Climate Assessent and Trade Updates
Update for November 29th, 2018
The National Corn Growers Association has written a letter to Ag Secretary Sonny Perdue requesting that the second round of MFP include more money for corn producers. Corn growers were allocated $96,000 in the first round of payments out of the $4.7 billion set aside for the program. According to a report from NCGA the letter asks that the USDA include ethanol and distillers grains in the calculation of damages this time.
The battle for 2019 acreage has begun and new crop prices offered right now are steering producers towards more corn acres in 2019. China nearly doubled the global corn carryout recently which could have been an enormous hit to U.S. corn prices but traders shrugged off these added Chinese bushels as they expect that corn will remain and be used in China. We have heard for quite some time that producers in Brazil were considering putting more second-crop acres to cotton this season and now that has been confirmed. This increase in cotton acres will ultimately mean fewer acres planted to corn, recent estimates show second-crop corn acres close to 11.5 million and nearly 2.5 million cotton acres. In addition the stabilization of crude prices and continuing concerns of unharvested U.S. corn acres have each helped to support prices.
The meeting we have all been waiting for between President Trump and Chinese President Xi will take place this Saturday evening, December 1st in Argentina. Both positive and negative tones have been generated from each country and most inside the trade are still unclear about what exactly to expect from the meeting. President Trump has again said that if nothing comes from this meeting he is prepared to move forward with tariffs on all Chinese imports. No one is expecting this meeting will result in a full-resolution over all of the disputes but the trade will be looking for reassurance that both sides are willing to work towards an agreement and some details regarding how negotiations will progress over the next few months. Whatever the outcome of Saturday’s meeting, it will be Sunday night’s open before the trade can react.
We all are aware of the importance of a new trade agreement with China. According to Chinese government data, the U.S. supplied only 1% of Chinese soybean imports during the month of October while imports from Brazil accounted for 94%. A year ago 23% of Chinese soybean imports were sourced out of the U.S. and 58% from Brazil. Last week soybean exports met expectations at 25 million bushels which was a seven-week high. However, that was still 30.8 million bushels less than the same week a year ago. Currently, cumulative sales are 395 million bushels behind 2017 and 650 million bushels off from 2016. The pace of soybean export sales is the slowest 11 week pace since 2011. Very clear evidence of the seriousness of this trade war.
NAFTA is scheduled to be signed tomorrow, November 30th by Canadian Prime Minister Justin Trudeau and the outgoing Mexican President Enrique Pena Nieto according to the news agency, Politico. “The signing will proceed despite the lack of a side deal to remove President Trump’s steel and aluminum tariffs and Mexico and Canada’s retaliatory duties.”
The Trump administration released the Fourth National Climate Assessment that was just completed this month. This 1,600 page report gives us a thorough review on climate changes and the impacts expected in the United States now and throughout the rest of the century. There are 12 different focal points within this report and I have included the exact text regarding the outlook for U.S. agriculture.
Rising temperatures, extreme heat, drought, wildfire on rangelands, and heavy downpours are expected to increasingly disrupt agricultural productivity in the United States. Expected increases in challenges to livestock health, declines in crop yields and quality, and changes in extreme events in the United States and abroad threaten rural livelihoods, sustainable food security, and price stability.
This introduction is then followed by this further explanation, "Climate change presents numerous challenges to sustaining and enhancing crop productivity, livestock health, and the economic vitality of rural communities. While some regions (such as the Northern Great Plains) may see conditions conducive to expanded or alternative crop productivity over the next few decades, overall, yields from major U.S. crops are expected to decline as a consequence of increases in temperatures and possibly changes in water availability, soil erosion, and disease and pest outbreaks. Increases in temperatures during the growing season in the Midwest are projected to be the largest contributing factor to declines in the productivity of U.S. agriculture. Projected increases in extreme heat conditions are expected to lead to further heat stress for livestock, which can result in large economic losses for producers. Climate change is also expected to lead to large-scale shifts in the availability and prices of many agricultural products across the world, with corresponding impacts on U.S. agricultural producers and the U.S. economy. These changes threaten future gains in commodity crop production and put rural livelihoods at risk. Numerous adaptation strategies are available to cope with adverse impacts of climate variability and change on agricultural production. These include altering what is produced, modifying the inputs used for production, adopting new technologies, and adjusting management strategies. However, these strategies have limits under severe climate change impacts and would require sufficient long- and short-term investment in changing practices." If you would like to explore this report further the link is provided.
The map below from the National Weather Service shows the 5 day precipitation forecast. Much of the eastern portion of the U.S. is expected to receive some form of precipitation with broad coverage of 1-2 inches of rain or snowfall across the Midwest.
The long-range forecast for December 3rd- December 9th from the National Weather Service shows wetter and colder than average conditions will be with us for the first full week in December.