OMAHA (DTN) -- While the U.S. pork industry sits on a record hog inventory, prices are being buoyed by expectations China will be turning more heavily to international markets for pork in the very near future.
U.S. pork producers had a record hog and pig inventory of 75.5 million head on June 1, up 3.9% from a year ago, according to USDA's Quarterly Hogs and Pigs report released Thursday. The market herd was at 69.1 million head, up 3.9% from a year ago, and is also the highest since USDA began estimating the market-hog inventory in 1964.
The pork market, though, has been buoyed partially on expectations that China will need to buy significantly more pork from exporters. As of June 20, China has 165,000 metric tons on the books to buy. Exports to China are rising in pork even with a 62% tariff.
Despite the higher U.S. inventory, hog prices have gone from 52 cents a pound in March up to 82 cents before settling down closer to 75 cents a pound now. Pork demand has remained strong with both domestic sales and exports.
"Given the demand situation, prices are relatively strong," said Lee Schulz, associate professor of agricultural economics at Iowa State University.
The pork industry doesn't need any further disruptions to demand. While African swine fever is a hog disease and does not affect the food safety of pork, any finding of ASF in the U.S. would have devastating market impacts, said Scott Brown, an Extension economist at the University of Missouri.
"We don't need any hiccups on the demand side, as best we can help, especially the domestic demand, if we want to keep prices at reasonable levels," Brown said.
Higher prices have come from greater expectations for even more sales to China, which has lost millions of hogs to ASF, many of which were hogs slaughtered early.
The economists said the reporting of hog losses out of China is uncertain and anecdotal, which makes it difficult to forecast how China will move going forward. For now, China has been able to store frozen pork.
"That has built up some large cold-storage stocks," said Steve Meyer of Kerns and Associates. "It's also been a surprise the past couple of months the cold-storage capabilities of China seem to be larger than what anybody really thought they were."
Meyer said the long-term expectations for more international demand from China were not predicted to kick in until the second half of 2019, which begins Monday, July 1. He also noted that most information coming out of China remains anecdotal.
China, though, also banned all meat from Canada this week. China may also struggle to import pork from Vietnam, which also now is being ravaged by ASF.
The actual flow of pork exports going forward could change completely, said Dale Durchholz, principal ag Grain Cycles.
"With the whole mix of things going on and political overtones, where do they source pork from, if and when they really start stepping up imports in the next six to eight months?" Durchholz said.
"We could see the whole flow of pork in the world change, not just because of ASF, but also the political repercussions the Chinese have both here in the U.S. and Canada and some others as well."
Brown added that he is paying attention to what happens to overall pork consumption in China as the outbreak continues.
"So I worry about the risk of where consumption falls as far as this ASF outbreak," Brown said.
Welcome
Friday, June 28, 2019
Farmland Brokers See Potential for Strength Despite Uncertainties
INDIANOLA, Iowa (DTN) -- From Ohio to Nebraska, farm real estate brokers note a firmness in the market that wasn't there three months ago.
"Even six weeks ago, we were looking at selling $3.30-per-bushel old-crop corn. There's a much different feel right now in the market," said Doug Hensley, president of real estate services for Hertz Farm Management with offices in Iowa, Illinois and Nebraska.
While the disastrously wet spring across the Corn Belt could create localized pockets of financial distress, brokers say quality land is still commanding strong prices and attracting an array of buyers.
Hensley said that at a recent auction, a Story County, Iowa, farm sold for $10,600 per acre. In Washington County, an 80-acre piece with an 89 corn suitability rating sold for $11,000 an acre, while a tract in the same county with 70 suitability rating sold for $6,950 per acre, "which I thought was a tremendous sale," noted Hensley.
Other farmland brokers echo the optimism.
"I've switched my tune from talking about a softer land market to one that has some strength to it," said Steve Bruere, president of Peoples Company based in Clive, Iowa, with real estate agents licensed in 20 states. "Land buyers are lining up in anticipation of a stronger commodity market. Interest rates are incredibly low, and if corn is going to be $5 or $6 a bushel this fall, you can make some money in farming -- if you have a crop."
Ron Spencer, a farm real estate broker in Lima, Ohio, said it's been the wettest spring anyone remembers, but that hasn't translated to the land market. He said he sold an 80-acre parcel in Wood County, Ohio, last week in an area that had virtually nothing planted.
"People were fighting over it," he said. A farming family bought it for $9,200 an acre.
Mark Wilson, owner of Wilson National real estate and auction group in Hillsboro, Ohio, said farms with premium soil and tiling can bring $8,000 to $10,000 per acre or more, depending on the circumstances. He said a farm in west-central Ohio recently sold for $12,400 an acre.
