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June 11, 2019 | Grain Hedge Insights | Kevin McNew | Views: 22

Slowest Corn Planting Pace on Record

USDA Releases Crop Progress Report

Reminder: USDA’s June WASDE report is published Tuesday, June 11 at 11:00 CST

 

USDA’s June 10 Crop Progress Report: Slowest Corn Planting Pace

The USDA released their crop progress report for the week ending 6/9/2019. The report showed the slowest U.S. corn planting and emergence pace on record.  The corn planting pace was reported at 83% planted and is 8% below the next slowest year, 1995, at 91%.

Put another way, as of June 9 the USDA reported that 17% or 15.7 million corn acres are left unplanted.

Corn emergence was reported at 62% which was behind the next lowest level of 85% in 2013.

Reported corn condition scores showed the percentage of the crop rated “very poor/poor” at 9% while 59% of the crop was rated as “good/excellent”.  

Soybean plantings were reported at 60% complete.  Only years 1981, 1995 and 1996 were slower and were all “tied” at 59% completed.  

Soybean emergence was reported at 34% which was the slowest on record.  

Spring wheat planting and emergence are on pace with the 5 year averages.  

Soft winter wheat scores showed continued weakness in Illinois and Ohio where 27% and 33% of the crops were reported as “very poor/poor”.  

Hard wheat condition scores have been trending “positively” with Kansas reporting the largest percentage rated  “very poor/poor” at 11%.

What It Means for the U.S. Farmer:  At FBN we believe that both the corn and soybean scores are supportive.  We believe that the corn data provides the USDA with enough information to materially lower the planted acres and yield numbers in their June WASDE on Tuesday, June 11.  Soybeans still have more time before the prevent plant date so acres can still be added.

Argentina Able And Ready to Assume Mexican Import Demand

If trade strife continues between the United States and Mexico despite a deal struck on Friday, Argentine grain exporters have the ability to meet Mexican food demand.   

The U.S. government called off a threatened 5% tariff on all Mexican goods when Mexico promised to do more to stem the flow of Central American immigrants into the United States. On Monday, President Trump warned he could revive the tariffs if Mexico's Congress does not approve the plan.

The United States has traditionally supplied more than 95% of Mexico’s corn imports and around 70% of its wheat imports.

Prior to the current tariff threat, trade turmoil beginning with President Trump’s threat to withdraw from the trilateral North American Free Trade Agreement had prompted Mexico to talk about broadening its suppliers.

What It Means for the U.S. Farmer: At FBN we believe that Mexico’s desire to diversify its agricultural commodity supply chain comes at an opportune time.  The U.S.’s 2019/20 corn crop is off to a poor start while Argentina and Brazil are having bumper corn crops.  While the cost of shipping corn and wheat from the U.S. to Mexico has only recently declined, the FOB price of corn in Argentina combined with the strength of the Mexican peso over the Argentine peso exchange rate provides Mexico with import options.  If the Mexican congress fails to ratify the trade deal we believe that exports could shift away from the U.S. which would be bearish for the U.S. producer.                                  

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

June 10, 2019 | Grain Hedge Insights | Kevin McNew | Views: 30

Unapproved GMO Wheat Growing in Washington State

Unauthorized GMO wheat has not entered the food supply and does not appear to pose any threats

USDA Investigates Unapproved GMO Wheat in Washington State

The U.S. Department of Agriculture has confirmed the discovery of unapproved, genetically modified (GMO) wheat plants growing in an unplanted agricultural field in Washington state.
There was no evidence the wheat had entered the food supply, the USDA's Animal and Plant Health Inspection Service said in a statement on Friday. The wheat is resistant to glyphosate, a widely used herbicide commonly referred to as Roundup.
There are currently no commercially approved genetically modified wheat varieties, and incidences of rogue plants are rare. However, unapproved plants were found in 2018 in Alberta, Canada, in 2016 in Washington state, in 2014 in Montana and in 2013 in Oregon.
A Bayer Crop Science spokeswoman said the latest discovery may have occurred on the site of a former field trial.
What It Means for the U.S. Farmer: At FBN we believe that this story is interesting and needs to be monitored. At the moment, the unauthorized GMO wheat has not entered the food supply and does not appear to pose any threats.    

