feeders OCT$249
- Live Cattle OCT $188
- Lean hogs OCT $80
Here are some key developments that have or will have big impact on our weather:
- • October has seen record heat for multiple districts in the Southwest.
- • Relief from the lack of moisture could be in the forecast in the next ten days.
- • Brazil’s monsoon season continues and has caused planting in crucial regions to be off by 35% compared to last year.
Source: “AgWest Commodities - Weather.” Goagwest.com, goagwest.com/pages/weather-new.php. Accessed 24 Oct. 2024.
- • Noninsured Crop Disaster Assistance Program (NAP) application deadline Nov. 15.
- • Acreage certification for fall-planted crops due Nov 15.
- • Beginning Farmer/Rancher resources are available at: .
Source: U.S. Department of Agriculture,
Look at all these fall / winter learning and networking opportunities!
- • UNL Smart Money Week - Education, Information, and Tools to Help Producers November 4th - 8th
- • COLORADO AG SHOW - GREELEY COLORADO January 28th - 30th
- • 33RD ANNUAL BUFFALO BILL FARM & RANCH SHOW - NORTH PLATTE February 7th - 8th
Elliot Eisenberg, the Bowtie Economist. October 17, 2024, Data Dissonance
“While inflation is barely 2.5% Y-o-Y, unemployment is just 4.1%, and incomes are rising, voters are sour on the economy. Here, I think, is why. Median income in 2023 rose to $80,610, but it’s still below the 2019 $81,210 inflation-adjusted peak. And, sure, overall inflation is low, but Y-o-Y food and energy (things we buy all the time) inflation peaked at 40% in 2022, its worst showing since 1979!”
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