The Ohio farmland market has been bolstered the past two to three years by developers buying up farmland around large and small cities. Subsequently, the land sellers have used that money to buy other farmland in Sec. 1031 tax-deferred land exchanges.
"We don't have as many farmers pursuing land as we did five years ago, but 1031-exchange money has helped keep farmland values steady," Wilson said. "If development slows down, that might make a difference to farmland values in Ohio."
Farmland brokers that spoke with DTN said extreme variability will be common this growing season.
"Some farmers who got their crop in, even if it only yields 160-180 bpa corn at $5, can make money, and 50 bpa soybeans can make money," said Howard Halderman, president of Halderman Real Estate and Farm Management that covers Indiana, Michigan, Ohio and Illinois. "We may see some financially stressed sales in a few areas. But we'll have to wait and see what happens with the government Market Facilitation Payments, crop insurance and commodity prices."
Randy Dickhut, senior vice president of real estate operations at Farmers National Company, said the land market is on edge because of all the uncertainties of this growing season.
"I think there will be winners and losers this year, probably accentuated even more so because of the delayed planting and the weather," he said.
Hensley calls it a hyper-local market. Some areas look good, and if the weather cooperates, farmers who get a decent crop will make a profit. Other areas will just break even, but in total wash-out areas, there will be weakness in the land market.
Dickhut said it will be important to watch the buyers.
"There's capital out there, but how much is there in the neighborhood?" Dickhut said. "We're watching to see if a few more farms come up for sale due to financial reasons. How many does it take to put a little too much for sale on the market in an area?"
Wilson said stronger commodity prices will help farmers with corn in the bin from last year. One Ohio ethanol plant was paying $5.10-$5.25 per bushel for corn this week.
Those prices are helping to renew optimism in the farmland market, said Mark Mommsen with brokerage firm Martin, Goodrich and Waddell in Sycamore, Illinois.
"Land buyers see opportunity ahead," he said. "This weather has gotten us closer to a reset than any time since 2013."
Hertz's Hensley said there will still be struggles, especially among farmers that rely heavily on rented ground, don't have a lot of equity in their land or struggle with production.
"For the most part, farm lenders have not forced farmers to do anything on a large scale. There's been some 'encouraged' sales of equipment and some parcels of land, but there haven't been many farmers forced out of business by their lender. It's not like the 1980s," Hensley said.
Dickhut said that in the 1980s, high interest rates and inflation drove farmers to keep operating until the bank shut them down completely. Their land had already lost so much value, it limited their options.
Now, farmers own more of their land outright, pay significantly lower interest rates on mortgages and are more willing to sell off an asset if it means staying in business.
Even though there will be local problems in the land market this fall, Hensley thinks higher crop prices offer potential for a stronger land market. "In the meantime, the land market may be idling until we get a clearer picture on trade with China, planted acres and crop yields."
"Even six weeks ago, we were looking at selling $3.30-per-bushel old-crop corn. There's a much different feel right now in the market," said Doug Hensley, president of real estate services for Hertz Farm Management with offices in Iowa, Illinois and Nebraska.
While the disastrously wet spring across the Corn Belt could create localized pockets of financial distress, brokers say quality land is still commanding strong prices and attracting an array of buyers.
Hensley said that at a recent auction, a Story County, Iowa, farm sold for $10,600 per acre. In Washington County, an 80-acre piece with an 89 corn suitability rating sold for $11,000 an acre, while a tract in the same county with 70 suitability rating sold for $6,950 per acre, "which I thought was a tremendous sale," noted Hensley.
Other farmland brokers echo the optimism.
"I've switched my tune from talking about a softer land market to one that has some strength to it," said Steve Bruere, president of Peoples Company based in Clive, Iowa, with real estate agents licensed in 20 states. "Land buyers are lining up in anticipation of a stronger commodity market. Interest rates are incredibly low, and if corn is going to be $5 or $6 a bushel this fall, you can make some money in farming -- if you have a crop."
Ron Spencer, a farm real estate broker in Lima, Ohio, said it's been the wettest spring anyone remembers, but that hasn't translated to the land market. He said he sold an 80-acre parcel in Wood County, Ohio, last week in an area that had virtually nothing planted.
"People were fighting over it," he said. A farming family bought it for $9,200 an acre.
Mark Wilson, owner of Wilson National real estate and auction group in Hillsboro, Ohio, said farms with premium soil and tiling can bring $8,000 to $10,000 per acre or more, depending on the circumstances. He said a farm in west-central Ohio recently sold for $12,400 an acre.
