Administration Announces $19 Billion Assistance Package
- The USDA intends to begin sending payments to producers by the end of May.
- The plan includes $16 billion in direct payments to farmers, along with $3 billion in government purchases of meat, dairy products and other foods.
- The commodities purchased will be distributed through food banks and other nutrition programs serving the poor, school children and the elderly.
- The USDA will make direct payments of $5.1 billion to cattle producers, $2.9 billion for dairy and $1.6 billion for hogs.
- Another $3.9 billion will go to producers of row crops such as soybeans, corn and cotton, while $2.1 billion is earmarked for producers of specialty crops such as fruits and vegetables. And $500 million will go for other crops.
- The USDA will receive another $14 billion in July for further assistance.
- The plan doesn't include any assistance for producers of ethanol or other biofuel producers.
FBN’s Take On What It Means: The closing of restaurants, school cafeterias and other commercial food service operations has upended the market for agricultural products, particularly dairy, meat and produce. The food-service industry is a disproportionate buyer of cheese, butter, meat, fresh fruits and vegetables. Slowdowns/shutdowns of several slaughterhouses because of virus outbreaks among employees has further disrupted hog and cattle farmers’ ability to sell their livestock. At the same time, decreased driving and an oil price war have forced ethanol plants to shut down, further depressing corn prices. The assistance is needed by producers, but the lack of aid to the renewable fuel industry negates some of the support.
Russia Could Suspend Wheat Exports
- The Russian Agriculture Ministry released a statement that the current 7 million tonne April-June grain export quota could be used up by mid-May.
- The ministry announced grain exports would be suspended until July 1 if the quota is met.
- There is speculation that some of last Thursday’s 180,000 tonne Russian wheat sale to Egypt for May 15 - June 5 shipment could be at risk.
- Market participants will be watching for the next round of unusually timed Egypt business later this week.
FBN’s Take On What It Means: Although the amount is roughly in line with what the country was expected to ship in that period, Russia's online calculator showed that as of Friday only 4.2 million tonnes of grain remained available for export from the quota. This will likely lead to caution about selling Russian wheat in international markets beyond May 15. This will bring more attention to HRW supplies offered from the US. While there was a cargo of HRW offered at a competitive FOB price in last week’s tender, higher transportation costs prevented it from being taken. FBN believes higher wheat prices in the near term provide an opportunity for producers to catch up on cash sales.
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