USDA Ag Forum Worksheet and Hopes for Another MFP Emerge
Update for February 24th, 2020
The annual USDA Agricultural Outlook Forum was held last week near Washington D.C. During this annual event estimates for U.S. supply and demand as well as the expected acreage and production numbers for the upcoming growing season are reported. Chief Economist for the USDA, Rob Johansson presented during the meeting barely mentioning the Phase 1 agreement. The final export tally reflected the agencies lack of trust in Chinese follow through, only increasing U.S. ag exports to China by $3 billion to a total of $14 billion despite the trade deal. Overall ag exports for the fiscal year saw a small increase from the previous outlook to $139.5 billion bushels an increase of only $500 million.
It is the job of USDA analysts to evaluate current conditions in agriculture to project marketing year outlooks. This year though the outlooks for the 2020/21 marketing year and trade forecasts indicate an unwillingness to include the trade deal into their calculations and have pushed the agreement to the side once again giving it little to no credibility. USDA Secretary Sonny Perdue explained the inaction by saying that since no details of the Phase 1 deal have yet been disclosed that the USDA economists had to put estimates together “based on what they knew at that particular time”. Which means they did not include prospective purchases from China nor the possible economic impacts of the coronavirus outbreak. He also noted that he believes that actual exports to China will be “much greater” than the current forecast given at the event last week because, “They have some (hardline numbers) that are unilaterally enforceable” and if not followed will result in more tariffs once again.
What we did learn from the Ag Outlook Forum is that acreage for the top 4 U.S. crops in expected to increase by 5% this year. The combined increase in acres for the nation’s top crops of corn, soybeans, wheat and cotton acres were raised by 11.7 million acres to a grand total of 236.5 million acres.
The outlook for corn in 2020:
Planted acreage of 94 million acres
Harvested acres of 86.6 million acres
A national average yield of 178.5 bushels per acre with total production of 15.460 billion bushels
Total use of 14.740 billion bushels:
Feed and residual 5.8 billion bu.
Food, seed and industrial 6.84 billion bu. *5.45 billion for ethanol
Exports 2.1 billion bushels
Carryover of 2.637 billion bushels
Price of $3.60 per bushel
The outlook for soybeans in 2020
Planted acreage of 85.0 million acres
Harvested acreage of 84.2 million acres
National average yield of 49.8 bushels per acre with total production of 4.195 billion bushels
Crush of 2.140 billion bushels
Exports of 2.050 billion bushels
Carryover of 320 million bushels
Price of $8.80 per bushel
USDA Ag Outlook Estimates
Chief Economist Robert Johansson noted at the meeting that farm balance sheets are tight and farm debt has reached record levels with current debt-to-asset ratio’s higher than they have been in over 15 years. This situation is prompting a large number of farmers, bankers and others in the ag sector to ask for an additional round of MFP to help with producers cash flow needs. State ag officials are in D.C. this week to meet with USDA Secretary Sonny Perdue, several U.S. lawmakers and Cabinet officials to present the case for another Market Facilitation Program. President Trump tweeted about the topic last Friday, “If out formally targeted farmers need additional aid until such time as the trade deals with China, Mexico, Canada and others fully kick in, that aid will be provided by the federal government, paid for out of the massive tariff money coming into the USA.”
Perdue has previously stated that the “market will handle…the pricing of commodities going forward… and that the government might reconsider if there’s an unexpected disruption in global trade flows.” Keep in mind though that it is President Trump’s endorsement that matters on this topic. What another round of MFP would look like is unknown but the total amount of aid could be reduced and how the program is implemented may also face changes.
Dr. Michael Cordonnier has increased his Brazilian soybean crop estimate by 1 MMT bringing the total to 125 MMT. He explained, “The weather in Brazil continues to generally be beneficial especially for the soybeans that are filling pods”. He estimate for Brazil’s corn crop remains unchanged at 100 MMT with Safrinha crop planting now underway. AgRural has also raised their Brazilian soybean estimate, increasing total production by 1.7 MMT to a record high of 125.6 MMT. Cordonnier also increased his Argentine soybean crop estimate by 1 MMT to 54 MMT, “we don’t have any yield reports as yet, but there are no significant problems being reported with the soybeans in Argentina. Therefore, I am expecting good soybean yields in Argentina.” He also forecasts an increase in the corn crop, raising his estimate by 1.5 MMT to 49 MMT. “There is every expectation that more positive corn yields will be reported when harvest moves in the two core production areas where the weather has been good during the entire growing season.”
Below are the recently updated maps from the Climate Prediction Center for the months of April, May and June, 2020. The forecast sadly indicates the high probability of another wet spring across the eastern half of the nation.
WeatherTrends 360 has been calling for a major change in the climate cycle leading to a moderate to strong La Niña developing during 2020 and lasting into 2021. This is expected to finally end the wet pattern in the U.S. and bring a much drier weather pattern for the later portion of 2020 and into 2021.