The Ohio farmland market has been bolstered the past two to three years by developers buying up farmland around large and small cities. Subsequently, the land sellers have used that money to buy other farmland in Sec. 1031 tax-deferred land exchanges.
"We don't have as many farmers pursuing land as we did five years ago, but 1031-exchange money has helped keep farmland values steady," Wilson said. "If development slows down, that might make a difference to farmland values in Ohio."
Farmland brokers that spoke with DTN said extreme variability will be common this growing season.
"Some farmers who got their crop in, even if it only yields 160-180 bpa corn at $5, can make money, and 50 bpa soybeans can make money," said Howard Halderman, president of Halderman Real Estate and Farm Management that covers Indiana, Michigan, Ohio and Illinois. "We may see some financially stressed sales in a few areas. But we'll have to wait and see what happens with the government Market Facilitation Payments, crop insurance and commodity prices."
Randy Dickhut, senior vice president of real estate operations at Farmers National Company, said the land market is on edge because of all the uncertainties of this growing season.
"I think there will be winners and losers this year, probably accentuated even more so because of the delayed planting and the weather," he said.
Hensley calls it a hyper-local market. Some areas look good, and if the weather cooperates, farmers who get a decent crop will make a profit. Other areas will just break even, but in total wash-out areas, there will be weakness in the land market.
Dickhut said it will be important to watch the buyers.
"There's capital out there, but how much is there in the neighborhood?" Dickhut said. "We're watching to see if a few more farms come up for sale due to financial reasons. How many does it take to put a little too much for sale on the market in an area?"
Wilson said stronger commodity prices will help farmers with corn in the bin from last year. One Ohio ethanol plant was paying $5.10-$5.25 per bushel for corn this week.
Those prices are helping to renew optimism in the farmland market, said Mark Mommsen with brokerage firm Martin, Goodrich and Waddell in Sycamore, Illinois.
"Land buyers see opportunity ahead," he said. "This weather has gotten us closer to a reset than any time since 2013."
Hertz's Hensley said there will still be struggles, especially among farmers that rely heavily on rented ground, don't have a lot of equity in their land or struggle with production.
"For the most part, farm lenders have not forced farmers to do anything on a large scale. There's been some 'encouraged' sales of equipment and some parcels of land, but there haven't been many farmers forced out of business by their lender. It's not like the 1980s," Hensley said.
Dickhut said that in the 1980s, high interest rates and inflation drove farmers to keep operating until the bank shut them down completely. Their land had already lost so much value, it limited their options.
Now, farmers own more of their land outright, pay significantly lower interest rates on mortgages and are more willing to sell off an asset if it means staying in business.
Even though there will be local problems in the land market this fall, Hensley thinks higher crop prices offer potential for a stronger land market. "In the meantime, the land market may be idling until we get a clearer picture on trade with China, planted acres and crop yields."
USDA Grain Reports Summary - US Corn Acreage at 91.7 MA; Soy Acreage at 80 MA
OMAHA (DTN) -- USDA increased its corn planting estimate to 91.7 million acres from its June WASDE estimate of 89.8 ma. While the latest estimate is a 1.1-ma drop from the agency's March Prospective Plantings estimate, it is above the high end of pre-report estimates.
The agency expects farmers to sow 80 million acres to soybeans, a 4.6-ma decline from the agency's March estimates.
In July, USDA's National Agricultural Statistics Service (NASS) will collect updated information on 2019 acres planted to corn, cotton, sorghum, and soybeans in 14 states, USDA said in a statement posted to the agency's website on Friday. (https://www.nass.usda.gov/…) If the newly collected data justify any changes, NASS will publish updated acreage estimates in the Crop Production report to be released at 11 a.m. CDT on Monday, Aug. 12, the agency said.
USDA's Acreage estimates on Friday are bearish for new-crop corn, bullish for new-crop soybeans and neutral for wheat, said DTN Lead Analyst Todd Hultman. USDA's June 1 Grain Stocks estimates were neutral for corn, soybeans and wheat, he said.
ACREAGE
USDA said farmers will plant 91.7 million acres to corn in 2019, 1.1 ma less than its March estimate of 92.8 ma. Planted acres are up or unchanged in 40 of the 48 states USDA surveys. Area harvested for grain is forecast at 83.6 million acres.
"Farmers responding to the survey indicated that 83% of the intended corn acreage had been planted at the time of the interview, significantly lower than the 10-year average," USDA said in a summary at the back of the report.
