USDA Worksheet, Cuts to Oil Production
Update for April 9th, 2020
USDA’s National Agricultural Statistics Service (NASS) has announced they plan to resurvey producers in Michigan, Minnesota, South Dakota and Wisconsin where a significant number of corn and soybean acres were reported as being unharvested last December. If warranted, results from the January 10th yield and on-farm stock estimates may be adjusted in the May 12th Crop Production report (no adjustments are made in the April report). One important note, farmers in North Dakota also reported a large number of unharvested acres in the 2019 survey but they will not be included in this current survey. NASS has said, “Since there is significant acreage still standing for harvest in North Dakota, producers in that state will be contacted at a later date.”
Today’s USDA monthly WASDE report showed all stock estimates above trade expectations but prices managed to remained mostly steady to higher to end the day. Hopefully the many negative factors that are figured into the April report will become less influential in our market as we move into planting season.
A meeting between Russia and OPEC (Organization of Petroleum Exporting Countries) has raised the hopes of U.S. oil and ethanol producers alike. Reuters quoted 3 OPEC sources that commented that this meeting is “conditional upon the United States joining in production cuts.” At the time this was reported President Trump said that OPEC had not asked him to sign any such agreement. Today we hear that the meeting between Saudi Arabia and Russia went well. This meeting comes after a month long dispute that happened to coincided with a major drop in demand resulting from the coronavirus crisis which ultimately destroyed oil prices. According to the latest updates the two agreed in principle on a deal that will be the largest organized reduction in oil production in decades.
In response to the current crisis in the U.S. biofuels industry, 15 senators, including Charles Grassley (R-IA), have requested in a letter to Ag Secretary Sonny Perdue that he support a recent proposal from the biofuels industry. In this proposal they are asking for reimbursement of feedstocks and for additional funds for the Higher-blends Infrastructure Incentive Program. The senators explained to Perdue, “Since March 1, industry sources show more than four billion gallons of ethanol production has ceased production”. They also pointed out in the letter that our ethanol plants use 40% of all of the U.S. corn grown each season and biodiesel producers use nearly 8 billion pounds of U.S. grown soybean oil which has added 13% to the price of soybeans. The massive drop in fuel demand from COVID-19 and EPA’s “failure to implement the RFS in accordance with the law” have caused prices for corn and soybeans to fall significantly. Lawmakers from our farm-states understand that keeping these biofuel plants open is vitally important and are looking for solutions.
USDA Secretary Sonny Perdue has asked that the $23.5 billion allocated as aid to farmers be sent out “sooner than later” and be “balanced and fair”. The total aid package for producers includes $9.5 billion as part of the Phase 3 rescue package as well as $6 billion that has been sitting in the CCC account plus an additional $14 billion in replenishment funds assigned to the CCC that will become available in July. Perdue would like to pay livestock, poultry and produce farmers first and then payout aid to producers of principle crops this summer so it would not impact planting decisions.
U.S. Ag and Food shippers are being charged abnormally high fees at some congested ports. Several groups that represent these shipping companies are now asking National Economic Advisor, Larry Kudlow and USDA Ag Secretary Sonny Perdue to intervene. Due to the reduction in trade caused by the coronavirus ships are being hit with substantial fees which are forcing them to remain idle at the docks. “These fundamentally unfair fees are frequently exorbitant in nature, even exceeding the negotiated freight rates in some cases, and render U.S. agriculture exports less competitive in the global markets.”
The 2020 planting season is not expected to get off to a quick start across the Corn Belt. The first map shown below illustrates the expected rainfall totals from April 8th through Monday, April 13th.
As we look at the forecast for next week (April 13th -19th) we can see that the colder temps are expected to continue along with above normal precipitation for a large section of the country.