    

Chinese May Soybean Imports Decline 24% YoY

China brought in 7.36 MMT of soybeans in May, down from 9.69 MMT last year, according to data from the General Administration of Customs. The May figure was also down from 7.64 MMT in April, when shipments had jumped as buyers delayed cargoes on a tax change.
China imported 31.75 MMT in the first five months of 2019, down 12.2%YoY.
Soybean shipments in the coming months were expected to jump significantly from May, even while African swine fever outbreaks continue to cut demand.
China plans to stockpile up to 7 MMT of U.S. cargoes booked during the earlier trade truce in preparation for a protracted trade war.
China has been aggressively importing soybeans from Argentina and Brazil.
What It Means for the U.S. Farmer: At FBN we believe that Chinese soybean demand from the U.S. should continue to decline.  African swine fever (ASF) and poor crush margins resulting from a 25% tariff make soybeans from Brazil and other countries a better purchase.  We believe that China’s decision to import the remainder of the 7 MMT that the country purchased in late December and early January is a positive but the U.S. soybean complex is still facing a record large ending stocks number.         

                            

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

June 07, 2019 | Grain Hedge Insights | Kevin McNew | Views: 41

Still No Agreement Between U.S. and Mexico

Tariffs are scheduled to be implemented Monday morning

No Agreement Between U.S./Mexico; Tariffs Implement Monday, June 10   

President Trump said progress was being made in border-security talks between Mexican and U.S. officials and warned that Mexico must “step up to the plate” if it wants to head off tariffs planned for next week on $350 billion in imports.  

Officials held a second day of talks in Washington on Thursday, after negotiations the day before ended without a deal.

Mexico and the U.S. are each other's largest trading partner.  Mexico is the largest export destination for U.S. row crops, pork and poultry.

Tariffs are scheduled to be implemented Monday morning at 12:00 a.m.

Mexican President Obrador said Thursday morning that the country’s delegation had presented a plan to address immigration issues to their counterparts in Washington, and said he was optimistic a deal would be struck to avoid the tariffs.

Mexico hasn’t detailed in public precisely what it is offering to do.  President Obrador said details of his plan would be released Saturday, June 8.  

What It Means for the U.S. Farmer: At FBN we believe that absent any type of agreement or DETAILS from Mexico about how country may respond to U.S. tariffs is a bearish input. We also believe that absent any information that it may be difficult for some futures market participants to be long into the weekend.   

 

Canadian Wheat Exports to China at 14-Year High

Canada has shipped the most wheat to China in 14 years as Chinese buyers shunned the United States.

China bought 1.5 MMT of wheat from Canada from August 2018 through April 2019, nearly double the pace a year earlier and the most since 2004-05.

China is largely self-sufficient in wheat production but does import higher protein wheat classes.  

China imposed a 25% tariff in 2018 on U.S. wheat in a trade war with the United States, which effectively halted sales and shipments to what was the fourth largest U.S. export market the previous season for high-protein U.S. hard red spring wheat.

42,000 tonnes of U.S. wheat exports to China so far this year as of April are the lowest in 11 years.  

What It Means for the U.S. Farmer: At FBN we believe that China’s 25% tariff on U.S. wheat exports has been another trammel for the U.S. farmer to overcome.  We believe that China not importing U.S. spring wheat, HRS, is part of the reason that the ending stocks number for 2018/19 has risen to 313 mbu which is the largest amount since the 1987 marketing year.      

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

June 06, 2019 | Grain Hedge Insights | Kevin McNew | Views: 38

June WASDE Estimates

New crop corn presents developing bullish supply-and-demand scenario while growing old crop carry-out is bearish

Reuters June WASDE Estimates Show Conservative Corn Numbers

Reuters released their June WASDE estimates on Wednesday, June 5.

