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USDA Worksheet, MFP Update and Latest On China Trade Deal

Update for November 12th, 2019

USDA’s report last Friday showed an overall yield reduction for corn, the acres with the largest cuts coming from western Corn Belt states. The states of Nebraska, Minnesota, Kansas and the Dakota’s all received lower yield estimates than the previous month. Iowa and Illinois corn yields were unchanged two states, Indiana and Ohio each received higher estimates than a month ago. The agency resurveyed producers in areas of Minnesota and North Dakota regarding planted acreage where planting was significantly delayed but elected to leave acres unchanged. Unfortunately the overall lower U.S. corn yield estimate was offset by cuts in demand. Corn used for ethanol and for feed use were each lowered by 25 million bushels and exports fell by 50 million bushels which lowered total demand to 13.915 billion bushels. There could be additional reductions for ethanol use in upcoming reports as ethanol demand at home is struggling, globally U.S. prices must be more competitive in order to attract and stabilize export demand for our products and away from South American exports. The trade had expected to see a reduction in the U.S. soybean yield estimate but instead yield was left unchanged from the previous month, perhaps even more upsetting was the news that the U.S. had not agreed to roll back tariffs as had been reported earlier. Soybean acres were also unchanged leaving soybean supply completely unchanged at 4.483 billion bushels. The only adjustment made to demand was the crush number which was reduced by 15 million bushels.

U.S. Agriculture Secretary Sonny Perdue announced last week that the second round of “trade aid” is on the way. “We’ll be getting it ready hopefully at the end of this month or early December.” A few weeks ago this upcoming payment was in doubt when U.S. officials announced a partial trade agreement, which included purchases of huge amounts of U.S. farm goods, had been reached with China. So far for the 2019 production year the USDA has paid out to farmers $6.7 million of the allotted trade aid dollars that were set to be paid out in 3 tranches. The third and final trade aid payment for 2019 is scheduled to be paid out in January, 2020. Politico reported that Sonny Perdue stated that the third and final payment will not be needed if the Phase 1 of the agreement is signed. “We’re hopeful that trade would supplant any type of farm aid needed in 2020.”

Early last week National Economic Council director Larry Kudlow, told Bloomberg that any Phase 1 deal would include “tariff agreements and concessions”. Friday we learned that this statement was incorrect when President Trump told reporters at the White House that he had not agreed to reduce the tariffs that were already in place. “China would like to get somewhat of a rollback, not a complete rollback, ‘cause they know I won’t do it.” “I haven’t agreed to anything.” He explained that rolling back the tariffs was something that China had wanted in this deal. Trump stated, “I’m very happy right now we’re taking in billions of dollars.” Editor of China’s state-run Global Times newspaper Hu Xijin remarked on Twitter to Trump’s comments saying that the markets were not anticipating this reaction, “It’s not a flat denial. What’s certain is that if there’s no rollback there will be no Phase 1 deal.” (Reuters)

Record breaking cold temps reached into the Northern Plains and Upper Midwest compliments of a powerful Arctic cold front over the weekend. This cold front is forecast to move quickly into the Southern Plains and Ohio Valley and reach the East Coast and Deep South today.

The northern Plains and Upper Midwest can expect to see light snowfall tonight and into Wednesday evening, accumulations of an inch or less are expected in most areas.

Thankfully the extremely cold temps are not expected to stick around too long in the Plains and Upper Midwest. As we look out to the 6 to 10 day forecasts we see warmer temperatures are finally expected to make a return by later this week. Along with the warm up bringing above normal temps we also see chances for above normal rainfall to develop across those same areas.

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