The Ag Analyst’s Briefing: Week of Jan. 23 Watchlist
The week of 23 January 2023 is a busy one, with a slew of public company earnings reports and Thursday’s very important release of initial 4Q gross domestic product (GDP). Consensus is calling for a +2.5% print (recall 3Q final GDP was 3.2%). Another positive print coupled with reduced inflation, could lend credibility to the soft economic landing thesis.
In the agriculture space, we continue to visit with grain and farm supply cooperatives as part of Board strategic planning sessions. Water scarcity due to structural and political challenges in Colorado and Kansas continue to be key themes we heard, as well as labor problems. On the latter, several equipment dealership executives last week indicated their frustration about hiring and retaining farm equipment mechanics and technicians who apparently can earn up to $100k/year.
This Week's Watch List
Treasury Bond Yields
3 Month = 4.55%, 2 Year = 4.18%, 10 Year = 3.48%. Forward yield curve remains inverted.
US GDP
Preliminary 4Q GDP will be released on Thursday. Bloomberg consensus is 2.5%, Atlanta Fed GDP Now calls for 3.5%.
China & DDGs
China has extended for 5 more years its anti-dumping (AD) and countervailing duties (CVD) on dried distiller’s grains (DDGs) from the U.S for 5 more years. Total duties range from 53%-66%, keeping the U.S. out of what was once a key market.
China Consumer Spending
The Chinese New Year is underway (15 day duration), which usually marks a period to high consumer spending. Will it kick off a recovery in China’s growth for 2023?
Animal Feed
Cattle on Feed: The 1 January cattle on feed inventory is 11.7 million head, down 3 percent from January 2022 and the lowest total for January since 2018. Placements on feed were down 8 percent from a year ago pointing to continuing tight cattle supplies.
Numbers of Interest
Economic
-1.07 Spread in basis points between 10-Year and 3-Month Treasury Bond Yields
-1.1% Change in U.S. retail sales in December as reported by the Commerce Department
850,000 Drop in China’s population in 2022 from 2021, the first drop since 1961 and 7 years earlier than China had projected for negative population growth
Agri-Food
-40% One-month decline in U.S. natural gas prices which is helping drive a decrease in fertilizer prices (BarChart.com)
25.0% Percentage of consumers that are starting to use a “food budget” following two years of food price inflation, according to the Gardner Food & Ag Survey (Farmdoc Daily)
60.3 Following its Brazil tour, AgResource Company estimates a final yield estimate of 60.3 bu./acre, which is 8 bushels higher than CONAB’s current forecast (TheScoopDaily)
Also of note: Retail Meat Records
- Meat department sales jumped more than $9B from 2018-2022, to a new record at $87.1B
- However, unit volume declined 2.7% and remained below pre-pandemic levels in the most recently ended year
- Sales of fresh chicken saw the biggest jump of categories measured, at up +15% YoY
- Total meat inflation was below average across all items in the store, at just 8.8%, and fresh meat was just 7.2% YoY
January Cattle on Feed
The 1 January Cattle on Feed inventory is 11.7 mln head -97% of January 2022 and in line with pre-report expectations. This is the fourth consecutive month of inventories below year ago levels, after the first 9 months of 2022 saw higher (or the same) year or year inventories It’s the lowest January inventory since 2018 starting out a year that will see very tight fed cattle supply.
- Marketing sof fed cattle in December were 1.74 mln head -95% of a year ago
- Placements of cattle in feed yards in December were 1.8 mln head –just 92% of a year ago
- Heifers at 4.65 mln head were 40% of the on-feed inventory implying no sign of retention for herd rebuilding
- Net Placements were 1.75 mln head, implying cattle on feed for > 150 days were 1.92 mln head and cattle on feed for > 120 days were 3.98 mln head
Kenneth Scott Zuckerberg is Lead Industry Analyst, Grains, Farm Supply & Biofuels, CoBank.