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Midwest Tour & Trump Reconsidering the SRE Waivers

Update for August 21st, 2019

The Pro Farmer Midwest Crop Tour began this week. The eastern leg began Monday in Dublin, Ohio and worked its way to Noblesville, Indiana. The western leg started in Sioux Falls, South Dakota and sampled fields as they moved to Grand Island, Nebraska. Official results for South Dakota and Ohio findings were released Monday evening. One of the interesting and unexpected discoveries that were made was how very similar the two crops were to each other from opposite sides of the Corn Belt during such an unusual growing season.

Eastern Leg: Ohio-The crop tour found the average corn yield of 154.35 bushels per acre which compares to last year’s 179.57 bushels per acre and the three year average of 164.38 bushels per acre. Low ear count was the main issue scouts found to be the cause of the reduced yield expectation and believe it is caused from planting in poor conditions. The soybean pod count in a 3X3 foot square came in at 764.01 compared to 1,248.20 pods in 2018 and the three year average of 1,136.75 pods. They also noted that the crop in Ohio is very immature for this date but also has a later 1st frost date than most areas.

Western Leg: South Dakota- One of the first comments made was in regards to the large amount of prevent plant acres that the group saw along the route, in fact many times it was difficult for the scouts to take corn and soybean yield samples from fields next to one another because of this. The tour found an overall average corn yield of 154.08 bushels per acre compared to 178.01 last year and the three year average of 158.59 bushels per acre. Scouts predict the reduction in yield this year due to low ear counts and a decrease in the length of grain. Most soybeans were found to be shorter than normal with a pod count in a 3X3 foot square of 832.85 vs 1,024.72 pods in 2018 and the three year average of 964.96 pods. The crop in South Dakota is very immature and is likely in serious trouble. The scouts estimated that the crop needs 50 more sunny and 80 degree days to have any hope of reaching maturity. They concluded that this crop has potential… and if everything goes perfectly it will be ok but if things go as normal it will be a catastrophe.

Day 2 of the Crop Tour results from Nebraska and Indiana.

Eastern Leg: Indiana-Crop maturity on this portion of the route is also behind normal but is better than the crops from yesterday. In general crop conditions and yields improved from the West Lafayette area westward to the Illinois border. The tour found an average corn yield of 161.46 bushels per acre compared to 182.33 bushels per acre in 2018 and the three year average of 175.66. Scouts noted that the impacts of an extremely wet spring are evident, with skips and blank stalks in many of the sampled rows. Finally did a yield check on a field of corn that was beginning to dent, another indication of just how far behind this crop is. The average soybean pod count from a 3X3 foot square was 923.94 compared to 1,311.87 pods in 2018 and the three year average of 1,219.69. As the scouts entered eastern Illinois they noted the increase in the number of prevent plant fields. Pro Farmer editor Brian Grete commented, “Many of these fields are ones that produce 200 bushel + corn yields and high soybean yields on a regular basis. To see good, black dirt that wasn’t planted in this area was very revealing about how rough spring conditions were. You normally don’t see any unplanted fields in these counties.” Results from day 3 of the eastern leg will include samples pulled from Bloomington, IL to Iowa City.

Western Leg: Nebraska- More than 300 samples from both corn and soybean fields were checked in irrigated and dryland fields to reach final numbers. While 41% of the samples this year (about average) were taken from fields of irrigated corn, about 60% of the Nebraska corn crop is under irrigation this practice has tended to skew Pro Farmer’s yield data slightly lower than the typical USDA tally during previous crop tours. This year is different than most and scouts found that while the irrigated corn was good it wasn’t that much better that it was able to pull the overall average higher like it normally does. This shift is a result of the rainfall the state has received most of the season. During a normal year producers would have irrigated nearly 8 inches by now, instead the average this year is 0-2 inches. Yields varied along the route from a low of 62 bushels per acre to a high of 273 bushels per acre. The overall yield averaged 172.55 bushels per acre compared to 179.17 bushels per acre in 2018 and the three year average of 167.73 bushels per acre. Pod counts for a 3X3 square came in at 1,210.83 pods compared to 1,299.08 in 2018 and the three year average of 1,191.37 pods.

The USDA Crop Progress report from this week brought some small adjustments. Good to Excellent ratings in both corn and soybeans each fell one point while the Poor to Very Poor rating for each crop received a 1 point increase. For this week 56% of the nation’s corn crop is rated GD/EX, 55% of the crop is in the dough stage and 15% has dented. 53% of the soybeans are rated GD/EX, 90% have bloomed and 68% have started setting pods.

Reports of the EPA granting 31 SRE (small refinery exemption) waivers hit hard and has garnered some much deserved attention. Yesterday POET, the world’s largest biofuels producer, announced it plans to idle production at its Cloverdale, IN facility. This decision was made in response to the recent decision of the Administration regarding SRE’s. POET President and COO, Jeff Lautt said “POET made strategic decisions to support President Trump’s goal of boosting the farm economy. However, these goals are contradicted by bailouts to oil companies. The result is pain for Midwest farmers and the reduction of hundreds of jobs and hundreds of millions of dollars of economic activity across Indiana.”

The RFS authorizes exemptions for small refineries (defined as those that process less than 75,000 barrels of petroleum a day) that face “disproportionate economic hardship”. Instead what has occurred is these waivers have been granted to refineries owned by oil giant like ExxonMobil, Chevron and others-none of which are small and none of which face economic hardship. POET Chairman and CEO Jeff Broin stated, “My long term fear isn’t for the biofuels industry, it’s for rural America. POET can continue to produce ethanol with cheap grain, but we don’t want to lose our family farmers. The EPA has robbed rural America, and it’s time for farmers across the Heartland to fight for their future.”

Since the announcement from the EPA corn growers across the country along with elected officials and Ag business leaders have protested to President Trump regarding this decision. Apparently he has been listening, Bloomberg has reported now that President Trump has suggested rescinding the 31 exemptions from the 2018 RFS! In addition, Iowa Representative Cindy Axne plans to call for a federal investigation into the EPA’s decision to waive the blending requirements under the RFS program.

The issues with China just continue. President Trump has decided to postpone new tariffs on some of the goods that were set to take effect on September 1st. Close to half of the goods will now not face the new tariffs until December 15th. In response the Chinese warned that they “will have to take necessary countermeasures” since the U.S. still plans to implement a new 10% tariff on $150 billion worth of imports from China. The diplomatic measures also continue as trade-related phone conferences are scheduled for the remainder of the month and Chinese trade negotiators are tentatively expected in Washington in early September. (Forbes, CNN)

Rural America has supported a new and fair trade deal with China since negotiations started but it’s time for an agreement. Friday, a senior analyst from the China National Grains and Oils Information Center commented that if China and the U.S. fail to reach an agreement in coming weeks “…we will have enough soybean supplies, as we can buy from South America”. He also said the state reserves could also be utilized. In another announcement Friday regarding Chinese buying of South American soybeans, a Chinese state-owned construction company is preparing to dredge Argentina’s Parana River. This river carries 80% of the Ag production out of the farm belt to the south Atlantic. By deepening this channel international cargo ships will be able to travel further inland to be directly loaded on the river, making their cargo transport process highly efficient.

The 6 to 10 day forecast from NOAA indicates a moderation in temps across much of the eastern Midwest with some cooler than normal air expected in the western portion. Rainfall amounts are expected to be above average, no heavy precipitation is in the forecast.

Long-term forecasts are beginning to pick up on a cooler pattern beginning early in September, with the coldest temperatures expected in the Western Corn Belt.

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