  • Old crop corn: carry-out estimated  +28 MBU to 2.123 BBU from May. We believe that the USDA will lower export demand.   
  • New crop corn: carry-out estimated to decline by 568 MBU to 1.917 MBU.  At FBN we think that adjustments will be made to the demand and supply sides.
  • New crop corn yield: -3.6 BPA to 172.4
  • New crop corn production: -779 MBU to 14.251 BBU
  • Old crop soybeans: carry-out +9 MBU to 1.004 BBU from the May report.  We believe small adjustment made to exports.
  • New crop soybeans: carry-out +13 MBU to 983 MBU.  We think that both the supply and the demand side will be adjusted.   
  • New crop soybean yield: -.5 BPA to 49.0
  • New crop soybean production: -27 MBU to 4.123 BBU
  • Wheat: all-wheat carry-out -23 MBU to 1.118 BBU.  We feel that a reduction in production and increase in exports will occur
  • *USDA presents by-class estimates in the July WASDE
  • All wheat production: -14 MBU to 1.883 BBU
  • HRW production: -25 MBU to 765 MBU
  • SRW production:  -4 MBU to 265 MBU  

What It Means for the U.S. Farmer: At FBN we believe that the estimated new crop corn presents a developing bullish supply and demand scenario while the growing old crop carry-out is bearish. We think that the wheat and soybean estimates are “interesting” and demand further scrutiny. In particular, we believe that the estimates for old crop/new crop soybeans and wheat are bearish/neutral.        

 

China Finds Armyworms in 18 Provinces   

Fall armyworms have spread to 18 of China's provinces, regions and municipalities since it was first detected in the southwestern province of Yunnan in early January.

The fall armyworm has the capability to severely threaten China’s agriculture and grain production security of China.

Fall armyworms, which feast in large numbers on the leaves and stems of many plant species, including sorghum, corn and sugarcane, can infest and damage hundreds of hectares of crops overnight. The pest was expected to reach the country's northeastern corn-belt by this month or July.

The pest has been found in at least 92,000 hectares of farmland in China, mostly in corn and some sugarcane crops.

China had about 130 million hectares of arable land as of the end of 2017 and grows corn on about 42 million hectares.

What It Means for the U.S. Farmer: At FBN we believe two things: 1. The proliferation of armyworms in China’s corn crop is a clear threat to their corn supplies.  2. China has a proven history of underreporting to the world market the extent of negative production and supply impacts of agriculture commodities that are deemed nationally sensitive. Given the lack of information, we believe that if China is unable to contain armyworms in key corn growing regions could force the country to start importing.                               

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

June 06, 2019 | Market Intel | Allison Wilton, Economic Analysis Intern, and John Newton, Ph.D., Chief Economist, American Farm Bureau Federation | Views: 44

What to Expect in the New Disaster Aid Package

Disaster aid bill includes more than $5.2B to assist USDA and related programs

American producers have been hit hard in the past few years by hurricanes, floods, tornadoes, typhoons, volcanic activity, snowstorms and wildfires. Farmers and ranchers in the South are still recovering from Hurricanes Michael and Florence, while producers in the Midwest are reeling from unprecedented flooding this spring. Several Market Intel articles have reviewed recent disasters as well as the historical delays in planting this year, Farmers Need Disaster Assistance and Crop Planting Delays Reach Historic Levels Resulting in High Levels of Uncertainty for 2019.

On June 3, the House passed a $19.1 billion disaster aid bill, H.R. 2157, that previously passed the Senate with overwhelming support. Now awaiting a presidential signature, this package includes more than $5.2 billion to assist USDA and related programs. The bill also includes funding for nutrition programs in Puerto Rico, American Samoa and the Northern Mariana Islands. This Market Intel highlights the agriculture-related provisions in the disaster aid package.

Farm Disaster Assistance

USDA was allotted $3.005 billion to assist with the loss of crops because of Hurricanes Michael and Florence, as well as other natural disasters occurring in the 2018 and 2019 calendar years. These crops and commodities include milk, on-farm stored commodities, crops prevented from planting in 2019, trees, bushes, vines and harvested adulterated wine grapes. Funding will be available until Dec. 31, 2020. A provision is also included for losses due to Tropical Storm Cindy, as well as losses of peach and blueberry crops from extreme cold and hurricane damage in 2017 and 2018. Orchardists and pecan tree growers may receive payments if their tree mortality rate is over 7.5% and below 15% (adjusted for normal mortality) in calendar year 2018.

