More Rain in the Forecast and Trump's Plan to Help U.S. Farmers
Update for May 14th, 2019
As expected the USDA report projected another years with abundant carryout’s both here at home and globally. It’s important to remember that this particular report uses corn and soybean acreage numbers that were projected in the March Planting Intentions report and also still assumes trend-line yields based on normal planting and growing season. All of these assumptions are already in question for the 2019 growing season and will likely continue to be through harvest.
The 2019-20 corn yield is currently projected at 176 bushels per acres which is a decrease of 0.4 bushels from 2019. This yield reduction is off-set by expected increase in corn acres this season, bringing total new crop corn production to 15 billion bushels. Total U.S. corn usage is expected to rise in 2019-20 which will help to balance out the slight decrease in exports. Food, seed and industrial use is expected to increase by +50 million bushels to 7 billion. Corn for ethanol is projected to see a 1% increase from last year and feed and residual use is also expected to increase over last year. U.S. corn exports are expected to fall by -25 million bushels despite an increase in global corn trade.
The 2019-20 soybean yield is currently projected at 49.5 bushels per acre, a 2.1 bushel decline from last year. Total production sits at 4.150 billion bushels based on the expected 84.6 million planted acres. Carryout is estimated at 0.970 billion bushels which is a 25 million bushel decrease from a year ago. Exports are expected to rise by +175 million from the revised 2018-19 forecast to 1.950 billion bushels. The U.S. 2019-20 projected season average soybean price fell by $0.45 to $8.10 per bushel.(on a side note…while prices are beginning to rebound, yesterday prices fell below $8.00 per bushel for the first time in over a decade!)
Trade talks with China this past week in Washington yielded no progress. The Wall Street Journal reported Friday, “U.S. increases tariffs on Chinese good as trade talks resume. President Trump increased tariff on $200 billion of Chinese goods to 25% as he ratcheted up pressure on Beijing and threatened to impose additional levies on virtually everything China exports to the U.S. Beijing said it would retaliate.” As one marketer stated, “Hope is diminished but the reality hasn’t changed much. China has not been buying corn or beans from us and that is expected to continue.” While we have been hearing for months that there would not be another round of aid to U.S. producers, Vice President Mike Pence made an unexpected announcement during a recent visit with farmers in northwest Minnesota. He stated, “Make no mistake about it, we have already had preliminary discussions in the White House for additional support for farmers if this impasse with China continues.” In addition to this remark made by the Vice President, President Trump sent out some very interesting comments on Twitter Friday morning that are shown below. While his idea to ship U.S. commodities as a humanitarian gesture is generous and very well-intended, there may be negative consequences with such a move. Now, following further consideration Reuters reported this morning that President Trump told reporters at the White House, “We’re going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about $15 billion, and do something reciprocal to our farmers so our farmers can do well.” “Out of the billions of dollars that we’re taking (in tariffs on Chinese imports to the U.S.) a small portion of that will be going to our farmers, because China will be retaliating, probably to a certain extent against our farmers.” Many analysts believe that the best plan available to help out U.S. farmers is another round of MFP’s. This allows the grain industry to continue to move grain through the existing market channels in an effort to reduce supplies while also giving direct income to those that are bearing the biggest cost of this trade war.
Crop progress is finally grabbing the attention of the trade. Nationwide 30% of the corn has been planted vs the 5 year average of 66%. Many of the top production states are significantly behind schedule with only a short reprieve from the rain expected this week, then followed by more rainfall. Some of the extended outlooks forecasts are showing ongoing rains into the 2nd week of June. When comparing planting progress for this year vs the past 25 years, this year comes in 3rd place behind the years of 1993 (27% planted by May 12th) and 2013 (28% completed by May 12th). There is now talk that 2 to 3 million corn acres may go unplanted with some estimates reaching even higher. Some of the states that are showing the biggest delays:
Illinois is 11% planted (71% behind the 5 year average)
Indiana is 6% planted (51% behind the 5 year average)
South Dakota is 4% planted (50% behind the 5 year average)
Minnesota is 21% planted (44% behind the 5 year average)
Iowa is 48% planted (29% behind the 5 year average)
Nebraska is 46% planted (26% behind the 5 year average)
Soybeans are also lagging behind with just 9% of the crop planted vs the 5 year average of 29% by this date. Just as with corn it’s the top production states that are also behind in soybean planting progress.
China has detected the presence of the Fall Armyworm along its southern border. On January 29th, 2019 China’s Ministry of Agriculture and Rural Affairs made the finding public and announced that the pest is believed to have entered the country from neighboring Myanmar along China’s southern border. The pest which has no natural predators in China, has been spreading at a much faster rate than anticipated now reaching through several Chinese provinces and at this time is impacting just over 21,000 acres. Chinese authorities are working on a plan to track and respond to the pest but there are no natural predators in China which complicates the effort to stop further invasion into the country. Fall Armyworm infestation results in a reduction of both crop quality and production. These pests attack over 80 varying crops including, corn, rice, wheat, sorghum, sugarcane, cotton, soybeans and peanuts which are expected to suffer the most damage within the country. FAW is an invasive plant pest that consumes plant material and its grain and is native to North America but has been found in several other countries around the world. Since there are currently no registered pesticides to control the invader, Chinese producers have been applying various chemicals as well as biological controls such as fungi and bacteria as well as crop rotation. In March a pheromone agent and trapping product were developed to help manage the situation and in April 21 registered pesticides used to control other insects have demonstrated effective results towards mitigating FAW’s spread and impact. Unfortunately most farmers in China are unable to afford these products and lack the training needed for application and the ongoing management needed. Use of these recently developed products will be costly and force producers of most crops to face negative profit margins. Below is a map of China showing the regions that are currently involved.
The 5 day forecast, shown in the first map below, now calls for 1-2 inches of rainfall through the western Corn Belt and Plains at the end of the week. This gives producers a narrow window of opportunity this week to get into the fields before the next round of rainfall begins.
Below is the 4-7 day outlook using data from the GFS model which shows even heavier rainfall totals for this weekend.
The National Weather Service’s long-range outlook shows that the above average precipitation is expected to continue for the next two weeks.
