The Executive Briefing: September 11

Thoughts for the week ahead

Never Forget.  We begin this week with a heavy heart for two reasons:

• First, today marks 22 years since the September 11th terrorist attack on the World Trade Center Towers and the U.S. Pentagon. Several of our team had been working in New York and Washington, DC at that time, and thus we honor friends, colleagues, first responders and all others that perished during that tragic event.
• Second, a 6.8 magnitude earthquake struck Morocco on Friday, causing widespread property damage and killing more than 2,000 people. Morocco is an important region of the world for phosphate, a natural source of phosphorous, a key element that is an essential ingredient in fertilizer.

Beyond Morocco, other items we are focused on this week include the September WASDE report,  the latest CPI and PPI readings, and several ag-centric outlooks. (More details on upcoming events can be found later in this week’s package.) This week’s Briefing also includes a  slide on Chicken Wings (which are preparing for takeoff), an insurance catastrophe monitor, and a few slides on recent spot commodity price performance.

The Watch List

Fertilizer Sector   

• Likely disruptions in Moroccan phosphate fertilizer production due to last Friday’s earthquake.

Grain Sector    

• Low water levels (again!) on the Mississippi River threaten ag exports out of the Gulf and shipments of inputs into the Midwest.

Government    

• Shutdown risk is back on the table for October 2023.

Monetary Policy    

• The next Federal Reserve rate decision comes next week.

Student Debt    

• Some 43 million people, or around 17% of adults in the U.S., have federal student loan debt, with payments due beginning 10/1/2023.  The typical monthly student loan payment falls between $209 and $314, equating to a pay cut of around 4% to 5% pretax of U.S. median household, according to a Wells Fargo analysis.
   

Upcoming Events

Monday, 9/11/2023    

• September 11th Terrorist Attack Remembrance Day
• Weekly Grain Exports & Crop Progress

Tuesday, 9/12/2023    

• World Agricultural Production (WASDE), USDA-NASS Crop Production, Grains & Oilseeds World Markets & Trade, Farm Journal Insurance & Weather Webinar

Wednesday, 9/13/2023    

• Consumer Price Index (CPI) (3.6% total and 4.3% core expected yr./yr.) U.S. Senate will hold its first AI Insight Forum
• EIA Weekly Ethanol Production , Meat Price Spreads

Thursday, 9/14/2203  

• Initial Jobless Claims, Product Price Index (PPI), U.S. Retail Sales, Business Inventories, European Central Bank monetary policy decision statement.
• Weekly Grain Export Sales, USDA Outlooks: Oil Crops, Wheat, Rice, Feed, Cotton & Wool

Friday, 9/15/2023    

• Empire State Manufacturing Survey, Industrial Production & Utilization, University of Michigan (GO BLUE!) Consumer Sentiment
• Feed Grains Yearbook Tables

Wednesday, 9/20/2023  

• Federal Reserve Interest Rate Decision

Saturday, 9/23/2023   

• 25 years ago today the U.S. Government bailed out Long-Term Capital Management, a large hedge fund that failed.

Morocco Earthquake & Fertilizer Facts

What Happened?
A 6.8 magnitude earthquake struck Morocco on Friday, causing widespread damage at killing more than 2,000 people based on initial estimates reported by major newspapers. Morocco is an important region of the world for phosphate, a natural source of phosphorous, an element that is an essential ingredient in fertilizer.

Phosphate Facts*

Global phosphate supply is dominated by China (85 million tons), Morocco (38 million tons) and the United States (22 million tons.) Russia (12.5 million tons) and Jordan (9.2 million tons) round out the top five producers.
The distribution of global phosphate reserves looks quite different.
Morocco is largest at 50 billion tons (70% of global reserves), followed by China (3.2 billion tons), Egypt (2.8 billion tons), and Algeria (2.2 billion tons.) 
Brazil and South Africa each have 1.6 billion tons of reserves.
The United States has 1.0 billion tons of phosphate reserves, putting it in 10th place.

Key Players in Phosphate Fertilizer** 
1.    EuroChem Group AG
2.    Coromandel International Ltd. 
3.    Israel Chemicals Ltd. 
4.    Hubei Xingfa Chemicals Group Co. Ltd. 
5.    Jordan Phosphate Mines Co. PLC
6.    Nutrien Ltd. 
7.    Maaden – Saudi Arabian Mining Co. 
8.    OCP SA
9.    The Mosaic Co. 
10.    PhosAgro AG
*Source: KSB Mining, April 4, 2023. **Straits Research

September WASDE Preview

Slightly bullish outlook for the September WASDE.

This is the first WASDE report of the year to include field-collected data, and likely includes changes to projected planted and harvested acres based on FSA and RMA data.  USDA estimates the harvest at 82.7 million acres of soybeans and 86.3 million acres of corn

As of September 5th, soybeans were rated 53% good to excellent (vs. 58% last year) and 17% poor to very poor (vs. 14% last year).  Corn was rated 54% good to excellent (vs. 56% year) and 18% poor to very poor (vs. 19% last year).

Ending stocks/carryover for next year are likely to be trimmed based on old crop exports but remain at historically high levels. 

Key item to watch will be the global stocks forecast, however, since South American crops are not yet planted, that remains a wildcard. Another key issue will be if there is sufficient rain between now and harvest, something that won’t be reflected in the WASDE report. 

WASDE is also going to revise the Canadian and Australian wheat crop estimates with new numbers that recently came out from StatsCan and ABARES.

Insurance / Catastrophe Monitor

It continues to be another year of extreme weather with the June 2023 transition from La Nina to El Nino
The extreme weather has resulted in numerous property losses impacting agriculture production, commercial non-farm agribusinesses, and supply chains.

The situation continues to result in higher property insurance premiums for grain and farm supply cooperatives, a subject we will be discussing in a webinar on Tuesday, September 12.

As of August 8th  prior to Hurricane Idalia) there have been 15 confirmed weather/climate disaster events with losses exceeding $1 billion in the US that resulted in the deaths of 113 people.

The 15 events compares to an average of 8 events from 1980–2022 annually and 18 events from 2018–2022 (CPI-adjusted).

Source: National Centers for Environmental Information https://www.ncei.noaa.gov/access/billions/

Numbers of Interest

6.5%    Expected increase in employer provided health insurance costs for 2024 (WSJ)
18.2%    Price change in U.S. Diesel #2 from June 5, 2023 ($3.80/gal) to September 4, 2023 ($4.49/gal) driven by Russian and Saudi cuts of sour and medium sour crude oil. (EIA)
20%    Commercial real estate (CRE) exposure held by banks relative to their deposits (WSJ)
-8.8%    China’s outbound shipments declined 8.8% in August y/y, compared to a 14.5% year/year drop in July.
10.7%    1 month price performance for the S&P Energy Index
$267 billion    In 2023, nearly 5,650 animal food manufacturing facilities will generate a total of $267 billion in total sales with 80,000 direct employees, according to the American Feed Industry Association’s annual report,
$177.5 billion    USDA estimate for Agricultural Trade for Fiscal Year 2023 as of August, down $3.5 billion from its May forecast, due to decreasing corn, wheat and tree nut exports

Kenneth Scott Zuckerberg is Lead Industry Analyst, Farm Supply & Biofuels, CoBank