Importantly, payments for crop insurance policies under the Federal Crop Insurance Act or the Noninsured Crop Disaster Assistance Program will cover up to 90% of the loss. Crops not covered under these programs can receive up to 70% of the loss. If a crop is offered a revenue insurance policy under the Federal Crop Insurance Corporation, the greater of the projected price or harvest price for that crop will be used to determine the expected value. (Note: There is widespread confusion among growers as to how this provision may relate to crops prevented from being planted, i.e., if prevent planting payments are made on 70% to 90% of the revenue guarantee it could influence planting decisions given the historic delays experienced in both corn and soybean plantings.)

If producers receive these payments, they are required to purchase crop insurance where it is available (under NAP if crop insurance coverage is not available) for the next two available crop years.

Finally, up to $7 million is provided for Whole Farm Revenue Protection indemnity payments that were reduced in 2018. This program provides a safety net for all commodities on a farm under one insurance policy.

Farm Service Agency Emergency Programs

To help owners of non-industrial private forests restore forest health, the Emergency Forest Restoration Program was allotted $480 million. In addition, the measure allocates $558 million for the Emergency Conservation Program, which helps farmers and ranchers recover damaged farmland and install methods for water conservation during a severe drought, and $435 million for Watershed Protection and Flood Prevention Practices to assist with rural watershed recovery.

Rural Development

The bill provides $150 million for Rural Development Community Facilities grants. These grants assist small rural communities in improving and repairing essential public services and facilities. However, these payments will not be applicable if the community is already receiving assistance from the Rural Community Advancement Program via the Rural Development Trust Fund, grants and guaranteed loans.

Market Facilitation Program AGI Waiver

As of May 13, the first round of trade aid provided $8.5 billion in market facilitation program payments to farmers and ranchers, Figure 1. One limiting factor, however, was that trade assistance was capped at $125,000 per operator and farmers with an adjusted gross income above $900,000 were not eligible for trade assistance.

The disaster relief bill amends this provision and waives the eligibility requirement with respect to adjusted gross income. A person or legal entity is now eligible to receive payments under the Market Facilitation Program if the average adjusted gross income exceeds $900,000 and more than 75% of the adjusted gross income comes from farming, ranching or forestry-related activities. Payment remains capped at $125,000 per operator.

Nutrition Assistance

The disaster bill includes provisions for disaster nutrition assistance in the Commonwealth of the Northern Mariana Islands, Puerto Rico and American Samoa. Assistance totals $643.2 million to these U.S. territories in response to major disasters or emergencies designated by the President.

Hemp Crop Insurance

The disaster aid package also included language offering coverage for hemp under the whole farm revenue protection insurance policy starting in the 2020 reinsurance year. The 2018 Farm Bill Provides A Path Forward for Industrial Hemp, but there was uncertainty about when hemp would be eligible for federal crop insurance.

Summary

The recently passed disaster relief bill provides emergency assistance to farmers dealing with the aftermath of natural disasters, as well as farmers impacted by late planting. Most of the agriculture-related funding — slightly more than $3 billion — is for farm disaster assistance related to hurricanes, floods, tornadoes, typhoons, volcanic activity, snowstorms and wildfires. Other funding is allocated for nutrition, conservation, forestry and watershed assistance programs. Figure 2 details the agriculture-related disaster spending by program.

Contact:
Allison Wilton, Economic Analysis Intern

American Farm Bureau Federation

Phone: (202) 406-3758

Email: allisonw@fb.org
 
John Newton, Ph.D., Chief Economist

American Farm Bureau Federation

Phone: (202) 406-3729

Email: jnewton@fb.org

June 05, 2019 | Grain Hedge Insights | Kevin McNew | Views: 51

Smithfield Imports Corn from Brazil

Archer Daniels Midland (ADM) is selling Brazilian corn to Smithfield Foods in U.S.

Smithfield Imports Corn from Brazil to the U.S.

Archer Daniels Midland (ADM) is selling Brazilian corn to Smithfield Foods in the United States, where wet weather has reduced plantings.

Smithfield owns port facilities on the U.S. east coast and occasionally will import corn and wheat because of the cost of shipping grains from the domestic corn-belt can be less economic.

Smithfield Foods likely ordered between 5 and 10 corn shipments from Brazil, which are expected to be loaded onto ships between September and January.

Paraguay and Argentina are also shipping corn to the United States, with around 1 million MT under contract for shipment from South America to the US.

