USMCA and China Phase 1 Agreements Both Near Completion
Update for December 18th, 2019
Corn has finally received some positive headlines. Demand appears to be growing and the trade feels that U.S. production totals will be lowered in the January 10th, 2020 USDA report. MAR20 corn is now trading near five week highs and the DEC20 contract has traded over $4.00. It’s believed that China’s attention may soon turn to U.S. corn, ethanol and DDG’s and more domestic end users have indicated they may begin to book additional bushels which could also help stabilize the cash market.
The U.S. soybean market has also been moving higher due in part to the announcement of a trade deal with China as well as the recently amended biodiesel tax credit. People close to the trade negotiations told Bloomberg that since the Phase 1 agreement is near completion it’s likely that the Chinese government will grant additional waivers to buyers of U.S. farm products on a more regular basis. On Friday of last week we were told by U.S. officials that China would purchase $32 billion in U.S. farm products over the next 2 years as part of the initial Phase 1 plan. China has not announced a specific commitment regarding the amount of U.S. farm products they plan to buy but did say they may add products not traditionally imported from the U.S. like corn, wheat and rice. Senator Chuck Grassley (R-Iowa) along with several other biodiesel supporters have managed to amend a government spending bill that will extend retroactively from 2018 and through 2022 the $1 per gallon tax break for biodiesel producers. This is encouraging news for an industry that has seen 10 plants close since the credit expired in 2017. The amendment is now awaiting final approval.
USDA crop progress reports have told us for weeks that North Dakota’s harvest is far from complete. Typically 85% of the state’s corn crop has been harvested by mid-November but according to a Department of Ag report 57% of the corn crop remained in the fields as of early December. That calculates to 1.88 million unharvested corn acres in North Dakota. A recent storm system has left behind a heavy blanket of snow across eastern North Dakota. The photo shown below is a satellite image taken of the area near Hillsboro and Mayville in eastern ND. The brown squares you see scattered throughout the photo are just some of the state’s many acres of unharvested corn that will now remain in the field until spring.
USMCA is finally ready for approval in the U.S. Following urgent talks held in Washington the Mexican Foreign Affairs Undersecretary Jesus Seade said that Mexico is “satisfied…now it is perfectly clarified. We have achieved something very important.” The Congressional Budget Office has estimated that this newly formed agreement with Mexico and Canada will increase U.S. government revenue by $2.97 billion between fiscal years 2020 to 2029, it will lower the federal deficit by $3 billion over 10 years and add 176,000 new jobs in the U.S. The U.S. House is planning to vote on the deal tomorrow following a committee meeting today and the Senate is expected to vote on the matter after the first of the year.
Argentina’s newly elected government has increased export levies on soy, wheat and corn as anticipated. President Alberto Fernandez took office Tuesday has boosted the rate for soybeans, soy oil and soymeal from near 25% to 30% and has increased the levy on corn and wheat from 7% to 9%. This action was taken to help the grains exporting nation raise revenue that is needed to avert defaulting on the countries $100 billion debt load. This comes at a bad time for Argentina’s farmers that are already struggling with high financing costs, inflation and dry growing conditions. The implementation of these higher export costs is expected to assist interest in U.S. exports. (Reuters)
Dry weather is expected to remain in place across most of the country through the end of the week. Look for temps to shift from slightly below normal to above normal as we reach the weekend and through the beginning of next week.