Update for December 10th, 2019
Today’s USDA’s December report delivered no major adjustments just a couple small changes. Now the markets attention will shift to the latest news regarding the Chinese trade situation and the Sunday tariff deadline imposed by President Trump.
The USDA reported on Monday that the U.S. corn crop is now 92% harvested, up only 3% from a week ago. Normally we would not still be receiving weekly crop progress updates at this point of the year because the average of unharvested corn acres for early December is 100%. 8% of the nation’s corn or approximately 6 to 7 million acres are still standing in the field and many of those acres will remain unharvested until spring. It’s no surprise to hear that harvest delays cause additional losses in grain yield but how much is lost when harvest completion is impossible until spring? There has not been a lot of research done on the topic but Ohio State University and the University of Wisconsin have studied the matter collected data which gives us an idea of what the final outcome may be. The data indicates that there are several factors that can affect the amount of yield loss including: planting population, stalk condition-lodging, ear loss, ear size, wildlife damage and the amount and duration of snow cover. The graph shown below includes the data collected by the group.
States with the largest amounts of unharvested corn acres:
North Dakota 43% complete
Michigan and Wisconsin 74% complete
South Dakota 83% complete
Minnesota and Ohio 93% complete
Small amounts also remain in Illinois, Iowa, Indiana, Missouri and Nebraska
(With so many unanswered questions about the actual size of the 2019 crop U.S. corn growers are in no hurry to sell corn at the current price level. Keep in mind as you’re making your marketing plans that right now South America is nearly; if not totally sold out of corn and if the spec funds don’t sell corn we could see corn prices strengthen and move higher.)
While progress is being made with Chinese trade negotiations some issues remain unsolved. China is asking for some of the current tariffs in place to be reduced and also asks that the new tariffs that are set to begin on December 15th be withdrawn. A stark difference from current U.S. intentions which are to keep existing tariffs in place through the negotiation process of Phase’s 2 and 3. China is also hesitant to agree to the large U.S. farm product purchases currently demanded, they feel there should be no specific requirements on quantity but instead should be based on need and price. The assistant minister of commerce of China, Ren Hongbin has said that Beijing is hoping that negotiations can soon end with a trade deal in place. On Sunday Vice President Mike Pence told Fox News “what China knows and what the world should know, the era of economic surrender is over…We took a strong stand and we’ve imposed tariffs on hundreds of billions of dollars’ worth of goods, and as the president has made clear, we’ll continue to take that path unless China is willing to step forward. We’re negotiating a Phase 1 trade deal that would make it possible for us to sell more agricultural goods to China. But the one thing you can know about President Trump is that he is always going to negotiate from a position of strength.” Reuters reported Monday that Chinese soy importers purchased at least 5 bulk cargo loads of U.S. soybeans for shipment in January and February. This comes after Beijing announced last Friday that it would issue additional tariffs waivers which would exempt Chinese importers from the current 33% tariff on some U.S. soybeans and pork products. Since the trade war began China has increased the tariff on soybean imports from the U.S. by 30%, if the newly added tariffs are removed the rate would return to 3% which is the same rate paid by Chinese importers of Brazilian soybeans. U.S. frozen pork products have seen 3 hikes in tariff rates since the beginning of our trade issues with China including a 25% hike in April, 2018, another 25% jump in June, 2019 and a 3rd increase of 10% in September. If the new tariffs were all eliminated the rate would return to 12% which is the “most favored nations” duty paid by China’s other trading partners.
Progress is being reported on the USMCA trade agreement. Bloomberg reports that Speaker Nancy Pelosi has been receiving additional pressure to bring the trade deal to a vote before year-end. If the White House and House Democrats are able to reach an agreement this week there could be a vote next week in the House. It is possible that the Senate could bring it to a vote prior to the holiday break but it’s quite likely it could be January before that happens.
The USDA will make a decision regarding the 3rd installment of MFP 2 sometime in January. Most believe that even if a Phase 1 trade agreement is soon reached the 3rd payment would still likely occur. Deputy Agriculture Secretary Steve Censky told members of the Illinois Farm Bureau at a meeting in Chicago this week, “We recognize that even if we have a trade agreement and things really get moving, we know that the farm income situation has been affected and can’t be turned around overnight. So there still is a great need for those payment, particularly this year.”
The forecast for the rest of this week shows limited chances for precipitation across the Corn Belt and Plains.
This trend changes as we look at the long range outlooks which show a shift to above normal precipitation beginning the 3rd week of December.
The maps below from WeatherTrends 360 show the likelihood of a large system developing for the Upper Midwest and Great Lakes region early next week.