1 Billion Bushels of Unharvested Corn and Positive Signals Arise Regarding the RFS

Update for November 26th, 2019

Typically weekly crop progress reports end by this time of year, however 2019 was not a typical growing season so the USDA has announced plans to continue the reports until harvest progress reaches 92%. A week ago the corn harvest was estimated to be 76% complete, this week that figure increased by 8% to 84%. That calculates out to approximately +13 million acres of corn in the field or over 1 billion unharvested bushels. Several top production states still have 10% or more of their corn crop standing in the field. Those include:

• Illinois

• Indiana

• Iowa

• Michigan (44% unharvested)

• Minnesota

• Wisconsin (43% unharvested)

• North Dakota (70% unharvested)

• Ohio

• South Dakota (32% unharvested)

• Pennsylvania

This week’s soybean harvest was estimated at 94% complete vs the historical average of 97%. The states of Michigan, North Dakota and Wisconsin lag the furthest behind their traditional harvest pace. Many of these northern states with large amounts of acres to harvest are also facing a winter storm that’s expected to bring heavy snowfall, strong winds and very cold temps over the next several days making harvest progress difficult if not impossible.

Currently the market appears to be unconcerned with U.S. harvest issues and without a Chinese trade agreement or serious weather development in South America that is unlikely to change. Recently prices and cash bids in Brazil have been on the rise and corn exports have reached new record highs. The fear is that improving prices will encourage producers in Brazil to plant more second-crop corn acres than originally planned. Brazil has said they plan to ramp up domestic corn usage for ethanol production which will keep some of the bushels from reaching the export market but it may also drive up prices even further enticing farmers to plant additional second-crop corn acres.

Chinese purchases of U.S. soybeans are up substantially from a year ago but still remain slow and according to customs data China’s imports of South American soybeans are off 42% from a year ago. Chinese importers had been reluctant to purchase South American beans in hopes that Phase 1 of the trade deal would soon be finalized and signed but last week, with no agreement in place and Brazilian currency near record lows against the U.S. Dollar, Chinese buyers purchased 20+ cargoes of soybeans out of Brazil.

U.S. trade officials turned down an invitation from Beijing for a new round of face-to-face talks in China this week. Instead a phone call was held today to further discuss Phase 1 concerns. This particular phone call was quite different than others between key negotiators from the two countries, this call included China’s Commerce Minister, the Governor of the People’s Bank of China and Vice Chairman of the National Development and Reform Commission. These new participants to today’s trade talks indicate notable progress as now higher-level Chinese officials are involved in the discussion. While several U.S. media sources including Bloomberg and Reuters have reported negative information regarding the progress of the Phase 1 talks the Global Times, a Chinese owned media source reports a much more positive outlook and has discounted the negative media reports from U.S. news sources.

There are some hopeful signs emerging regarding the RFS. The White House has reportedly asked the Senate Finance Chair Chuck Grassley of Iowa for his input regarding the latest proposal to boost the ethanol market in 2020, and have met with Terry Branstad, former Iowa governor and current Ambassador to China. Economic Advisor Larry Kudlow asked Grassley to explain how the EPA’s use of the SRE’s (small refinery exemptions) negatively impacts the ethanol industry and why the current proposal from the administration fails to provide relief. This shows that the Trump administration may be having second thoughts about the proposal. The Farm Belt is a critical region for the president to secure prior to next fall’s election.

A large portion of the Central Plains, Northern Iowa and Great Lakes region is forecast to receive between 6 to 12 inches of snow starting today into Wednesday.

In addition to the snowfall, strong Northwest winds of 40 to 60 mph are expected to accompany the system.

Once this initial storm system exits the region another system is predicted to move through over the weekend affecting many of the same areas.