Good morning.
Is that the smell of… sour milk?
As the dairy feud between the U.S. and Canada rages on, U.S. Ag Secretary Tom Vilsack got a little spicy with our neighbors up north this week.
For those who haven’t been milking the coverage of this story for all it’s worth… a panel ruled in December that Canada had manipulated its tariff-rate quotas in order to limit U.S. dairy imports. Now, American dairy groups are calling for retaliatory tariffs—and Vilsack said Canadian officials should be "capable of reading between the lines about what’s next … I can assure you we are not going to give up on this."
It’s safe to say the dispute over this cash cow isn’t ending anytime soon.
The News:
- Cotton Faces Significant Shrinkage
- Pronto Plant Pipeline
- A $6B Farm Buoy
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Everything’s bigger in Texas.
BBQ. Steaks. Pride. And cotton.
As the nation’s #1 cotton producers, Texans sure know how to grow socks and T-shirts.
But something else is bigger in Texas—drought.
Not a drop to drink: On Tuesday, the U.S. Drought Monitor categorized over 90% of the Lone Star State in drought condition—with well over 50% considered "extreme" or "exceptional."
And that spells trouble for cotton.
Abandonment issues: Historically, Texas cotton-growers abandon a portion of their planted acres if they are considered uneconomical to harvest. The average over the past 10 years sits around 29%.
But this year, Gro Intelligence estimates it may be a whopping 47%. That’s a lot of cotton balls (and bales).
And the problem isn’t isolated in Texas.
In March, the USDA reported an expected 1M acre planting increase nationwide, but those Texas-sized abandonment estimates have dropped the expected harvested acres to 9.1M… that’s 1.1M less than expected.
In sunny California, farmers have increased their cotton acreage by around 10% over the last year.
But in March, the USDA had estimated a 24% increase.
Although cotton was once a coveted crop due to lower water usage, the extreme drought in the Golden State has forced more farmers to convert acreage to more permanent crops.
Where this goes: The drought, paired with India offering duty-free cotton imports through the summer, have shot cotton prices through the roof. But with little water, the prospect of capitalizing by growing more seems like a long shot.
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→ When pigs fly? With international flights to South Korea increasing, the country is ramping up quarantine requirements at 8 airports and 6 harbors to keep African swine fever from entering the country
→ Shifting from sugar. After cancellations of raw sugar orders (totaling 200K-400K tonnes), Brazilian sugar cane mills are diverting production to ethanol instead, as energy prices continue to rise.
→ Speaking of ethanol… A new Iowa bill will require at least half of the state’s gas pumps to dispense a 15% ethanol gasoline blend—with supporters saying the law could be an example for other states to follow.
→ Hitting pay dirt. Perennial, which uses machine learning and remote sensing technology to measure and report carbon presence in soil, has raised $18M in funding.
→ Roadmap to robots. China released its first roadmap for intelligent agriculture, paving the way to popularize unmanned ag machinery throughout the country.
→ Trouble in Texas. For the second straight year, Texas’s olive fruit crop is expected to be almost a total failure, thanks to bad weather (including Winter Storm Uri).
→ Palm oil flowing again. Indonesia is lifting its export ban on palm oil—a major boost to the industry’s 17M workers— although cooking oil prices have not reached the country’s original targets.
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There’s a new pipeline in town.
Not that pipeline: one from Solis Agrosciences, a new company out of St. Louis. The company launched a platform called Plant Pipeline as a Service to help ag biotech startups develop products for market within a shorter timeline.
Plant pipeline: Complex processes and equipment requirements cause some ag biotech startups to get off to a slower start. It can take up to 13 years and $136M to get a biotech crop to market. With conversations surrounding climate change, food security, and sustainability, Solis has support from the biotech industry.
Soundbite: "There are so many startups trying to innovate, but even with funding those startups find it difficult to access proprietary processes and tools [and] have access to the specialized equipment that’s necessary," says Mary Fernandes, a founder and president of Solis. "The aim of Solis is to make innovation faster and simpler."
With a fee-for-service model, Solis aims to connect with startups to get them the resources, infrastructure, and talent they need so they can go from research to commercial-ready, lickety split.
Pipeline perks: The Solis platform provides a myriad of ways to help:
- Greenhouse space
- Research support
- Molecular analysis tools
- Regulatory requirement support
All of this, and the companies get to retain their intellectual property. Solis is kicking things off with soy and corn but hopes to expand to other plants depending on what customers ask for.
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Grains: Wheat finally settled somewhat after the India export ban news.
Livestock: Not much news other than some choppy trade up and down for the day.
*As of Market Close [5/20/22]
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Samuel Roden | Getty Images
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Commodity and specialty farmers in rural America: finally some good news for you. $6B in disaster aid is headed your way later this month.
The aid will be paid through Farm Service Agency’s new Emergency Relief Program (ERP) as part of the $10B earmarked for agricultural disasters. It will offset lower yields and losses of crops, trees, bushes, and vines due to wildfires, hurricanes, floods, derechos, drought, and exposure to smoke in 2020 and 2021.
More than 220K farmers who have received crop insurance indemnities and more than 4K farmers not eligible for crop insurance are expected to see the green.
Soundbite: "For over two years, farmers and ranchers across the country have been hard hit by an ongoing pandemic coupled with more frequent and catastrophic natural disasters," Agriculture Secretary Tom Vilsack said.
"As the agriculture industry deals with new challenges and stressors, we at USDA look for opportunities to inject financial support back into the rural economy through direct payments to producers who bear the brunt of circumstances beyond their control."
Oh and this: USDA already said it would pay $577M+ in disaster aid to offset forage losses caused by severe drought or wildfires last year. This is through the ERP companion program, the Emergency Livestock Relief Program.
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Cotton prices are surging right not, but did you realize that the famous fiber is also an ingredient in our cold hard cash?
It's true. Can you fill in the blank: Paper money is made from ____% cotton.
Answer at the bottom of the email.
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Written & Edited by Kevin Cross, Sheridan Wimmer, Rachel Robinson, Ashley Scoby, and Travis Martin
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