Soybean acreage, at 80 ma, is significantly lower than USDA's forecast last spring of 84.6 ma. The average trade guess was that USDA would leave acreage unchanged, although estimates ranged from 83 ma to 86.5 ma.
Farmers planted 45.6 million acres to wheat, down from USDA's spring estimate of 45.8 ma. It's 5% lower than last year and the lowest since USDA began keeping records in 1919. All winter wheat acreage totaled 31.8 ma, with 22.7 ma of it hard red winter, 5.54 ma of soft red winter and 3.55 ma of white winter. USDA estimates 12.4 ma of spring wheat.
Cotton plantings were estimated at 13.7 million acres, down 3% from last year.
QUARTERLY GRAIN STOCKS
Soybean grain stocks in all positions set a record for June 1 at 1.79 billion bushels, up 47% compared to 1.2 billion bushels for the third quarter a year ago. On-farm stocks totaled 730 million bushels, up 94% from last year. Off-farm stocks were pegged at 1.06 billion bushels, up 26% from last year. All disappearance -- usage of the crop -- from March to May totaled 937 million bushels, up 5% from last year.
Corn grain stocks were pegged at 5.2 billion bushels on June 1, which is 2% lower than last year's corn stocks at the same period. On-farm stocks totaled 2.95 billion bushels, up 7% from last year. Off-farm stocks totaled 2.25 billion bushels, down 12% from last year. The March-to-May disappearance totaled 3.41 billion bushels, down from 3.29 billion bushels for the same quarter last year.
Wheat ending stocks for the 2018-19 crop year came in at 1.07 billion bushels, compared to 1.09 billion bushels for the same period last year. On-farm stocks are estimated at 207 million bushels, up 58% from a year ago. Off-farm stocks are pegged at 865 million bushels, down 11% from last year's storage. The March-to-May usage totaled 521 million bushels, up 31% from the same quarter last year.
The agency expects farmers to sow 80 million acres to soybeans, a 4.6-ma decline from the agency's March estimates.
In July, USDA's National Agricultural Statistics Service (NASS) will collect updated information on 2019 acres planted to corn, cotton, sorghum, and soybeans in 14 states, USDA said in a statement posted to the agency's website on Friday. (https://www.nass.usda.gov/…) If the newly collected data justify any changes, NASS will publish updated acreage estimates in the Crop Production report to be released at 11 a.m. CDT on Monday, Aug. 12, the agency said.
USDA's Acreage estimates on Friday are bearish for new-crop corn, bullish for new-crop soybeans and neutral for wheat, said DTN Lead Analyst Todd Hultman. USDA's June 1 Grain Stocks estimates were neutral for corn, soybeans and wheat, he said.
ACREAGE
USDA said farmers will plant 91.7 million acres to corn in 2019, 1.1 ma less than its March estimate of 92.8 ma. Planted acres are up or unchanged in 40 of the 48 states USDA surveys. Area harvested for grain is forecast at 83.6 million acres.
"Farmers responding to the survey indicated that 83% of the intended corn acreage had been planted at the time of the interview, significantly lower than the 10-year average," USDA said in a summary at the back of the report.
Soybean acreage, at 80 ma, is significantly lower than USDA's forecast last spring of 84.6 ma. The average trade guess was that USDA would leave acreage unchanged, although estimates ranged from 83 ma to 86.5 ma.
Farmers planted 45.6 million acres to wheat, down from USDA's spring estimate of 45.8 ma. It's 5% lower than last year and the lowest since USDA began keeping records in 1919. All winter wheat acreage totaled 31.8 ma, with 22.7 ma of it hard red winter, 5.54 ma of soft red winter and 3.55 ma of white winter. USDA estimates 12.4 ma of spring wheat.
Cotton plantings were estimated at 13.7 million acres, down 3% from last year.
QUARTERLY GRAIN STOCKS
Soybean grain stocks in all positions set a record for June 1 at 1.79 billion bushels, up 47% compared to 1.2 billion bushels for the third quarter a year ago. On-farm stocks totaled 730 million bushels, up 94% from last year. Off-farm stocks were pegged at 1.06 billion bushels, up 26% from last year. All disappearance -- usage of the crop -- from March to May totaled 937 million bushels, up 5% from last year.
Corn grain stocks were pegged at 5.2 billion bushels on June 1, which is 2% lower than last year's corn stocks at the same period. On-farm stocks totaled 2.95 billion bushels, up 7% from last year. Off-farm stocks totaled 2.25 billion bushels, down 12% from last year. The March-to-May disappearance totaled 3.41 billion bushels, down from 3.29 billion bushels for the same quarter last year.
