Financial Aid Package Passes and Big Sales to China
Update for March 25th, 2020
An economic aid package was expected to pass through the Senate on Sunday but did not, Monday and again Tuesday additional votes were held but yet again partisan politics stood in the way of much needed assistance to Americans. Last week House Majority Whip James Clayburn (D-N.Y.) advised fellow democrats to look at this crisis as a “tremendous opportunity to restructure things to fit our vision”. House Leader Nancy Pelosi released a 1,100 page bill Monday that did not include the desperately needed increase in the borrowing capacity of USDA’s Commodity Credit Corporation which are needed in order for the agency to replace the Market Facilitation Program (MFP) with an even larger ag sector aid program. Thankfully the White House and Senate announced early this morning that a $2 trillion financial rescue package has passed. Senator John Hoeven (R-N.D.) told reporters that the final legislation does include the much needed increase from the usual $30 billion to $50 billion in borrowing capacity for the USDA. Treasury Secretary Steven Mnuchin told reporters that he had spoken with President Donald Trump about the details of the agreement and said that the president would “absolutely” sign it as written today.
While the COVID-19 virus rages across the globe impacting everyone, the ag sector is also dealing with an oil war between Russia and Saudi Arabia which is greatly damaging our ethanol industry. Most news coverage is focused on the virus but there is little coverage on the plummeting oil market and what, if anything is being done remedy the situation. According to an article in the Wall Street Journal there is a group of officials within the Energy Department that are trying to persuade the Trump Administration to establish a coalition with the Saudi’s. If such an alliance could be formed the partnership would join together the world’s two largest oil producing countries giving Saudi Arabia a way out of OPEC. This would help to stabilize global oil markets which have collapsed since the oil war began. At this time department leaders within the Energy Department nor the White House have endorsed the idea and there is no guarantee the Saudi’s would agree to such a deal either. It’s reassuring to realize that the situation is being addressed by the Energy Department which has also enlisted the assistance of the National Security Council to help develop both short term and long term diplomatic solutions.
In response to the oil crisis the White House had asked for funding to refill the U.S. Strategic Petroleum Reserve in order to purchase up to 30 million barrels by the end of June all in an effort to help domestic oil producers. The reserve is located in caverns along the Texas and Louisiana coastlines and has a capacity of 77 million barrels. The $3 billion purchase requested by the Energy Department did not withstand debate and was not part of the final agreement this morning.
The Trump administration has decided not to appeal the 10th Circuit District Court ruling regarding the use SRE’s. This decision handed down by the federal court invalidated 3 small refinery exemptions from the 2016 compliance year and drastically limited the number of refineries that would qualify going forward. Reuters reported that Trump Administration had not filed an appeal but noted that there is a group of small refiners that are appealing the ruling. Since the administration did not join in the appeal process it’s unlikely the ruling will be overturned.
News of a near 30 million bushel sale of 2019/20 corn to China has been confirmed by the USDA. This is the single largest sale to the country since 2013. There are many speculations as to what prompted the unexpected purchase right now. Some believe that this is a sign of recovery in China, some feel it’s a result of the deep discount in corn prices while others believe China may be worried South America may not be a reliable source during COVID-19.
A 4 million bushel sale of soybeans to an unknown buyer was announced last week, assumptions are the buyer is China. Sales of U.S. soybeans to China increased from just 1.044 MMT during the first two months of 2019 to 6.101 MMT this year. Imports from Brazil dropped by 26% to 5.14 MMT during that same period. Concerns over the reliability of South American shipping due to yearly labor strikes, a smaller crop than earlier anticipated, financial concerns with an Argentine processor and COVID-19 are all possible reasons for the purchase.
Latest harvest updates from South America show 70% of the soybean crop in Brazil has been harvested. Dry conditions in Rio Grande do Sul and inconsistent yield results from Bahia have convinced Dr. Cordonnier to lower his soybean production estimate in Brazil by 1.0 million tons to 122.0 MMT. Dry conditions may also reduce final yields for the newly planted Safrinha corn crop, particularly across southern growing regions.
(Source: Soybean & Corn Advisor, Inc.)
Many of us have noticed over the past few years a change in our weather patterns. The picture shown below illustrates the polar jet stream which is responsible for most of the weather in our latitudes. The red ribbon represents a portion of the polar jet stream and is the fastest moving portion of the jet stream which flows at 30-40,000 feet above the earth at approximately 120 M.P.H. Notice that the flow is rather flat, this made short and long-term forecasts much more accurate and predictable. What has happened recently is that the jet stream has become “wavier” than normal and much less predictable than it had been before. These waves are responsible for stalling storm systems in what is called a “cut off low” because they are unable to make all of the turns in the wavier jet stream and become trapped. This is what causes weather systems to sit in one area and dump rainfall for days and sometimes weeks.
A “classic March cyclone” will move through Iowa on Saturday as it makes it way eastward. Showers and thunderstorms, some severe with the potential for heavy rain, will approach the state Friday night. More light rainfall is forecast ahead of the system tonight and again tomorrow night. The EURO model shown below shows expected rainfall totals from this storm system.