What It Means for the U.S. Farmer:  We believe that U.S. importing corn from Latin America is bearish and signals that commercial end users could be hastening their search for cheap corn.  While Smithfield has a reputation of “innovative” procurement tactics, at FBN we believe that importing corn into the U.S. is a unique business activity and not the norm.     

China to Import Remainder of U.S. Soybeans; Will Add to Reserves  

China will stockpile up to 7 MMT, 257 million bushels of soybeans bought from the U.S. during an earlier truce in the trade war rather than crush them for immediate sale as a feed ingredient.

The move to store such large volumes of the U.S. oilseed comes as China faces the specter of a drawn out trade conflict with its second-largest supplier of the commodity after tensions between the two escalated abruptly last month.

China bought about 14 MMT of U.S. soybeans in December as part of the truce in the trade spat between the world's top two economies.

China, the world's top soybean buyer, had already sharply reduced imports from the United States after setting a 25% duty on such cargoes last July in response to earlier tariffs on Chinese goods set by Washington.

To offset the decline in U.S. imports, China stepped up buying from Brazil and other countries.

What It Means For The US Farmer: At FBN, we believe that China’s decision to purchase should be met with caution.  We believe that the news is positive and has the ability to help clear some of the outstanding export sales and help stabilize a growing 18/19 carry-out.                           

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

June 04, 2019 | Grain Hedge Insights | Kevin McNew | Views: 42

32% of US Corn Acres Still Left to Plant

Historical Low Planting Levels for Corn

USDA Crop Progress: 32% of U.S. corn acres still to plant;  Record Low

  • The USDA’s June 3 crop progress report showed strikingly and historical low planting levels for corn.  32% of the U.S. corn crop, or 29.696 million acres is still left to planted headed into the June 5 prevent plant dates for the eastern corn belt.  
  • Eastern corn belt GFS 5 day model runs showing material precipitation for key growing states.  
  • The planting pace in Ohio, Indiana, Illinois, Wisconsin, Minnesota, Iowa and South Dakota are all at historically slow rates leaving millions of acres unplanted.  
  • The current pace combined with other variables like weather and insurance based economics should force the USDA to adjust their planted/harvest acres figures and the yield estimated in the June WASDE.  
  • Reported planted soybean acres at 39% was a historical slow pace for the week.  
  • All major producing states are either at, or approaching historical lows.  
  • The USDA reported their first crop condition scores for spring wheat.  All major producing states: Minnesota, North/South Dakota, and Montana all have 0% classified as “very poor” and 1% classified as “poor.”
  • Hard and soft wheat scores show some weakness after last week but overall the HRW scores remain strong.  
  • What It Means For The US Farmer: At FBN we believe that the corn and soybean scores are bullish.  However we also believe that the 2018/19 demand side of the corn and soybean equations are bearish.  We believe that a strong U.S. dollar, a lackluster corn export program and slowing demand structure in China present headwinds for the U.S. corn and soybean balance sheets.  There is still a long time until harvest but we believe that the developing story can be supportive U.S. corn.

 

  

 

Russian Wheat Production Lowered by .8 MMT to 82.6 MMT     

  • Citing dryness and above average heat agri-consultant, SovEcon, lowered Russian wheat production by .8 MMT to 82.6 MMT.  
  • 2018/19 Russian wheat production was 71.2 MMT.  
  • SovEcon also downgraded its estimate of Russia's grain exports in the new 2019/20 marketing year, which starts on July 1, by 700,000 tonnes to 48.7 MMT. The wheat export forecast was cut by 500,000 tonnes to 37.7 MMT.
  • Russian winter and spring wheat conditions have been ideal headed into June leaving ample amounts of moisture in the soil.  
  • Russian winter wheat is entering the heading stage with the harvest starting in July.
  • What It Means For The US Farmer:  We believe that recent Russian wheat forecast can be beneficial to the U.S. farmer.  The weakening of the Russian ruble combined with appreciation the HRW futures curve has compressed Russian/U.S. FOB spreads making U.S. wheat uncompetitive against Russian wheat.  At FBN we maintain that these are not supportive for the U.S. export program.

                  

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

June 03, 2019 | Grain Hedge Insights | Kevin McNew | Views: 49

Mexico Delegation in U.S. to Discuss Immigration Issues

China’s willingness to re-engage the U.S. can be positive

Both China and Mexico Signal Willingness to Negotiate With U.S.