Wheat ending stocks for the 2018-19 crop year came in at 1.07 billion bushels, compared to 1.09 billion bushels for the same period last year. On-farm stocks are estimated at 207 million bushels, up 58% from a year ago. Off-farm stocks are pegged at 865 million bushels, down 11% from last year's storage. The March-to-May usage totaled 521 million bushels, up 31% from the same quarter last year.
Washington Insider: What About the US Strategy for Europe?
While most of the current press coverage of trade issues is focused on the U.S.-China talks, Bloomberg says that the logic of the President’s attacks escapes leaders in Europe, and that this is especially true as President Trump heads to a showdown with China’s Xi Jinping and as the costs of his trade war become clearer.
The estranged U.S. allies may not follow the logic of the administration’s offensive but they have become reconciled to persistent attacks from Washington, EU officials told Bloomberg. As Trump ramps up his effort to win a second term in 2020, they expect no letup, and are even getting used to fighting back. For example, “should Trump get serious about his threats, we’re prepared,” Cecilia Malmstrom, the EU’s trade commissioner told Germany’s Der Spiegel magazine this week. “Our list of counter measures is set.”
If talks at the G20 meeting in Osaka and in the coming weeks fail to head off the threatened U.S. tariffs on Europe’s cars, EU officials say they are confident that their response will be sharp enough to hit the president “where it hurts.”
Earlier levies on Harley Davidson motorcycles and bourbon whiskey specifically targeted Trump’s political base. Other measures against U.S. tech firms prompted members of Congress to write asking Brussels to back off, Bloomberg said.
Still, there seems to be little else the Europeans can do. It can hold its own in a trade dispute but its locker is empty when it comes to hard-power tools needed at the sharp end of geopolitics. That means the EU has limited leverage to shape the U.S. agenda in hotspots like Syria, the Persian Gulf, or the South China Sea.
Part of the struggle for EU leaders is that they feel they would be natural allies with the Trump administration against China, one official said. They share many of his grievances over Chinese practices even if they’d favor a more diplomatic approach to Beijing.
At the same time, administration attacks on China over unfair trade and investment practices and against the rise of Huawei Technologies Co. in ultra-fast telecommunications networks echo European reservations. But instead of forging a united front against the communist government in Beijing, the U.S. administration has taken the Europeans to task over an even longer list of complaints that go beyond trade to defense spending and energy.
“Europe treats us worse than China,” the President said on Wednesday, reeling off a familiar list of complaints about German defense spending on a new gas pipeline to Russia.
So, will Europe be the target of his next trade offensive? “Oh yeah,” the president said, although the EU says it “remains in the dark about whether Trump will actually follow through” on his threat to hit European cars and auto parts with tariffs based on national-security grounds.
That move would mean the end of the fragile truce struck last July in the wake of American duties on European steel and aluminum, which provoked an EU response targeting firms in Trump’s heartland states like Kentucky and Wisconsin.
While the European official said that the EU believes some key figures within the Trump administration will argue against automotive tariffs, other factors suggest the threat remains real. In May, Trump said he shared the conclusion of a Commerce Department report that foreign automotive goods undermine U.S. national security and called for “reducing imports.”
Bloomberg also reports the view that U.S. policy for Iran is the most glaring example of uncertain U.S. policy goals — and that the President’s unilateral withdrawal from the 2015 nuclear accord has thrown a decade of diplomatic work into turmoil. In response, European capitals responded with an investment vehicle designed to circumvent U.S. sanctions and preserve some of the economic benefits of the deal for Tehran. But the dominance of the dollar and the threat of retribution from Washington has meant that no company has dared to use it.
EU leaders have been lamenting the limitations of their toolkit for years. But they are still left appealing to their common interests with that U.S. — an approach that has so far fallen on deaf ears.
“We’ll once again make an attempt and discuss the issue of multilateral cooperation,” German Chancellor Angela Merkel told lawmakers in Berlin Wednesday as she prepared to deal with Trump in Osaka.
The President clearly prefers unilateral trade policies and believes they enhance the U.S. position. Others strongly disagree, and the administration preference likely will be tested repeatedly over the next few months — challenges producers should watch closely as they emerge, Washington Insider believes.
The estranged U.S. allies may not follow the logic of the administration’s offensive but they have become reconciled to persistent attacks from Washington, EU officials told Bloomberg. As Trump ramps up his effort to win a second term in 2020, they expect no letup, and are even getting used to fighting back. For example, “should Trump get serious about his threats, we’re prepared,” Cecilia Malmstrom, the EU’s trade commissioner told Germany’s Der Spiegel magazine this week. “Our list of counter measures is set.”
