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Latest 2019 Acreage Estimates and the February Break

Update for February 20th, 2019

Another delegation of Chinese officials has arrived in Washington to continue trade negotiations. This follows meetings held last week in Beijing which President Trump described as “very productive”. While both sides are working toward a “memorandum of understanding” there are still several issues that remain and Washington Farm Journal Correspondent Jim Wiesemeyer says, “this will not be done this week”. He explained that the framework agreement which addresses their economy, structural issues, intellectual property, forest transfer and various business practices will likely need to be solved by President Trump and Chinese President Xi Jinping when they meet once again. (A specific date and location for this meeting has not yet been made public)

Private analysts firm Informa updated their 2019 acreage estimate last week based on USDA February report adjustments. Their newest figures increased 2019 corn acres to 91.6 million, which is an increase from their estimate last month of 90.0. Soybean acres were lowered to 86 million a decrease of 160,000 acres. The corn to soybean price ratio is currently 2.4:1 for NOV 2019 soybeans and DEC 2019 corn. This ratio is lower than the past two years for this same timeframe but is still within the range of historical averages. March is characteristically when we see prices adjust to move the ratio into balance, the big question is what correction the market will make in order to encourage U.S. producers to plant less soybeans in 2019.

The end of February used to be called the “John Deere Low” because so many producers had many large payments due March 1st. Now many refer to this seasonal downturn in prices as the “February Break”. This is a normal and expected occurrence in the market and is typically followed by some of the highest crop prices of the year which generally arrive during the spring season. Here is a list of some of the factors that currently have the largest influence on market prices for corn (the crop with the best fundamentals) and soybeans (the crop with the worst fundamentals):

** soybean prices have remained in a narrow trading channel for several months until recently when prices broke below a 5 month technical channel**

  • Concerns are growing as news circulates regarding China’s plan to expand agricultural incentives and programs to encourage their producers to plant more soybeans.

  • The EU has threatened to purchase fewer U.S. soybeans and less U.S. energy if the U.S. moves forward with the proposed tariffs on new autos and parts from the EU.

  • South America’s weather has been improving and is reducing crop stress.

  • African Swine Flu has been found in Vietnam and is rumored to also be present in Canada.

Farm income projections have been updated for 2018. According to the USDA farm income increased from the November outlook of $66.3 billion to $69.2 billion. This most recent figure includes the payments from the Market Facilitation Program. The USDA estimate for 2019 is likely to reach $77.6 billion (a number not seen since 2014), direct payments are included in this estimate and are projected at $10.2 billion.

The United Nations has announced an outbreak of Locusts has potentially started along both sides of the Red Sea. This outbreak, which reportedly began in Sudan and Eritrea, has been spreading rapidly along the Red Sea and is now reaching into Egypt and Saudi Arabia. The U.N. Food and Agricultural Organization said Friday that they are flagging this as a possible threat to crop and food security. Adult Locust swarms can fly nearly 100 miles a day with the wind and can each consume nearly their own weight in fresh food daily. While this may not sound significant, a very small swarm eats as much in one single day as about 35,000 people.

It’s time for spring fieldwork in the southern portions of the U.S. Fieldwork was limited by weather issues last fall in many areas of the country and a continuous flow of rain and snow this winter are beginning to raise questions and concerns especially among farmers that are now entering their planting season. There has not been much in the way of equipment moving in the field due to the wet conditions so far and we all have seen first-hand the yield drag that can result from planting a crop in soil that is too wet. Right now market bears are using the abundance of precipitation to pressure prices by saying the moisture is recharging the soils but as we all know, at some point too much of a good thing becomes a bad thing. Currently the weather outlook for this portion of the country does not look good for any planting progress to occur at least through next week.

A series of powerful storm systems continue to march across the nation’s mid-section. Large areas from the southern Rockies through the Upper Midwest will receive heavy amounts of snowfall while most of the northern Atlantic states will contend with a mixture of snow, sleet and freezing rain. Several states across the Southeastern U.S. are dealing with excessive rainfall which is causing flooding in many areas.

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