USDA Report Outlook and China Update
Update for August 9th, 2019
Monday, August 12th we will get the latest USDA data. There remains a wide range of predictions in both corn and soybean acreage as well as total production expectations. This particular report also contains a re-survey of 14 states that had unplanted acres as of the survey for the June report. According to the USDA they have visited with each of the farmers involved in the survey that had reported unplanted acres in June. Each field was reviewed to determine how many acres were planted and how many of those acres they intend to harvest. In addition farmers were asked what their intentions were about harvest vs non-harvest on each of their planted fields. Farmers were also asked to estimate their yields on harvestable acres…assuming the current conditions at the time of the interview and normal growing conditions to finish out the remainder of the growing season.
Monday’s corn production number is being viewed as a huge wild card. The USDA currently has total production at 13.875 billion bushels, most in the trade think that number will be lowered, but by how much is the big question. Also keep in mind that a few “respected sources” have actually raised total production a bit higher. The average yield from the USDA is currently at 166 bushels per acre which is over a 10 bushel per acre decrease from the average last year but the trade is looking for that figure to fall even lower, closer to 164.7 bushels per acre.
The USDA currently has the average soybean yield set at 48.5 bushels per acre vs 51.6 a year ago. Traders are expecting to see that reduced to 47.5 bushels per acre. Soybean planted acres will be an interesting number to watch, traders actually expect to see this estimate increase from 80 million acres in June.
China’s Commerce Ministry announced earlier this week that Chinese companies will no longer be buying U.S. agricultural products and more tariffs may be placed on the products purchased shortly before the ban took effect. (In 2017 China imported $19.5 billion in farm products)
The chairman of China’s largest grain, oilseeds and food company, Johnny Chi told agribusinesses in Brazil this week that his company COFCO International plans to heavily invest in Brazilian soybean production. DTN reported that during the next 5 years COFCO plans to increase purchases of Brazilian soybeans by 5% each year to a total increase of 25% and in addition plans to finance the expansion of soybean production within Brazil by more than 60 million acres.
At this time it appears as though both sides are trying to outlast the other. According to the Wall Street Journal, China believes it can wait for the tariffs to damage the U.S. economy enough that eventually President Trump will be forced into making concessions. An economist and advisor to Chinese policy makers, Yu Yongding said, “The best retaliation is letting U.S. tariffs on China hurt the U.S.’s own economy.” Charles Liu, a former economic negotiator on the Chinese delegation at the United Nations told Bloomberg News, “its unlikely China will buckle to any further pressure as they are convinced dealing with the current U.S. administration means give them an inch and they want a foot”.
Treasury numbers show that as of June 30th the U.S. government had collected $63 billion in tariffs on Chinese imports during the preceding 12 months. With tariffs on the rise the U.S. is now on pace to generate $72 billion in tariffs annually and could reach as high as $100 billion if the tariffs on $300 billion worth of Chinese goods is implemented on September 1st.
U.S. National Economic Council director told reporters that, “the door is still open for additional negotiations”. “We are planning for the Chinese team to come here in September…That should lead to good things.” Kudlow told CNBC Tuesday that the Trump administration wants to continue talk with China and indicated that the president could be willing to adopt a flexible approach on tariffs. “The reality is we would like to negotiate. We’re planning for the Chinese team to come here in September. Things could change with respect to the tariffs.”
Given the high level of tension with trade talks sources have indicated that the second and third installments of the MFP payouts are all but certain. Officials at the USDA will not confirm but sources have reported that development for the software needed for these two additional payments is in the planning stage. Larry Kudlow has joined President Trump in support of a MFP 3 or Ag Trade Aid Program should the trade war linger into 2020. “The farmers have been great”, Kudlow said. “They’re patriots. They’ve backed us 100%. God bless them. We’re helping them as much as possible. We will help them more if need be and we’ll see how the negotiations go.” President Trump tweeted about this also saying, “As they have learned in the last two years, our great American Farmers know that China will not be able to hurt them in that their president has stood with them and done what no other president would do—And I’ll do it again next year if necessary!”
Pro Farmer reported on a tour crop consultant Dr. Michael Cordonnier took last weekend through northern and central Illinois and eastern Iowa to evaluate the crop in those areas. He traveled a route from Chicago to Iowa City then south to Keokuk, Iowa and east across central Illinois back to Chicago trying to hit areas that were indicating the presence of abnormal dryness on the latest Drought Monitor.
Following the trip he noted, “It may not be an official drought as of yet, but it is getting close, if they are not already in one.” *Important side note, some of these areas did receive some rainfall shortly after his visit* He observed a large variance in corn depending on location and planting date. Early planted crops showed some stress from lack of moisture but this corn is mostly finished pollinating and looks decent as long as it receives needed rainfall. The later planted crop will not pollinate until the 2nd to 3rd week of August and moisture stress was very evident.
In general he said that the early planted corn was as expected and some fields could yield 200 bushels an acre or more but does not expect any record-setting yields. On the other hand the later planted corn was worse than expected and some fields could average 50 bushels per acre and face further yield reduction by even an average frost date.
Cordonnier found the corn in eastern Iowa to be “somewhat better” than that in western Illinois, estimating an average yield in this area of Illinois might be 175 bushels per acre.
He also noted that he saw a striking amount of short soybeans throughout his trip with very few fields that had reached thigh high. He anticipates early planted soybeans could average 50 to 60 bushels per acre with timely rains, later planted fields that appeared in worse condition could yield as little as 10 to 15 bushels per acre without adequate moisture.
Cordonnier also reported, “The number of empty fields is amazing—we saw hundreds of empty fields.”
The current forecast that runs through Monday calls for under an inch of rain for a large portion of the Corn Belt. Higher amounts are possible in South Dakota and in the Ozarks region where they may receive as much as 5 inches of rain by early next week.
The maps below show the adjustment in the 8-14 day forecast which turned hotter and dryer across the Corn Belt in the most recent outlooks.
