Update for October 16th, 2019
The USDA surprised the corn market last week with an increase of 0.2 bushels per acre in the estimated corn yield, raising the expected average to 168.4 bushels per acre. Corn production was left unchanged at 13.779 billion bushels, exports were lowered by 150 million bushels to 1.9 billion bushels and ethanol usage was reduced by 5.4 billion bushels, a drop of 50 million bushels. Ending stocks were expected to fall by 500 million bushels, but instead only saw a 261 million bushel decrease. The average farm price for corn was raised from previous estimates up to $3.60-$3.80 per bushel.
Soybean yield estimates fell by 1 bushel to 46.9 bushels per acre and harvested acres fell by 300,000 to 75.6 billion acres. Ending stocks were lowered by 180 million bushels to 460 million bushels, this was a much larger adjustment than the trade had expected. Total production was lowered by 83 million bushels while the soybean crush was increased by 5 million bushels. Soybean harvest price saw a $0.50 increase to $9.00.
U.S./China trade negotiations appear to be headed in the right direction. On Friday an agreement on Phase 1 of a trade deal was completed and will now be written over the following 3 to 5 weeks. In response to the progress President Trump has agreed to postpone the scheduled tariff increases that were set to begin this Friday, October 15th and the Chinese have agreed to purchase $40 billion to $50 billion of U.S. farm products over a two year scale-up process. Once that process is completed the purchase level will be on a yearly basis.
Monday, on CNBC Treasury Secretary Steven Mnuchin stated, “What I will tell you is we made substantial progress last week in the negotiations. We have a fundamental agreement, it is subject to documentation, and there’s a lot of work to done on that front.” He explained that the agreement includes “very significant structural issues in agriculture” and that further talks were planned for this week between himself, Ambassador Robert Lighthizer and the Chinese vice premier. Mnuchin added, “My expectation is we’ll have the deputies meet between now and Chile and my expectations are that we will be meeting with the vice premier in Chile before the presidents meet to finish the deal.”
State affiliated media in China reported that both the U.S. and China share the same view of the progress in negotiations last week. “If the Chinese side has disagreement with (what U.S. President Trump has said), it will make a response immediately,” it said. “People who are familiar with China’s situation would know that China takes a very cautious approach when it comes to official language used in announcements to the public…but we can confirm that both sides essentially share the same stance.” On Monday the Chinese foreign ministry confirmed that progress was made on issues including agriculture, intellectual property protection, exchange rates, financial services, the expansion of trade cooperation, dispute settlements and technology transfer. An editorial from China’s Global Times magazine titled their coverage of the negotiations, “The breakthrough in China-U.S. (talks) should be celebrated instead of dismissed.”
President Trump’s administration is being urged by various commodity and farm lobby groups to move forward with the second and third installments of the MFP-2 payouts. This appeal comes following the announcement of the Phase 1 “agreement” during trade talk’s last week. Farm groups are also requesting a MFP-3 payout in 2020. Sonny Perdue responded to this plea by advising farmers not to count on another MFP program next year. Promoters of the idea are optimistic that President Trump will instruct the Ag Secretary to offer the payments yet again, as he did with the first and second rounds, in part because 2020 is an election year.
U.S. Speaker of the House, Nancy Pelosi received a letter last week from Mexican President Andres Manuel Lopez Obrador. The letter asks for her to accelerate the ratification vote for the USMCA. Several member of Congress have suggested that there are more than enough votes in both the House and Senate to clear USMCA. It’s possible the vote could occur as soon as the end of November but it may take until sometime in December for action to be taken.
The EPA has issued a supplemental proposal regarding the 2020 Renewable Volume Obligation which has stunned and infuriated the ethanol and corn sectors. Less than 2 weeks ago we were assured that the new proposed biofuels plan would protect the RFS by no longer allowing SRE’s to undercut the legal mandate for the 15 billion gallon blending requirement.
According to Iowa Renewable Fuels Association Executive Director Monte Shaw, “Instead of standing by President Trump’s transparent and accountable deal, EPA is proposing to use heretofore secret DOE (Department of Energy) recommendations that the EPA doesn’t have to follow. That means there is no guarantee that SRE’s will be accounted for in the RFS.” Farm groups and ethanol industry leaders are asking for Trump to intervene once again to get the RFS aligned with his original commitments.
The EPA will hold a public hearing on October 30th regarding the proposal and at that point a 30-day public comment period begins. A final decision on the matter has been promised by the end of the year.
An early season snowstorm as dumped up to 2 feet of snow from northeastern South Dakota to northern Wisconsin, heaviest amounts fell across eastern North Dakota.
Cooler than normal temps will remain through the middle of the week but a warm up is expected by the weekend.
The 6 to 10 day outlook for October 19th through the 23rd turns warmer and wetter with above-average temps and precipitation expected.