MFP Details and Link, U.S. & China Resume Talks Next Week and Crop Conditions
Update for July 25th, 2019
The heatwave last week took a toll on U.S. corn condition ratings this week. The crop found to be in Good to Excellent condition fell by -1% to 57% and the corn rated in Poor to Very Poor condition increased by +1% to 13%. In fact 6 states have GD/EX ratings below 50%, one of the states with the poorest current ratings is Illinois-a result of late planting and cool temps in June. In addition to the concerning condition of the U.S. corn crop is the fact that it is also dramatically behind for this point of the growing season. The USDA reported that as of July 21st a mere 35% of the crop was silking vs the five year average of 66%. A few notables:
Iowa has 41% of the crop silking
South Dakota 9%
Soybean ratings remained unchanged from the previous week at 54% GD/EX. While this is far off from the 70% GD/EX rating from a year ago the bigger concern is the lagging crop development which remains well behind the normal pace. Many of the top soybean producing states are running 20 to 30 plus points behind normal. Typically, soybean yields in the Midwest are largely effected by August weather conditions. This year due to all of the crop delays, the weather conditions in September will take on as much if not more importance, making long-range outlooks for an early frost even more concerning.
U.S. trade representatives will be heading back to China next week to once again begin work on a trade agreement, this is the first face to face meeting between U.S. and Chinese trade teams since discussions collapsed in May. Treasury Secretary Steven Mnuchin told reporters at the White House that he and U.S. Trade Representative Robert Lighthizer will leave Monday and will spend Tuesday and Wednesday meeting with Chinese leaders in Shanghai. Mnuchin sees the decision made by the Chinese to hold these meetings in Shanghai as a “good omen” because this is where negotiators met during the Nixon administration to work on normalizing relations between the two nations. The White House Economic Advisor, Larry Kudlow is also optimistic about the upcoming trade negotiations since the Chinese government has given permission for 5 companies to buy up to 3 million tons of U.S. soybeans free of the 25% import tariffs. Bloomberg reports two individuals, that prefer to remain unknown, said the retaliatory tariff-free quota for 2 million to 3 million tons of U.S. soybeans is part of a “goodwill gesture” as negotiations resume. The two also mentioned that if talks progress well there is the possibility that the exemptions could be extended for a second round of purchases.
On other trade news…A trade deal with Japan that is focused on U.S. agriculture products appears to be moving forward. USDA Secretary Sonny Perdue stated that “there have been signals that they’re willing to do an ag-first policy on trade and then look at the tougher issues later on going forward.” Historically Japan has been a top destination for many U.S. Ag products. U.S. feed grains like corn and related products including DDGS (an ethanol co-product) have led the list. Now we can add ETBE, which is another corn byproduct, made from U.S. corn based ethanol, to the list of Ag products Japan will be importing. The country has agreed to allow U.S. ethanol to meet up to 44% of their total estimated demand of 217 million gallons to make ETBE. The first shipment of 13.5 million gallons of ETBE from the U.S. has arrived in Japanese ports, this represents 2 million bushels of corn demand.
Demand for Brazilian soybeans has been so strong for so long that reports now say that the country has less than 9MMT left to export between now and the next harvest. In addition the low protein content of the 2018 crop harvested in January of that year has negatively affected sales for the companies that are unable to guarantee the minimum protein levels required by Chinese importers. Meaning China may be looking to the U.S. for soybeans whether they want to or not.
The USDA Risk Management Agency continues to update the total of “projected” prevent plant acres in preparation for the August 12th Crop Production Report. At a meeting held Monday in Atlanta, GA, Thomas Worth from the RMA told agriculture economists that prevent plant acres could total between 15 and 20 million in 2019.
Details for the 2019 Market Facilitation Program were announced this morning. Sign up will begin on Monday, July 29th and ends December 6th. MFP will provide payments to eligible producers of covered commodities which include non-specialty crops, specialty crops, dairy and livestock. Payments will be made according to your county rate in a series of 3 different “tranches” (or portions). The first payment will be the largest with a 50% payout of your county rate or $15/eligible acre which ever amount is greater (so if your country rate is above $31 per acre you will receive half of that amount as your first payment…example country rate for Winnebago County in Iowa is $68 so first payment will be $34/eligible acre). The second payment is scheduled for November and the third in early January, both of which are tentative based on market conditions and the trade situation during those given times. Additional details regarding eligibility and specific payment rates by state and country are available by visiting the following link: https://www.farmers.gov/sites/default/files/documents/PaymentRates.pdf
Enjoy the brief sweep of cool dry air from the north which will limit rain chances and reduce temps and humidity in the eastern 2/3rds of the U.S.
Next week the chance of rain increases but the long-range 8-14 day outlook shows a shift for the first week in August to warmer and drier conditions.