Update for April 18th, 2019
Corn prices continue to trade near contract lows as the Funds remain short and even though the weather is allowing for very little planting progress to take place (corn planting is 3% complete, up 1% from a week ago but 2% below the historical 5 year average) it’s just not late enough yet to cause the market to react. Last year at this time only 17% of the U.S. corn crop had been planted and by the end of April many of the big production states like Iowa, Illinois, Indiana, Kansas, Nebraska and Ohio had fallen well behind their normal pace and in the states of North and South Dakota and Minnesota no corn had been planted. By mid-May though, most states had managed to rebound to a more traditional pace and were able to produce a new national record yield with an average of 178.4 bushels per acre.
Crop yields in South America continue to rise. In his overnight wire, Dr. Cordonnier increased the soybean crop in Brazil by 1.0 million tons and the corn crop by 2.0 million tons. He also increased both the corn and soybean crops in Argentina by 1.0 million tons. Below is a graph showing yield estimates for corn and soybean crops from several South American countries.
Each week we seem to receive some optimistic updates from the ongoing U.S./China trade negotiations. Last Saturday, Treasury Secretary Steven Mnuchin said that the trade talks are progressing and are close to the final round on the remaining issues. He also noted that U.S. Trade Representative Robert Lighthizer is scheduled to have two telephone conferences with Chinese trade officials this week and then plans to travel to Beijing the week of April 29th. Chinese envoy Liu He is slated to return back to Washington the week of May 6th and if an agreement can then be reached, officials from both countries would meet to wrap up the text and legal language of the trade deal. Given this timeline of these scheduled meetings a hoped-for-presidential signing ceremony could occur as soon as Memorial Day.
In other trade news Reuters reports that it appears as though China is planning to lift their ban on U.S. poultry and also plan to buy more pork in an effort to work towards equalizing the trade deficit. U.S. Trade Representative Robert Lighthizer has also begun trade negotiations with the country of Japan. Japan’s Economic Minister Toshimitsu Motegi this week. Following the first day of talks Motegi labeled the 3 hour meeting as “good and frank”.
The 2017 U.S. census finds that the average age of U.S. farmers is rising and has been for the past 40 years. During the 1978 census the average age of the “principal operator” was 50.3 years. By the census of 1992 that average increased to 53.3 years, by 2007 the average age was 57.1 and in 2012 the average was 58.3. The 2017 census shows that the average age is now 59.4 years. In contrast the 2017 census found that the average age of new and beginning farmers in the U.S. is 46.3 years.
The Weather Channel reports that as of early April, drought conditions across the U.S. have dropped to 21st century lows with less than 5% of the country now classified in any stage of a drought. Quite a different story from the expansive drought of 2012 when drought conditions covered virtually the entire Plains, Rockies and Mississippi Valley. Drought monitors in Mid-August of 2018 showed that 36% of the U.S. mainland from Missouri to Texas on westward were experiencing drought conditions. That all changed during the 6 month period from July-December, 2018 when the U.S. entered into its wettest 6 month period in recorded history which dates back to 1895. In addition to the extremely wet conditions found during the last half of 2018, the first 3 months of 2019 rank amongst the top 10 wettest January-March periods on record for many states across the country. The irony in this is that while drought is of little concern for any portion of the U.S. for the first time in many years, now worries have turned to overly wet conditions and flooding.
Fieldwork across the northern Plains region and Upper Midwest will remain at a standstill for the foreseeable future. While the improved soil moisture profiles will benefit crops in regions that are able to be planted, many traders agree that the current USDA “preventive plant” acres are likely to increase especially in the northern states of Minnesota, Wisconsin as well as the Dakota’s. Excessive precipitation is also disrupting barge traffic on several major Midwestern waterways which has led to the closure of 10 locks along the Mississippi River bringing barge traffic to a standstill. The railroads are also working to repair and restore service in hard-hit areas as soon as possible but these lines are not expected to reopen anytime soon.