Beijing released on Sunday a government policy paper on trade issues, accusing Washington of scuttling the negotiations, which broke down in all but name in May.

The document said the Trump administration’s “America First” program and use of tariffs are harming the global economy and that China wouldn’t shy away from a trade war if need be. But throughout the document and at a briefing, the government suggested a willingness to return to negotiations.

Vice Commerce Secretary Wang Shouwen said in Beijing on Sunday.“We’re willing to adopt a cooperative approach to find a solution.”

Mexico, meanwhile, rushed a delegation to the U.S. to discuss immigration issues, following the Trump administration’s threat last week to impose tariffs on all Mexican goods entering the U.S.

What It Means For The US Farmer: At FBN we believe that tariffs have the ability to negatively impact the U.S. farmer.  We believe that the USDA’s reported weekly export sales numbers for corn and soybeans along with basis levels are proof of what trade wars can do to the farmer.  We think that China’s willingness to re-engage the U.S. can be positive for the U.S. farmer. Mexico has not responded with a list of counter tariffs on U.S. goods we believe that row crops represent a vulnerable target.      

                 

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

May 31, 2019 | Market Intel | Michael Nepveux, Economist, American Farm Bureau Federation | Views: 125

Crop Planting Delays Reach Historic Levels

Late planting results in high levels of uncertainty for 2019

In many parts of the country, the weather just isn’t cooperating for farmers. All across the farm belt record-breaking precipitation has been causing headaches for farmers with flooding of fields and excess soil moisture.

As a result, tractors are getting stuck in mud, fields are completely underwater, and Mother Nature is doing her very best to keep crops from getting put into the ground.

On Tuesday, USDA released the latest Crop Progress report showing historic delays in corn and soybean plantings across farm country. Many acres are, or soon will be, eligible for prevented planting payments through corn crop insurance policies.

We are looking at the biggest event for grain and oilseed markets since the drought of 2012. The combination of record-breaking extreme weather alongside continued policy uncertainty has agricultural economists across the board scratching their heads trying to figure out how everything will shake out.

At this point, the only thing for certain is that nothing is known with any degree of certainty.

Delays in Planting

USDA’s Tuesday release of the Crop Progress report showed historic delays in corn and soybean plantings across the country. Looking at the five year average, typically at this point in the year corn planting would be 90% complete, but this year farmers have only planted 58% of their intended acres.

This translates to nearly 39 million acres of corn still waiting to be planted, which is an astronomical number, especially at this point in the year. We talk about corn experiencing historic delays in planting, but to put that in perspective it is helpful to look at some of the worst years in planting delays.

Figure 1 shows 2019 planting progress for corn alongside the five-year average and 1993 and 1995, two years that are widely cited as being some of the most delayed in corn planting.

2019 started out relatively in line with 1993 and 1995, even performing better through week 18. However, in the past three weeks, this year’s progress has fallen further and further behind, with the most recent week at 13 percentage points behind the next worst year for corn planting. Some states are certainly hit worse than others, with South Dakota, Illinois, Indiana and Ohio being hit particularly hard of planting delays. 

Soybeans are planted later than corn, but so far are showing a similar pattern, largely falling behind the five-year average. The U.S. is only 29% complete on planting soybeans, while the five-year average is 66%. As of this week, there are still 60 million acres of soybeans that farmers intended to plant that are not planted.

Some in the industry have argued that farmers are doing the math between prevented planting and current corn prices to see which option is more economical. They are looking at historical years of Crop Progress reports and extrapolating those results on this year’s progress. But that may not apply here, as it might come down to whether or not farmers can even physically get out there and plant the crop. We are sitting on record floods, and many states in the corn belt are looking at record levels of topsoil measured at a surplus moisture level. There would need to be several days of sun and no rain in order to get the fields close to where they need to be for those looking to plant in the next week to be able to do anything, but the current forecast does not seem to be cooperating.

Uncertainty, Uncertainty, Uncertainty

Right now, weather is the primary driver of uncertainty in planting progress over the next few weeks. However, the political realm is doing its best to compete and add another layer of uncertainty around farmers’ planting decisions. If Mother Nature cooperates, some farmers still have time to plant corn before they begin to lose a share of the crop insurance coverage.

