Farm Programs

Congress continues to be highly divided Program (CSP), and other conservation on many key topics and will likely remain programs. The BBB bill also contains in that mode until after the 2022 mid- funding for renewable energy developterm elections, and possibly longer. Most ment (primarily wind and solar energy), likely, we will continue to have renewable diesel tax credits, research Congressional discussions on infrastruc- and development of sustainable aviation ture legislation and funding, climate fuels, and transition to electric vehicles. change and carbon sequestration, renew- The House version BBB bill did not able energy, and dealing with new strains increase the capital gains tax rate for of Covid. However, we are also likely to farmers or include any adjustments to have initial hearings on the next Farm the “stepped-up basis” rule on farm Bill in the coming months. There are assets and would not change the farm many important issues and decisions estate tax exemption; however, that potentially could affect farmers farmers remain very wary of potenand the agriculture industry, which tial future costs and tax implicacould possibly be addressed by Congress and the tions of this legislation. The initial cost of the White House in 2022 and beyond. House BBB bill was listed at $1.75 trillion; howevFollowing is perspective on some key ag policy issues which may be under consideration by Congress or through executive action in the coming year: er, the Congressional Budget Office has estimated the total cost at closer to $5 trillion once the legislation has been fully implemented. The diverse BBB bill is now being debated in the U.S. Senate and if passed could have some changes in both pro-

Infrastructure legislation and implementa- grams and funding from original House Bill. If a tion — After months of negotiation, the Federal compromise is reached on the BBB legislation early “Infrastructure Investment and Jobs Act” or so- in 2022 that allows it to pass both houses of called “Bipartisan Infrastructure Framework” (BIF) Congress and be signed into law, it will likely bill, was passed by Congress and will now be imple- include several provisions that will impact farmers mented by the Federal government. The BIF legis- and the agriculture industry.lation provides $1.2 trillion in funding for basic infrastructure projects. This includes approximately $550 billion in new spending, with the remaining $650 billion being for pre-allocated funding targeted toward highway projects and other projects that were already scheduled. Of the new funding, $284 billion or 52 percent will be allocated toward for surface transportation needs, including road and bridge projects and modernizing the U.S. rail system, as well as upgrades to ports and waterways and public transit investments. The remaining $266 billion (48 percent of the funding) is allocated to other core infrastructure projects, such as improving the U.S. electrical grid, expanding broadband access, drinking water and wastewater improvement projects, and other targeted rural development efforts. Many of these basic infrastructure projects will benefit farmers, businesses, and rural communities. Climate change and carbon sequestration — It seems that everyone from members of Congress, business leaders, the national media, and local friends and neighbors are discussing carbon sequestration, carbon credits, and potential legislation to address climate change. Obviously, there is a wide range of opinions regarding the impacts of climate change and how to address the situation. Some would like to see a strong-handed approach by the Federal government relative to types of vehicles we drive, energy policy, and farming practices, while others would like to see a more voluntary and incentivized economic approach that is developed by business and industry. One quote at Farmfest this past year by an expert on carbon credits was: “the carbon market is like the wild, wild west,” meaning there is no clear-cut path as to where the United States or the ag industry is headed related to the carbon market. Several com-

“Build Back Better” legislation — In panies have already introduced carbon programs November, the U.S. House passed the so-called that will pay farmers for introducing practices that “Build Back Better” (BBB) Act that is a broad- sequester carbon, so that those carbon credits can based piece of legislation would address many be in turn used by those companies or sold on the issues and would boost targeted spending for cli- open market. Before farmers enter into long-term mate change, renewable energy, health care, child- agreements related to carbon credits, it is imporcare, education, immigration, and other social infra- tant for them to know what practices will qualify structure provisions. It is estimated that approxi- for carbon credits, what will the compensation be mately $82 billion was included in the House ver- for the carbon credits, and are there potential sion of the BBB legislation for agriculture related future impacts on their farming operation. The spending and provisions. This includes funding for “bottom-line” is that it is probably better to “walk a 5-year program to pay farmers $25 per acre for before you run” when it comes to make major planting cover crops, as well as major funding changes in a farming operation strictly targeted increases for the Environmental Quality Incentives toward gaining compensation from the emerging Program (EQIP), the Conservation Security carbon market.

