Chinese Trade Update and Round 2 of MFP
Update for November 19th, 2019
The USDA reported yesterday that 76% of U.S. corn acres have been harvested to date vs the 92% average. Northern states are running the furthest behind and many producers in these areas feel that the USDA has overestimated their respective state yields partially due to adverse weather conditions and the negative effect it is having on yield. Farmers need more time in these areas but several forecasts show that the weather is expected to become “much more problematic winter weather” after December 1. Northern states running behind:
North Dakota has only harvested 23% of their corn crop vs the 85% average
Michigan is 39% harvested vs75% historically
Wisconsin has 44% of the crop harvested vs 77% average
South Dakota just 53% harvested vs 91%
Minnesota is 77% harvested vs 94% historically
Corn exports continue to weigh on the market. Since the beginning of the year U.S. exports are well behind average while Brazil has exported 60% more than their previous record pace. To add to the battle the U.S. Dollar is strong so currency rates favor Brazil at this time. In addition Informa recently estimated the 2020 corn crop at 94.4 million acres vs the 89.9 million planted this year.
USDA estimates last week indicated that the soybean harvest continues to be progressing slowly with 6.5 to 7 million acres left to harvest in many of the same northern states struggling to complete corn harvest. It’s late enough into the season now that it’s reasonable to assume that at least some of these acres may not be harvested until spring, further damaging yield. There are indications that China may be purchasing 8 to 10 cargoes from U.S. exporters for December and January delivery, unfortunately many believe this is to cover supply needs until South American soybeans are harvested. Sadly a new stumbling block has developed with the China trade deal which could delay any agreement once again. Apparently China is struggling to officially commit to the purchase of $40 to $50 billion of U.S. ag products (or any numerical figure that large) previously discussed. At this time though both sides are still working towards a December signing of Phase 1.
Trump spoke to reporters at the White House last week regarding the Chinese trade situation he stated, “We’ll see what happens, but it’s moving along rapidly.” He has made it clear though that if the two are unable to form an agreement he plans to substantially raise tariffs on Chinese imported goods. The Wall Street Journal reported that one Chinese official said that Beijing does not want to make a deal with the U.S. that appears to be more favorable to the U.S. than to China and that locks them in to these purchases if further trade talks go poorly. More trade talks were held over the weekend at the request of U.S. negotiators. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with China’s Vice Premier Liu He to discuss each side’s main concern regarding Phase 1 of the trade deal. China does not want to be forced to commit to purchase to set amount of U.S. ag products but the initial phase 1 discussions have both side’s agreeing to $20 billion for the time being. U.S. agriculture exports to China reached a peak in 2013 at $29 billion with over half of which were soybeans.
Bloomberg reports that Japan’s powerful lower house of the parliament has approved the trade agreement with the U.S. The measure will now move to the less powerful upper house where it is expected to be approved and likely come into effect before January 1. This agreement opens the country’s market to U.S. agriculture products including beef and in return the U.S. will hold off on new tariffs on Japanese carmakers.
The USMCA trade agreement will likely be approved by year-end according to USDA Secretary Sonny Perdue. At a farm broadcasters meeting in Kansas City last week he said, “I’m optimistic it will get done. In light of everything else going on in Washington D.C., both Democrats and Republicans need to go home over the Christmas break and say this got done.” Speaker of the House of Representatives Nancy Pelosi has also stated that an agreement is “imminent”.
The USDA has announced that the second round of MFP payments will be made November 18th-28th sooner than previously expected. County FSA offices have been instructed to prioritize the processing of these payments and have them finished by November 22nd.
A D.C. Circuit Court of Appeals has thrown out a challenge by the Advanced Biofuels Association against the EPA and the multitude of exemptions granted to oil refiners. The 3 judge panel said that the lawsuit failed to identify a “final agency action” that can be challenged in court. The judges also warned the EPA that it could face future lawsuits: “The EPA’s briefing and oral argument paint a troubling picture of intentionally shrouded and hidden agency law that could have left those aggrieved by the agency’s action without a viable avenue for judicial review.” (Politico)
Another biodiesel plant has been shut down in Indiana which has left 14 employees jobless ahead of the holiday season. This is due in part to Congress’ failure to extend the $1.00 per gallon tax credit for biodiesel blenders that has helped out the industry since 2005. Integrity Biofuels is now the 10th plant to be idled just this year, leaving a total of 250 workers unemployed.
Above average temps are expected to remain in place across the western half of the U.S. through Saturday. Above average precipitation is forecast to return to the heartland bringing back soggy conditions before the Thanksgiving holiday.