Professor Brown Latest Ag News December 13, 2015

Latest Ag News December 13, 2015

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 Two big events this week in the agriculture world. 

 First, the World Trade Court handed down  its final decision regarding USA Country of Origin Labeling laws.  The USA lost big time.  Canada and Mexico were awarded one billion dollars in retaliatory tariffs.  That means that COOL laws in the USA are now dead.  The House of Representatives had already passed a stand-alone bill that repealed the COOL laws last summer.  Now the US Senate will also include language to repeal COOL in its omnibus spending bill, which of course will be signed by President Obama.  Cool is dead.

Second big news is that  the Environmental Protection Agency finally released its rules for the Renewable Fuels Standard for 2015 and 2016, after a delay of OVER 12 months.  And of course no one is happy because these new rules require that LESS ethanol be blended into gasoline than was previously required by Congress.  But also, it still requires that MORE ethanol be blended into gasoline than consumer groups and the gasoline industry think is economically viable.  Further, the bio-diesel lobby doesn’t think there is a big enough mandate to make the bio-diesel industry profitable.  It sucks for everyone, but at least after a 12 month delay we have a standard.

Oil is the other big news.  It looks like we are headed for a general oil price collapse towards US$20 per barrel.  Just one year ago, a few brave souls were predicting this but of course those poor souls were subjected to vicious ridicule in the financial press.  Today, even the major banks like JP Morgan are calling for a $20 per barrel bottom in this market.  And the US shale industry has NOT curbed production and drilling by any measure that equates to the same drop in price.

Oil is going to get cheaper.  And cheap oil means cheap corn and soybeans.   Which then turns into cheap meat and milk.

Crop prices traded sideways this week, and cattle prices were slightly lower than last week.  Slaughter weights remain high for both beef and pork, which means we have lots of extra meat on the market, competing for the consumers’ dollar.

One interesting report from CattleFax this week showed that beef heifer and cow slaughter is way down from last year.  This translates into more heifer retention on the farm.  CattleFax says that meat production will be down by 220 million pounds in 2015 because of heifer retention.  But this will turn into an INCREASE of 870 million pounds for 2016 when these heifers start to produce calves that will come to the market.

I know, its confusing.  The January USDA report should clear up a lot of questions.

That’s it for this week, feel free to email me or post any questions, comments or blistering criticisms.  Brought to you by BreedexUSA LC, your source.