MFP 2.3 Payments Confirmed & China
Update for January 22nd, 2020
There are rumors that China purchased 5 cargo loads of U.S. corn late last week from terminals in the Pacific Northwest. Such a purchase from the Chinese makes sense for several reasons. U.S. corn is the most economical option available on the market right now and also these purchases would begin to fulfill a portion of their Phase 1 agreement. Additionally, it would be uncharacteristic of the Chinese to sign an agreement of this magnitude and not follow through soon thereafter to prove their integrity. While the purchase has not been formally confirmed by U.S. officials the trade is watching closely to see if they do any (additional) buying this week before Saturday which is when week-long festivities begin in celebration of the Chinese New Year.
While it’s not unusual for China to be purchasing their current soybean needs from Brazil during this point of the year, it is still disappointing not to see Phase 1 buying kick in. U.S. chief ag negotiator, Gregg Doud explained to members of the National Association of Wheat Growers at a meeting in Washington, that China will purchases U.S. agricultural goods “in line with market terms” meaning “seasonality” “We don’t expect China to buy U.S. soybeans during the middle of the Brazilian harvest. That’s what that term means”. He reassured those in attendance that there are strong measures in place to assure enforcement of the agreement, “Either country has the right to put tariffs on commensurate with the value of whatever the problem is and, importantly, if and when that happens, the other side cannot retaliate…The goal is not to have that happen and I will tell you, that’s very sincere on both sides.” (Source: Brownfield Ag News)
In addition to the issue of seasonality there is also a lack of information being shared from the Chinese government to their commercial soy importers. Recently a delegation of U.S. soybean exporters and farmers returned home from their annual meeting with Chinese buyers. Jim Sutter, chief executive of the U.S. Soybean Export Council was a member of the visiting delegation whose visit just happened to coincide with the signing of the Phase 1 trade deal. Sutter told Reuters that there was a lot of uncertainty within the country about how Phase 1 is going to work. Commercial buyers told Sutter that they were unaware of any urgency to begin ramping up soybean imports and that up to that point had not received any orders from Beijing to prioritize U.S. soybean purchases nor had they been offered any financial incentives to do so. Again, remember that typically most Chinese soybean needs during this time of year are filled by the newly harvested South American crop, not U.S. supplies.
Soybean producers in Brazil have only harvested 1.8% of the countries soybean crop vs the average of 6% according to a report Monday from agribusiness consultancy Ag Rural. Weather during South America’s planting season significantly delayed progress and now as a result the ideal planting window for the second season crop is being reduced. Reuters asked Antonio Galvan, a producer in Mato Grosso, about planting the second crop corn after the ideal time-frame. Galvan explained the current situation facing SAM producers like this, “For it to be a truly great harvest, we need rains lasting until the end of April and if possible beginning of May.” He expects that some farmers may change their acres to less profitable crops such as sorghum or sunflowers in order to guarantee a second harvest.
USDA Ag Secretary Sonny Perdue has confirmed that the MFP 2.3 payment will be on the way to farmers once it has been reviewed by the White House Office of Management and Budget. Perdue stated, “We hope sooner rather than later, but we don’t have a date of release.” Perdue attended the annual convention of the American Farm Bureau Federation on Monday where he said that he sees no need for a third year of trade-related aid for farmers. China typically buys the majority of their U.S. ag products during the fall and early winter but Perdue is expecting that China will adjust the timing of purchases in 2020 making a MFP 3 round of payments unnecessary. President Trump also presented at the AFBF conference where he told producers that their “best days are yet to come” and thanked them for standing behind him during the long trade war with China.
In case you missed this information a few weeks ago…
Brownfield Ag News reports that the University of Illinois has created an online ARC/PLC calculator. This program was designed to help farmers decide between the Agriculture Risk Coverage (ARC) and the Price Loss Coverage (PLC) options under the 2018 Farm Bill. This program will calculate payments from each option based on county and modeling for each crop year from 2019 through 2023. Ag policy professor Jonathan Coppess explained that once the user creates their account they are able to run countless estimates. “You get a thousand simulations of these program payments to give you a rough concept of where those payments are likely to be and what the percentages or odds of getting a payment in that range looks like.” March 15th, 2020 is the deadline for producers to sign up for either program. Control & Click to follow this very helpful link:
https://fd-tools.ncsa.illinois.edu/
Weather outlooks from NOAA for January 26-30th show a large portion of the U.S. can expect warmer than normal temps but also many areas are also expected to receive above normal precipitation as well. Future outlooks into early February indicate a continuation of the pattern.
6-to-10 Day Weather Forecast
