USDA Report and Polls in China Picking Biden as next U.S. President
Update for August 12th, 2019
Many producers and traders alike were shocked with today’s USDA numbers. Corn was especially hit hard as planted acres exceeded even the high end of the trade estimate and currently sits at 90 million acres. The nation’s average corn yield received an impressive increase from the July estimate of 166 bushels per acre to 169.5 per acre now in August, bringing total production up to 13.901 billion compared to the average estimate of 13.193 billion. Too add insult to injury, corn demand was lowered for exports by 100 million bushels due to increasing competition from Argentina, Brazil and Ukraine and demand for ethanol was reduced by 25 million bushels. The estimated season-average corn price was also lowered by a dime to $3.60 per bushel.
While the report showed some totals outside of the trade range for soybeans as well, the market viewed the numbers as neutral to bullish. Acreage came in at 76.7 million acres, well lower than the 81 million acres traders had expected. Yield was 0.9 bushels higher than the trade had expected at 48.5 bushels per acre but total soybean production was estimated at 3.680 billion bushels, below the average trade estimate of 3.883 billion. The U.S. season-average soybean price was left unchanged from a month ago at $8.40 per bushel.
The next event the market will be paying very close attention now that the August report is behind us will be the Pro Farmer Crop Tour which is set to begin next Monday, August 19th and conclude on the 22nd. This annual trip through the Corn Belt is always very informative and interesting to monitor.
President Trump’s advisor to China, Michael Pillsbury was interviewed Saturday on the WSJ Editorial Report television program where he explained why he feels there is a good chance no trade accord will be reached until after the 2020 elections. Pillsbury, an expert on China said he has been in contact with the Chinese press and individuals that advise the government and said he was told that China believes former Vice President Joe Biden will win the U.S. Presidential election. He said that they “have polls and their own assessment” and also acknowledged that China had told him prior to the election in 2016 that they believed Trump would win the presidency. Pillsbury said, “They were right and now their current assessment explains why comments that the Chinese want to wait until after 2020 elections are probably accurate.” He said that China believes the Democrats are much softer than Trump regarding trade with China, especially when it comes to enforcement. When asked if he felt that China was doing this in an effort to make Trump’s re-election as difficult as possible, he said, “I don’t think so. They’ve got their own fear of instability of their economy slowing down; or demonstrations breaking out—not just in Hong Kong, but if this spread to mainland cities it would mean the survival of the regime. So there is pretty good incentive for the Chinese to make a deal.” He noted that we have two “master negotiators in Xi Jinping and Donald Trump. Which one will outsmart the other is still open. My money is on Donald Trump because for the time being, our economy is bigger…they are closing in on us. But Xi Jinping is no pussy cat!”
The EPA has granted 30 small refinery exemptions for the RFS 2018 compliance year. A total of 40 SRE’s had been applied for, 4 exemptions were withdrawn or found to be ineligible and 6 were rejected. Waivers granted for 2018 are down slightly from 2017 but the impact is still significant and will certainly affect everyone involved in the corn and ethanol industries. This action exempts an estimated 1.43 billion gallons of renewable fuel and as one corn analyst explained, “This is like adding 5-6 bushels per acre to the crop size on Monday’s USDA report. If Trump was trying to see what it would take to lose his support with producers, this should be a good test.” In addition the EPA said it also plans to ease the regulatory burdens impeding the growth of natural gas, flex fuel vehicles and E85 blends.
The 6 to 10 day outlook for August 17th-21st shows above average temperatures with above average rainfall expected in the Upper Midwest while the Plains and southern Corn Belt look to remain on the drier side.