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USDA Worksheet, EPA Proposal & First Winter Storm Tomorrow

Update for December 9th, 2021

Today’s USDA report was mostly neutral for corn and soybeans. Corn stocks were left unchanged from a month ago and the projected season-average farm price continues to sit at $5.45 per bushel. Soybean stocks and soybean crush were both unchanged from November, soybean oil production was increased and the season- average farm price for soybeans was left unchanged at $12.10 per bushel. The next major USDA update will be the year-end report which is scheduled to be announced on January 12th.

Yesterday Mexico purchased 1.84 MMT of U.S. corn, the single biggest export sale to the nation the U.S. has ever made and it is also the 5th largest U.S. corn sale made to any country in history. The corn market has been waiting for a big export demand headline like this for a long time but the trade seemed unphased, not at all what was expected. Could this mean that most interested investors are already in the corn market…? Soybean exports to China jumped by 68% in November to 8.57 MMT up from 5.11 MMT in October. Total soybean imports so far for the year through November are 5.5% lower than this same time in 2020.

There never seems to be a lack of uncertainty where China/U.S. relations are concerned and currently the climate between the two nations is worrisome. The White House has announced that the U.S. is diplomatically boycotting the 2022 Beijing Olympic games. Our athletes will participate in games but official representatives of the U.S. government will not be there to represent the country. As expected China immediately responded. One Chinese official said that the U.S. will have to “pay a price” and China will be taking “resolute countermeasures” as a result of this decision. Since we rely so significantly on Chinese purchases we have to wonder what long term effect these tensions could have on grain trade.

The private group AgRural reports that soybean planting in Brazil is now 94% completed as of last Thursday. They also stated that the crop is doing well except for areas across the southern states where precipitation has been sparce since the substantial rainfall the region received during September and October. In November a noticeable change occurred as the weather pattern began to transition back to La Niña which started the process of drying the soils out once again. Forecasts for December show only small chances for rainfall throughout the area which could be very detrimental for the developing crop. Because of these dry conditions AgRural has stated they intend to reduce their estimate for Brazil’s corn crop later this week.

Reuters reported yesterday that the Family Farm Action Alliance, a group consisting of over 6,000 farmer and rural members, has sent a letter asking the U.S. Department of Justice to look into recent spikes in fertilizer prices. The group maintains that current price hikes are a manipulation of the market by fertilizer companies and “not based on basic supply and demand, but rather on the price the farmer is paid for their commodity crops.”

Fertilizer companies justify the current record high prices to the increasing cost of the products used to produce the fertilizer as well as severe weather in the U.S. that disrupted production of the product.

Companies involved in the fertilizer industry have decreased from 46 firms in the 1980’s down to 13. According to a 2020 report by the Federal Trade Commission the two largest companies Mosaic Co and Nutrien control 93% of the potash market in North America. Dr. Philip Howard an expert on food industry consolidation and associate professor at Michigan State University says, “There’s a potential in the way this industry is structured to really exploit farmers.” Mosaic Co senior vice president for public affairs has denied any wrong doing and said that the current spike is a result of “curtailed exports from certain nations, including China, and strong global demand, among many factors.” The DOJ has not responded to a request for comment on this matter but the department has acted on other similar matters in the past several months. Several of the nation’s largest poultry companies were investigated and ultimately indicted for price fixing and investigations were also conducted in the cattle market where price manipulation was suspected and eventually found. The Biden administration has promised farmers that they are ready to take action against consolidations within the agriculture sector that farmers have said for many years “squeeze their profits”. U.S. Secretary of Agriculture Tom Vilsack also plans for his department to look into seed patents.

Finally, after several months the EPA has announced updated blending requirements for the RFS and have denied numerous pending waivers. The Renewable Fuels Association President and CEO Geoff Cooper said, “Over the past four years, RFA has led the charge to stop the previous EPA’s illegal abuse of the small refinery waiver provision. We commend EPA Administrator Michael Regan and the Biden administration for denying all pending small refinery exemptions, and we are extremely pleased to see the Agency shutting the floodgates on these destructive waivers. Under the previous administration, these exemptions destroyed demand for more than 4 billion gallons of renewable fuel, resulting in higher fuel prices for the consumer, increased GHG emissions, and lower farm income. Today’s announcement should finally put an end to the rampant abuse of the exemption program that we experienced under the last administration.” Last month EPA Administrator Michael Regan commented that the blending quotas “are designed to take advantage of biofuels, so agriculture is at the table. We’re listening to agriculture, but we’re really following the law, following the science in doing what we believe Congress intended, recognizing that there may be people unhappy with various elements” of the proposed plan. Regan also added, “We recognize the sense of urgency, and we recognize the desire of certainty that both industries want (ethanol and biodiesel) and we’re hoping to provide that sooner rather than later.”

The USDA also announced plans to offer $700 million in grants to biofuels producers that together lost an estimated $4.4 billion as a result of the pandemic. In addition, $100 million in grants will be available to expand the availability of the higher gas and diesel blends.

The first major winter storm of the season is just hours away from arrival for a large part of the Upper Midwest. The system is forecast to arrive mid-day tomorrow and continue into Saturday morning. Model guided snowfall totals are shown in the maps below but these are only estimates.

This round of snow will not be sticking around for Christmas though as another major warm up is expected next week. A massive ridge is forecast to build in the central portion of the U.S. with the core of the heat expected to target the central Midwest. Models are indicating we could see record warmth next week with highs Monday-Friday possibly running 25 degrees above normal each day. Enjoy it while it’s here because it won’t last long. In the maps below notice the MJO Phase 6 which shows warm temps for next week. Cooler temps in Phase 7 will soon follow with much colder temps predicted to arrive during Phase 8 which is forecast to develop around December 22nd.

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