If talks at the G20 meeting in Osaka and in the coming weeks fail to head off the threatened U.S. tariffs on Europe’s cars, EU officials say they are confident that their response will be sharp enough to hit the president “where it hurts.”
Earlier levies on Harley Davidson motorcycles and bourbon whiskey specifically targeted Trump’s political base. Other measures against U.S. tech firms prompted members of Congress to write asking Brussels to back off, Bloomberg said.
Still, there seems to be little else the Europeans can do. It can hold its own in a trade dispute but its locker is empty when it comes to hard-power tools needed at the sharp end of geopolitics. That means the EU has limited leverage to shape the U.S. agenda in hotspots like Syria, the Persian Gulf, or the South China Sea.
Part of the struggle for EU leaders is that they feel they would be natural allies with the Trump administration against China, one official said. They share many of his grievances over Chinese practices even if they’d favor a more diplomatic approach to Beijing.
At the same time, administration attacks on China over unfair trade and investment practices and against the rise of Huawei Technologies Co. in ultra-fast telecommunications networks echo European reservations. But instead of forging a united front against the communist government in Beijing, the U.S. administration has taken the Europeans to task over an even longer list of complaints that go beyond trade to defense spending and energy.
“Europe treats us worse than China,” the President said on Wednesday, reeling off a familiar list of complaints about German defense spending on a new gas pipeline to Russia.
So, will Europe be the target of his next trade offensive? “Oh yeah,” the president said, although the EU says it “remains in the dark about whether Trump will actually follow through” on his threat to hit European cars and auto parts with tariffs based on national-security grounds.
That move would mean the end of the fragile truce struck last July in the wake of American duties on European steel and aluminum, which provoked an EU response targeting firms in Trump’s heartland states like Kentucky and Wisconsin.
While the European official said that the EU believes some key figures within the Trump administration will argue against automotive tariffs, other factors suggest the threat remains real. In May, Trump said he shared the conclusion of a Commerce Department report that foreign automotive goods undermine U.S. national security and called for “reducing imports.”
Bloomberg also reports the view that U.S. policy for Iran is the most glaring example of uncertain U.S. policy goals — and that the President’s unilateral withdrawal from the 2015 nuclear accord has thrown a decade of diplomatic work into turmoil. In response, European capitals responded with an investment vehicle designed to circumvent U.S. sanctions and preserve some of the economic benefits of the deal for Tehran. But the dominance of the dollar and the threat of retribution from Washington has meant that no company has dared to use it.
EU leaders have been lamenting the limitations of their toolkit for years. But they are still left appealing to their common interests with that U.S. — an approach that has so far fallen on deaf ears.
“We’ll once again make an attempt and discuss the issue of multilateral cooperation,” German Chancellor Angela Merkel told lawmakers in Berlin Wednesday as she prepared to deal with Trump in Osaka.
The President clearly prefers unilateral trade policies and believes they enhance the U.S. position. Others strongly disagree, and the administration preference likely will be tested repeatedly over the next few months — challenges producers should watch closely as they emerge, Washington Insider believes.
Details on MFP Program Could Arrive Soon
USDA Secretary Sonny Perdue Wednesday said that USDA has decided it can make a “minimal” payment to farmers under the Market Facilitation Program 2 (MFP 2) for cover crops that are planted on prevent plant acres.
However, he did not signal how much the payment would amount to and noted that the agency is close to announcing details of the MFP 2 effort.
“The reason we are close is the prevented-planting triggers are done,” he told reporters after speaking to the National Council of Farmer Cooperatives in Washington. “That was our purpose for being intentionally opaque about the plans and not having producers trying to farm the program. I think we are close to beginning disclosing some of these plans.”
Perdue said USDA will also “top off” prevent planting payments using money from the recently approved disaster aid package, but said the amount of increased payments will depend on how many prevent plan acres there are.
While many are touting the potential for farmer payments from MFP 2, crop insurance, the disaster package and being able to sell forage harvested from cover crops on prevent plant acres, Perdue stressed, “All those combined will not come up to what a farmer could have [earned] if they could have planted. Prevent plant is not a strategy. It's a fall-back safety mechanism."
However, he did not signal how much the payment would amount to and noted that the agency is close to announcing details of the MFP 2 effort.
“The reason we are close is the prevented-planting triggers are done,” he told reporters after speaking to the National Council of Farmer Cooperatives in Washington. “That was our purpose for being intentionally opaque about the plans and not having producers trying to farm the program. I think we are close to beginning disclosing some of these plans.”
