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September 01, 2020 | FBN Insights | Kevin McNew

Prices Soften After Crop Ratings Slip As Expected

Corn and bean condition ratings fell in line with expectations

Crop Ratings Decline 

  • Corn crop ratings slipped again this week, down to 62% good to excellent from 64% last week, but remain above 58% last year.
  • 63% of the corn crop is denting versus the 56% average, and 12% has reached maturity compared to 10% average. 
  • Soybean crop conditions also decreased as expected to 66% good to excellent from 69% last week, but is above 55% last year.
  • 8% of the bean crop is dropping leaves, which is on pace with the average.
  • Spring wheat harvest advanced to 69% complete from 49% last week, and is beginning to catch up to the 77% average pace.
  • Upland cotton crop conditions were 44% good to excellent, down 2 from last week after Hurricane Laura moved through Louisiana cutting its rating.

FBN’s Take On What It Means: Corn and bean condition ratings fell in line with expectations. Recent rainfall for much of the Midwest will likely help stave off further deterioration next week. The weather forecast calls for dryness across most of the Midwest, but with below-normal temperatures and crops well into the growing season reducing impacts due to limited moisture, FBN expects conditions can stabilize going forward. 

Brazil Increases Ethanol Tariff 

  • Brazil allowed its zero tariff quota for ethanol imports to expire on Monday August 31.
  • US producers will be required to pay a 20% tariff on any ethanol exported to Brazil.
  • The tax-free import quota was used entirely by US corn ethanol producers and allowed 750 million liters per year into Brazil.
  • Agribusiness lobbies in both countries are pressuring their respective governments for a new deal.
  • Large ethanol producing states are seen as key to President Trump's reelection campaign. 
  • Brazilian agribusiness would like to have a deal which includes free trade for Brazil's sugar entering the US.

FBN’s Take On What It Means: Though the zero tariff for ethanol has expired, that does not stop the Brazil/US governments from negotiating a new deal. With domestic sales down in both countries, both are looking to boost foreign sales. Some trade-off can be expected as Brazil has little to gain from eliminating the tariff by itself, and President Trump would benefit by touting another trade deal. 

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