Chicago Board of Trade Market News
Outlook
A spokesman for the U.S. Treasury Department told news reporters that the Biden administration is set to finalize guidance on the 45Z Clean Fuel Production tax credit before President Biden leaves office on January 20, 2025, so that eligible producers will be able to claim the credit for 2025 production. The 45Z tax credits provide support for biofuels production, especially renewable diesel, biodiesel, and sustainable aviation fuels (SAF). This should be supportive to soybean crush for soyoil and ethanol production, especially from lower-carbon feedstocks such as corn grown with sustainable practices. Ethanol producers, in particular, are hoping SAF will provide market growth for ethanol production amid stagnant demand for corn-based ethanol as a gasoline additive. The Department of Agriculture is expected to issue some guidance on what climate smart farming techniques may be used to access the credit, but other key items such as life cycle analysis, will remain unfinished and leave the industry without a blueprint to access the credits, the sources said.
Job growth in the U.S. is slowing. The US Bureau of Labor Statistics will release the December jobs report on Friday, December 6th with data for November. Ahead of the government’s statistics, ADP released its private payroll data which shows that private businesses added 146,000 jobs to payrolls in November, which was the lowest in 3 months and follows a downward revision in October’s data to 184,000 jobs added. The jobs data has been in a significant downtrend since hitting highs early in 2022. Despite the downtrend in new jobs numbers, the US economy is still growing. The latest data shows US gross domestic product (GDP) increased at an annual rate of 2.8% in the third quarter of 2024, but that was down from the second quarter growth rate of 3.0%. The increase in the third quarter primarily reflected increases in consumer spending, exports, federal government spending, and business investment.
In contrast to the general economy in the U.S., which is growing, net farm income in the U.S. has fallen sharply since 2022. The most recent estimate of U.S. net farm income is $140.7 billion which is down $52.7 billion compared to 2022, or a decline of 27%. While USDA-ERS claims that financial pressures are modest, the outlook for net farm income is grim amid negative production margins for 2025 crops. It is likely that bankers may pressure farmers into selling more of their stored 2024 crop supply before renewing operational loans for 2025 in the coming months. The economic research division of USDA released their estimates for national average crop production costs for the upcoming 2025/26 crop. Total cost projections were lower for both corn and soybeans than last year, but with lower prices projected, margins are likely to be negative for many producers. Total corn production costs are estimated at $879.10 per acre with operating costs down $11.33 per acre from last year, but overhead costs increasing by $3.32 per acre for a net reduction in costs of $8 per acre. Total costs for soybean production are estimated to be $625.29 per acre, down just 52 cents per acre from last year. Costs for both crops will be the 4th highest on record. New crop corn futures (Dec 25) are 37 cents per bushel less than last year’s spring crop insurance guarantee and soybean futures (Nov 25) are $1.54 less than last year. The decline in sales prices far exceeds the decline in production costs. Currently, the projected national average return on corn for the 2025 crop is a loss of $57 per acre (compared to a $17/acre loss on the 2024 crop) and soybean returns are estimated at a $62 per acre loss for the 2025 crop compared to a $13/acre profit for the 2024 crop.