Perdue said USDA will also “top off” prevent planting payments using money from the recently approved disaster aid package, but said the amount of increased payments will depend on how many prevent plan acres there are.
While many are touting the potential for farmer payments from MFP 2, crop insurance, the disaster package and being able to sell forage harvested from cover crops on prevent plant acres, Perdue stressed, “All those combined will not come up to what a farmer could have [earned] if they could have planted. Prevent plant is not a strategy. It's a fall-back safety mechanism."
Some RFS Information Coming But Finalizing Other Shifts Delayed
EPA is expected to propose the new annual renewable fuel blending targets via the Renewable Fuel Standard (RFS) for 2020 ahead of the July 4 recess, according to contacts.
Renewable fuel groups are hoping and lobbying to see a sizable boost in the amount of ethanol refiners are expected to blend to make up for previous refinery exemptions/waivers from the EPA.
However, EPA now appears to have slowed up finalizing the rule-making process on the reset of the RFS levels for 2020-2022. EPA sent its proposals to the Office of Management and Budget (OMB) for review and the agency held at least four meetings on the topic, including one Wednesday, June 26.
While the OMB lists the legal deadline for the action as November 30, 2019, the budget office now indicates the final rule on the plan is not expected until February 2020. That indicates EPA is not expected to keep the RFS reset and the 2020 biofuel and 2021 biodiesel on the same regulatory timeline which previously appeared to be the case.
Renewable fuel groups are hoping and lobbying to see a sizable boost in the amount of ethanol refiners are expected to blend to make up for previous refinery exemptions/waivers from the EPA.
However, EPA now appears to have slowed up finalizing the rule-making process on the reset of the RFS levels for 2020-2022. EPA sent its proposals to the Office of Management and Budget (OMB) for review and the agency held at least four meetings on the topic, including one Wednesday, June 26.
While the OMB lists the legal deadline for the action as November 30, 2019, the budget office now indicates the final rule on the plan is not expected until February 2020. That indicates EPA is not expected to keep the RFS reset and the 2020 biofuel and 2021 biodiesel on the same regulatory timeline which previously appeared to be the case.
US June 1 Hog Inventory Up 4% From Year Ago
OMAHA (DTN) -- United States inventory of all hogs and pigs on June 1, 2019 was 75.5 million head. This was up 4% from June 1, 2018, and up 1% from March 1, 2019. This is the highest June 1 inventory of all hogs and pigs since estimates began in 1964, USDA reported on Thursday.
Breeding inventory, at 6.41 million head, was up 1% from last year, and up 1% from the previous quarter.
Market hog inventory, at 69.1 million head, was up 4% from last year, and up 1% from last quarter. This is the highest June 1 market hog inventory since estimates began in 1964.
The March-May 2019 pig crop, at 34.2 million head, was up 4% from 2018. This is the largest March-May pig crop since estimates began in 1970. Sows farrowed during this period totaled 3.11 million head, up slightly from 2018.
The sows farrowed during this quarter represented 49% of the breeding herd. The average pigs saved per litter was a record high 11.00 for the March-May period, compared to 10.63 last year.
United States hog producers intend to have 3.18 million sows farrow during the June-August 2019 quarter, down slightly from the actual farrowings during the same period in 2018, but up 3% from 2017. Intended farrowings for September-November 2019, at 3.17 million sows, are up slightly from 2018, and up 2% from 2017.
The total number of hogs under contract owned by operations with over 5,000 head, but raised by contractees, accounted for 47% of the total United States hog inventory, unchanged from the previous year.
"The Quarterly Hogs and Pigs report posted an increase of 4% in all inventory on June 1. A total of 75.5 million head were reported. Overall inventory levels increased 1% from March 1, as year-to-year growth in the hog herd continues to be consistent with previous plans," said DTN Analyst Rick Kment.
"The 69.1 million head of market hog inventory is the largest June 1 total since estimates began in 1964, leaving concern that additional growth will continue over the near future," Kment said. "Even though farrowing intentions are down slightly from a year ago, numbers are 3% above 2017 levels, creating expectations of continued large supplies through the near future.
"Market reaction to this report is expected to be neutral to slightly bearish, as very little directional changes are revealed in this report."
Breeding inventory, at 6.41 million head, was up 1% from last year, and up 1% from the previous quarter.
Market hog inventory, at 69.1 million head, was up 4% from last year, and up 1% from last quarter. This is the highest June 1 market hog inventory since estimates began in 1964.