FARM PROGRAMS By Kent Thiesse MARKETING

Ethanol and biodiesel policy and develop-

ment — Many states in the Upper Midwest, including Minnesota, have a well-established corn-based ethanol industry, which utilizes over 35 percent of the corn produced each year in the United States. In addition to the direct benefits to farmers, renewable energy plants have become cornerstones in rural communities by providing jobs, adding to the local tax base, and enhancing the overall economic vitality of the communities. The renewable fuel standards which are set by the U.S. Environmental Protection Agency are targeting corn-based ethanol blending rates to return to the statutory level of 15 billion gallons per year in 2022, after being temporarily

See THIESSE, pg. 17

Grain Outlook Corn price rebounds

The following marketing analysis is for the week ending Dec. 17.

CORN — The corn market got off to a sluggish start this week before rebounding and trading to its highest level since Aug. 12 when it traded to $5.99.75 per bushel. The March corn contract traded to $5.98.75 per bushel going into the weekend as forecasts for South America leaned drier.

News was thin in holiday-mode trading and heading into a short trading week before Christmas. Basis levels stayed firm to keep bushels moving in the pipeline. The market remains domestically focused despite rumors of Chinese interest in U.S. corn. PHYLLIS NYSTROM There were no corn export sales CHS Hedging inC. announcements this week..Trade St. Paul talk circulated last week about China buying large amounts of Ukrainian corn, but there’s no way to confirm the business.

South American weather is getting more play as a market influence. The near-term forecast for eastern Argentina and southern Brazil favored warmer and drier for the balance of December. The South American crop is not yet made, and the market is inclined to maintain a weather premium for the next few weeks.

Weekly ethanol production fell 3,000 barrels per day to 1.07 million bpd and was less than projected; but was still near the record at 1.108 million bpd. The corn for ethanol line on the balance sheet may need to be increased. Ethanol stocks rose 419,000 barrels to 20.9 million barrels and were higher than expected but down 9 percent from last year. Gasoline demand increased from 8.96 million bpd to 9.47 million bpd.

Weekly exports were a marketing year high and within expectations at 76.7 million bushels. This brings total export commitments to 1.516 billion bushels and 7 percent behind last year. Year-on-year exports are expected to be down 9.2 percent. We need to average approximately 25.3 million bushels of sales per week to hit the 2.5 billion bushel export forecast. Mexico was the biggest buyer this week with their total purchases this year at 452.7 million bushels vs. 381.9 million bushels last year on this date. China still has 413.4 million bushels of unshipped corn on the books vs. 229.2 million bushels last year.

AgRural this week cut its Brazilian corn production 1.1 million metric tons to 114.4 mmt. The U.S. Department of Agriculture is using 118 mmt in its balance sheets. Brazil’s ag exporter association Anec pegged its December corn exports at 3.917 mmt vs. 3.470 mmt previously and 2.403 mmt in November. The Buenos Aires Grain Exchange is carrying Argentina’s corn production at 57 mmt compared to the USDA’s 54.5 mmt. Argentina’s Ag Secretary put its corn planting at 66 percent complete compared to 67 percent on average with ratings down 2 percent for the week at 83 percent good/excellent.

Outlook: March corn took out the November high of $5.96.75 per bushel at the end of the week and set a new recent high at $5.98.75 per bushel. However, it closed well off the weekly high at $5.93.25 per bushel. The $6.00 level is psychological resistance and is expected to attract farmers› sales. The next upside targets will be $6.16.5 per bushel, then $6.33 per bushel. The contract high is $6.40.5 per bushel. If news and demand stay quiet, it may revisit the lower end of the recent trading range near $5.80 per bushel. Watch South American weather and money flow for direction into the end of the year.