If this weather were occurring in a normal year many farmers would take the prevented planting payments on their crop insurance policies as for many farms, corn prices have not increased enough to push net returns from planting above net returns from prevented planting payments. What makes this year so challenging to predict is uncertainty surrounding two policy provisions (assuming of course Mother Nature even gives farmers a chance to plant).

In its original announcement of another round in the Market Facilitation Program, USDA said that payments would occur with a single county rate on crops that are planted in 2019. USDA did not say what the payment rates would be and emphasized that the program would not influence planting decisions. Despite their best efforts, the announcements of direct payments tied to planting decisions are very likely impacting growers’ decisions. While USDA has not announced the rates, many farmers who may have otherwise taken the prevented planting option may look to plant something in order to participate in the MFP program as the original announcement stated that payments would only be paid on planted acres.

This decision is further complicated by ad hoc disaster assistance legislation currently working its way through Congress. This bill ostensibly enhances the prevented planting payment factor on crop insurance. However, there is uncertainty about whether this would be applicable to many counties in the Midwest which is where the majority of these planting decisions are being made, or in federal disaster areas only. Regardless, passage of this bill has been blocked three times this week, and will not likely be considered again until a later date.

Adding additional uncertainty to the planting decision, yesterday Agriculture Secretary Perdue hinted that there is still a possibility that farmers who file prevented planting insurance claims may still be eligible for payments under the new MFP program. The justification is that acres prevented from being planted have a lower insurance value due to the adverse impact of retaliatory tariffs on spring crop insurance prices (Tariffs Impact Crop Insurance Coverage in 2019).

Potential Implications of Corn Prevented Plantings

Now that we have all the uncertainty we can handle, we get to move on to the fun job of trying to figure out a few scenarios of how this all may translate to the balance sheet for 2019. In our first scenario (scenario A), we take a somewhat conservative estimate (especially considering some of the numbers being talked about in the trade) of a decline of 5 million acres of corn, and a yield decline of 4 bushels per acre from USDA’s last WASDE. Scenario B takes a similar yield decline, but a bigger hit to acres with a 10 million decline. Scenario A results in total production of 13.83 billion bushels, and with my assumptions on consumption changes draws down our carryout to 1.66 billion bushels, or 11.6% stocks-to-use ratio. Scenario B results in a total production of 12.97 billion bushels, and with my assumptions on demand rationing our carryout drops to 1.38 billion bushels, or 10% stocks-to-use ratio.

In either circumstance, a lower stock-to-use ratio is sure likely to lift new-crop corn prices above the current projection of $3.30 per bushel. USDA’s June 28 Acreage report will provide the first survey-based estimate of crops that were actually planted in 2019.

Contact:
Michael Nepveux, Economist
Phone: (202)406-3623
Email: michaeln@fb.org

May 31, 2019 | Grain Hedge Insights | Kevin McNew | Views: 49

U.S. Levies Import Tariff on All Mexican Goods

Tariff structure starts at 5% and increases to 25% October 1

U.S. Levies 5% Import Tariff on All Mexican Goods

Responding to the continuing border crisis and what is deemed as an “ineffective response” President Trump moved to implement a progressive tariff on Mexican imports effective June 10.    

The tariff structure starts at 5% and increases to 25% on October 1.

As of 8 am CST Mexican President Obrador has not responded with a list of counter-tariffs on U.S. goods.

Mexico and the U.S. are each other's largest trading partner.  The U.S. imported $346.5 billion of Mexican goods in 2018.  

Mexico is the largest export destination for U.S. corn, soybeans, DDGS, pork and other agricultural commodities.   

The U.S. tariff came after the U.S, Canada and Mexico completed a major step forward in the renegotiation of NATFA 2.0

The Mexican economy contracted by -.2% in the first quarter of 2019.  Any tariff structure could push the Mexican economy into a recession.  

 

What It Means for the U.S. Farmer: At FBN we believe that the 5% tariff on all Mexican exports to the U.S. can have harmful and protracted effects.  At the moment we don’t know how this move by President Trump will impact the U.S farmer. In the past Mexico has been quick to place tariffs on U.S. hams and other agricultural commodities.  At FBN we believe that the American grains and oilseed producer could be vulnerable toward a retaliatory tariff by Mexico.                     

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

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