News On China and A La Niña Weather Pattern-Finally
Update for January 28th, 2020
Just when we things are finally coming together and the outlook for commodities looks better than it has in a long time, prices tumble. Concerns regarding U.S. corn quality have now risen amongst some of the largest Asian feed makers. A major portion of the U.S. grain shipped from the U.S. to ports in North Asia leave from our Pacific Northwest terminals. A large percentage of the grain reaching these ports are arriving from areas where there has been significant reductions to quality due to weather damage. U.S. corn is graded on a scale of 1-4 with #1 corn being of the highest quality. A trader in Asia told Reuters, “This year there are more number 3 and number 4 grades of corn, mainly from the crop that gets shipped through Pacific Northwest ports to North Asia. Gulf ports are getting better quality, but it is expensive to ship corn from Gulf terminals to Asia.” As a result many corn buyers in of Asia are turning to Ukraine which is estimated to still have around 13 MMT’s available for exports yet this season. Continue to watch this situation because a new potential outbreak of the bird flu in Ukraine has raised concerns about sourcing grain from that region.
China has entered their weeklong celebration of the Lunar New Year, the biggest and longest holiday in the country but the recent outbreak of the coronavirus has developed into a nightmarish situation. China is scrambling to contain the spread of the virus but in the meantime this infectious outbreak is delivering a major hit to the global economy as China is the source for nearly 1/3 of all the economic growth in the world. Analysts are questioning what this may mean for U.S. exports…some believe China may see this recent downturn in commodity prices and shipping rates as a buying opportunity to cover needed supplies. In their efforts to contain the virus the Chinese government has quarantined over 50 million people and has extended the Lunar New Year holiday for at least a week, Shanghai and the manufacturing hub of Suzhou have ordered residents not to return to work until February 9th and Shanghai Disneyland has announced they are closed indefinitely. The World Health Organization has not yet labeled the outbreak a global health emergency but some health experts are uncertain if China will be able to contain the epidemic. This virus is known to have killed 106 people so far and more than 4,580 are infected within China. Epidemiologists estimate that each infected individual will transmit the virus to 2 or 3 others, meaning there could be many hundreds of thousands of cases of the virus that have not yet been identified. Here in the U.S. there are 5 confirmed cases of the virus found in individuals that have recently returned from the Chinese epicenter. Equity markets around the world are nervous and have seen considerable losses in the last few days and further losses are expected this week if the virus continues to spread and the death count rises.
There has been a lot of speculation regarding the South American planting of the seasons 2nd crop corn. Weather has been generally cooperative but there is still a considerable amount of unplanted acres in Brazil. Some areas of northeastern Brazil are too wet to plant and may ultimately reduce second crop corn acres in that area. Argentine producers are basically completed with their planting but some areas are dry and may see yield drag as a result. Sources in the region estimate there are currently 15.6 million acres of second crop corn planted in Argentina. In comparison to U.S. acres in 2019:
Iowa 13.6 million acres last year
Illinois 11 million acres
Nebraska typically plants 10 million acres
Minnesota around 8 million acres
Kansas and Indiana each plant between 5 and 6 million acres
North Dakota, South Dakota, Wisconsin, Missouri and Ohio generally each plant between 3 and 5 million acres each year.
Farmers in the hard-hit Upper Midwest are being asked by NASS again this month about their 2019 production numbers. The USDA is recounting for the second time final results for corn and soybeans from producers in Michigan, Wisconsin and North Dakota and corn only numbers in Minnesota and South Dakota. The Great Lakes Regional Director for NASS, Marlo Johnson told Brownfield Ag, “We just want to go out and make sure that we have accounted for what was not planted at the time or was left in the field due to the weather.” Final production numbers for 2019 will be tallied by the USDA and updated, if changes are needed, in the spring
A new outlook from WeatherTrends 360 is forecasting a La Niña event for the spring of 2020, meaning a much different year than we’ve seen in a while.
According to their predictions this spring should bring us the best conditions for planting that we’ve seen since 2016. The past couple of winter seasons we saw a lot of snow and cold temps that lasted through March in many areas but the spring of 2020 is expected to be more similar to the springs of 2015 and 2012. 2012 was a record warm winter and spring so conditions won’t be quite that favorable but close. “Farmers will also have a much better spring planting season after a disastrous season last year. God Bless our farmers!”