Acreage Outlook for 2019 and A Wet Forecast
Update for September 18th, 2018
Corn prices have now reached fresh new contract lows. Several negative factors have all come together at the same time to bring prices to this level:
The U.S. corn yield is expected to reach an all-time new record.
Fears that the current trade battle with China may continue for several months.
The expected large increase in the number of U.S. corn acres producers are forecast to plant in 2019.
Informa Economics IEG is projecting that acres planted to corn will increase by 4.4% jumping acres planted to corn in 2019 to 93.044 million. Fortunately demand has remained extremely strong for corn and that demand is expected to continue. There was also a report that earlier this week many end-users of both corn and soybeans appear to have started purchasing larger quantities of both products which could help stabilize the rising basis levels. Several news sources reported earlier this week that Green Plains was planning to close a couple of ethanol plants in north central Iowa. However, in an updated article from Reuters Green Plains CEO Todd Becker has informed the media that the company has not shut down any of their ethanol plants. He noted that they will be flexing production up and down which is very common and will begin their annual fall maintenance shutdown where most if not all plants typically shut down for 2 to 4 days.
Soybean prices have now posted new lows for the decade. Several factors have led to this incredible price decline:
As harvest progress, now 6% complete, the average yield continues to increase.
Brazil is in the process of planting and a record number of soybean acres are expected to be planted this season.
The ongoing trade war with China that shows no sign of ending soon.
It’s not surprising to learn that given these circumstances Informa Economics IEG is projecting a big drop in 2019 soybean acres. Trade sources report that U.S. producers planted 89.6 million acres to soybeans in 2018 but acres planted to soybeans are expected to fall by 8.2% in 2019 to 82.27 million.
NAFTA negotiations with Canada continue this week in Washington D.C. Canadian Foreign Minister Chrystia Freeland is meeting with U.S. Trade Representative Robert Lighthizer to work out a trilateral agreement with Mexico. Several U.S. business groups are pouring on the pressure to Lighthizer to work out an agreement with Canada as they are our #1 trading partner. Insiders expect a resolution sometime after the October 1st election in Quebec but before the U.S. mid-term election on November 6th.
On Monday, President Trump announced that he will impose additional tariffs on $200 billion in Chinese goods. These new tariffs will affect thousands of goods which will increase the impact of the tariff war to a larger population of U.S. consumers. This additional tariff affects nearly half of all Chinese goods imported to the U.S., news of this latest tariff increase once again hit corn and soybean prices hard earlier in the week.
Bloomberg is reporting that China now plans to cut the average tariff rates on imports from the majority of its trading partners perhaps as soon as next month. It isn’t clear how this reduction would affect imports from the U.S. until details are outlined by the Chinese government regarding which products will see the reduced rates. (World Trade Organization rules state that any reduction in tariffs usually must be offered to all countries equally.) This could be good news for U.S. farmers as China would be able to say that this was their choice to reduce import tariffs on products that are needed, such as soybeans.
Rain, rain, rain…Several inches of rain are possible across a large portion of the Corn Belt this week and into next week as well. The map below shows the 7 day rainfall outlook for September 17th-24th.
More rain…Unfortunately the 6 to 10 day forecast from the National Weather Service shows a continuation of the wet pattern from this week.
A pattern change next week is expected to bring an end to the above average temps and humidity as fall temps are forecast to develop. Below average temperatures will expand into the northern and central Plains by Tuesday and will continue the spread cooler temps south and east through Thursday. Highs are expected to be 10 to 15 degrees below normal with some 30 degree temps expected in the far North with frost possible in some locations.