For the week, March corn gained 3.25 cents to close at $5.93.25, July was 1.75 cents higher at $5.92.75, and December fell 4.5 cents to $5.46.5 per bushel.

The markets will be closed all day on Dec. 24 and reopen at their normal Sunday nighttime on Dec. 26. The markets will trade regular hours on Dec. 31. Merry Christmas!

SOYBEANS — Sharp losses were seen in soybeans to begin the week as soyoil extended the previous week’s losses. However, as dryness and heat were forecast for southern Brazil and Argentina, soybeans recovered to achieve a fresh high for the move. Meal, on the other hand, rallied to a five-month high and filled the July overhead gap by mid-week. There was market chatter of front-running ahead of index rebalancing next month which would include selling soyoil and wheat while buying meal. Lending pressure to soyoil was Brazil’s official announcement of lowering the 2022 biodiesel blend to 10 percent from the current 14 percent. A shortage of the feed additive lysine has added support to the meal market.

January soybeans retraced early week losses to trade to its highest price since Sept. 30 when it traded to $13.04.25 per bushel. This week’s high was $12.97.5 per bushel. The USDA had one soybean export sale announcement for the week with 4.85 million bushels sold to China. There were two soyoil export sales, both to India, totaling 53,000 metric tons.

The Buenos Aires Grain Exchange early in the week said the La Niña weather outlook presents a “big challenge” for Argentina’s corn and soybean crops. The BAGE estimated Argentina’s soybean crop at 44 mmt, well below the USDA’s 49.5 mmt forecast. Their soybean planting is 69 percent complete vs. 70 percent on average with ratings tumbling to 75 percent good/excellent from 88 percent the previous week. Abiove raised its Brazilian soybean production outlook from 144.1 mmt to 144.8 mmt. However, AgRural cut their Brazilian soybean figure .7 mmt to 144.7 mmt. The estimates are at record levels, but we will need it with demand expected to continue to increase with a growing biodiesel industry. The USDA is at 144 mmt for Brazil. A Reuters poll projected Brazil’s soybean crop at 144.12 mmt on record planted acreage. Anec, Brazil’s ag exporter association, estimated its December soybean exports at 2.8 mmt, up from 2.579 mmt previously. In November they exported 2.587 mmt of soybeans.

The November National Oilseed Processors Association Soybean Crush report showed 179.5 million bushels were crushed. This was below the trade estimate of 181.6 million bushels but is the second largest crush ever for November but is down 1 percent from 2020. Soyoil stocks at 1.832 billion pounds were lower than the 1.903 billion pound expectation. This was the first monthly stocks decline since June. January soyoil broke a six-session streak of lower closes on the news.

Weekly export sales were in the lower half of estimates at 48.1 million bushels. Total commitments are 1.474 billion bushels and down 25 percent from last year. Year-on-year exports are anticipated to fall 9.5 percent to 2.05 billion bushels. China has bought 819.4 million bushels of U.S. soybeans this marketing year vs. 1.15 billion bushels last year. They have 205.7 million bushels in unshipped soybeans. Based on the current rate, we could expect the USDA to reduce exports on the January World Agriculture Supply and Demand Estimates report. We need to average 15.4 million bushels of sales per week to hit the USDA’s outlook and our window of being the cheapest soybeans in the world is narrowing. It’s expected soybeans will be available from Brazil in the last half of January.

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $5.72 +.17 $12.93 +.78 Edgerton $5.90 +.14 $12.68 +.63 Jackson $5.88 +.14 $12.78 +.58 Janesville $5.75 +.12 $12.70 +.58 Cannon Falls $5.67 +.13 $12.71 +.65 Sleepy Eye $5.87 +.14 $12.88 +.63 Average: $5.80 $12.78 Year Ago Average: $4.04 $11.79

Grain prices are effective cash close on Dec. 21. *Cash grain price change represents a two-week period.