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USDA Worksheet, Winterstorm Aubrey and New Biofuels Plan Update

Update for October 9th, 2019

The October USDA Crop Production and WASDE report are scheduled for release tomorrow. Informa reduced their estimated corn yield last week from 169.6 bushels per acre down to 167.5. Many traders also look for the USDA to slightly reduce their forecasted yield which currently sits at 168.2 bushels per acre. In addition the trade expects to find a lower ending stocks number given the recent 300 million bushel reduction in the quarterly stocks report. Prevent Plant acres will be updated in this report tomorrow but Cover-Crop acres will not.

Traders also expect to see a small reduction made to the estimated soybean yield as well as a reduction made to the balance sheet. Informa lowered their soybean yield estimate last week from 48.4 bushels per acre to 46.5 and also reduced total production from 3.671 billion bushels down to 3.513 billion bushels.

The USDA weekly report showed that as of October 6th, 93% of the U.S. corn crop has dented and 58% has reached full maturity vs the average of 85%. It’s important to note that many of the largest corn producing states are seeing significant delays in maturity and harvested acres which are detailed in the charts below. Now in addition to the slow progress of crop development there is a winter storm heading for the northern Plains which is predicted to significantly impact half of the unharvested crop in Minnesota, North Dakota and South Dakota. Heavy snowfall followed by record low temps, freezing conditions and very strong winds are expected and will likely reduce yields by as much as 10% to 20% in this area. Roughly 10% of the total U.S. corn production is grown in this region.

The weekly USDA soybean report showed the U.S. soybean harvest was only 14% completed vs the average of 34%. Soybeans dropping leaves now sits at 72% vs the average of 87%. You will find the specific details by state in the charts below. Notice the considerable lag in soybean harvest in the states that will soon be in the midst of an early October snow storm!

There has been some confusion regarding the recently announced details surrounding the White House’s new biofuels plan. Yesterday, in an interview with the Red River Farm Network, EPA Administrator Andrew Wheeler explained the package will provide the opportunity for small refinery exemptions to be granted while still reaching the RFS. “We will estimate what the number will be (the waivers from the past 3 years will be averaged and added back into the RFS total) and add it the RFS for the next year so that after the small refineries are exempted, the final number will still end up being 15 billion gallons.” This means farmers can feel secure in knowing there will be a “15 billion gallon certainty” while also preserving the SRE option for “those refineries that truly are in jeopardy of going out of business because of the RFS”. He also stressed that this plan is not retroactive as had been discussed earlier, instead this plan applies only to business going forward. This plan has won the approval from biofuel advocates but oil industry leaders condemned the plan saying it is politically motivated and will punish refiners, consumers and manufacturing workers.

Chinese officials are offering to increase purchases of U.S. agricultural goods including a 10 MMT hike in soybeans in an attempt to prevent a new round of tariffs that are scheduled to begin October 15th. This boost would raise the total purchase of U.S. soybeans to 30 MMT’s. The Financial Times has reported that China is looking to “de-escalate” and “reset” the troubled talks prior to the possible meeting during the annual summit of Asia Pacific Economic Conference leaders in mid-November between President Trump and Chinese Leader Xi Jinping.

The Wall Street Journal published an article and illustration showing that the “Chinese tariff disruptions have likely peaked”. Considering the political unrest in Hong Kong and tightening food supplies, leadership within the country may now be concerned about wide spread food inflation. The graph shown below clearly illustrates that point.

The Weather Channel is warning residents in the Dakotas and Minnesota to be prepare. “A significant blizzard is expected to hit the eastern Dakotas and possibly far western Minnesota Thursday through Saturday, with eastern North Dakota in line for more than 20 inches of snow. The event will cause crop damage, stress animals and halt any harvest efforts for quite some time. Northwest HRW wheat producing areas will likely receive snow tonight into Thursday, and freezing temperature are possible as far south as the Texas Panhandle.”

In addition to the estimated historical winter storm precipitation totals shown on the BAM WX map below the weather group is also beginning to alert us of another significant cold front expected to arrive later in the month. Stay tuned for more on this.

The forecast for this Saturday, October 12 through Wednesday, October 16th shows below normal temps remaining in place for the majority of the U.S.

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