The March-May 2019 pig crop, at 34.2 million head, was up 4% from 2018. This is the largest March-May pig crop since estimates began in 1970. Sows farrowed during this period totaled 3.11 million head, up slightly from 2018.
The sows farrowed during this quarter represented 49% of the breeding herd. The average pigs saved per litter was a record high 11.00 for the March-May period, compared to 10.63 last year.
United States hog producers intend to have 3.18 million sows farrow during the June-August 2019 quarter, down slightly from the actual farrowings during the same period in 2018, but up 3% from 2017. Intended farrowings for September-November 2019, at 3.17 million sows, are up slightly from 2018, and up 2% from 2017.
The total number of hogs under contract owned by operations with over 5,000 head, but raised by contractees, accounted for 47% of the total United States hog inventory, unchanged from the previous year.
"The Quarterly Hogs and Pigs report posted an increase of 4% in all inventory on June 1. A total of 75.5 million head were reported. Overall inventory levels increased 1% from March 1, as year-to-year growth in the hog herd continues to be consistent with previous plans," said DTN Analyst Rick Kment.
"The 69.1 million head of market hog inventory is the largest June 1 total since estimates began in 1964, leaving concern that additional growth will continue over the near future," Kment said. "Even though farrowing intentions are down slightly from a year ago, numbers are 3% above 2017 levels, creating expectations of continued large supplies through the near future.
"Market reaction to this report is expected to be neutral to slightly bearish, as very little directional changes are revealed in this report."
Friday Watch List
Markets
After a long planting season and amid great uncertainty, USDA will release its Acreage and June 1 Grain Stocks reports at 11 a.m. CDT, likely centers of attention for Friday's grain prices. Earlier at 7:30 a.m., a report on U.S. personal incomes will be followed by a report on consumer sentiment at 9 a.m. CDT. On Saturday, President Donald Trump is set to talk trade with China's President Xi Jinping.
Weather
Most crop areas will be dry Friday, with very warm to hot conditions. Rain will be limited to portions of the Northern Plains, northern Midwest, and Delta. Conditions are generally favorable for row crop development and winter wheat ripening and harvest.
After a long planting season and amid great uncertainty, USDA will release its Acreage and June 1 Grain Stocks reports at 11 a.m. CDT, likely centers of attention for Friday's grain prices. Earlier at 7:30 a.m., a report on U.S. personal incomes will be followed by a report on consumer sentiment at 9 a.m. CDT. On Saturday, President Donald Trump is set to talk trade with China's President Xi Jinping.
Weather
Most crop areas will be dry Friday, with very warm to hot conditions. Rain will be limited to portions of the Northern Plains, northern Midwest, and Delta. Conditions are generally favorable for row crop development and winter wheat ripening and harvest.
U.S., China Reach Tentative Truce on Tariffs
The U.S. and China have agreed to forgo the next round of tariffs that President Trump threatened to impose on $300 billion in Chinese goods. That report comes from both Politico and the South China Morning Post. It comes ahead of a meeting between Trump and Chinese President Xi (Zhee) Jinping this weekend at the G-20 Summit in Osaka, Japan. One source tells the South China Morning Post that Trump’s decision to temporarily halt raising tariffs on more Chinese goods was President Xi’s price for agreeing to meet with him in Japan. It’s well known that agriculture has been one of the hardest-hit economic sectors by Trump’s trade dispute with China. Other countries have responded to American tariffs on imports by trying to exert pressure on a big part of the electorate that ultimately helped Trump win the presidency. Also on the trade front, U.S. Trade Representative Robert Lighthizer made a pre-Japan visit down Pennsylvania Avenue in Washington, D.C., this week to get some more face time with House Democrats before heading overseas for the G-20 gathering. Trump’s trade boss left Democrats feeling more optimistic about getting their concerns with the U.S.-Mexico-Canada Trade Agreement resolved
China Bans Canadian Beef/Pork Imports
China issued a sudden ban on Canadian beef and pork exports, which will create a huge loss for Canada’s livestock sector. A livestock industry group says China is one of its top five international markets. Chris White, president of the Canadian Meat Council, says this decision will affect everyone in the entire Canadian value chain, including the farmers who raise the animals and the packers that process the product, as well as the companies that ship the product overseas. The Chinese Embassy said Tuesday that it asked Canada to suspend all meat exports after a shipment of pork was found to contain traces of ractopamine. It’s a feed additive that’s restricted in China. After detecting the residue, China says a further investigation found forged veterinary health certificates attached to that batch of pork. The CMC says the Canadian government is asking why beef products were also suspended because the failed certificates pertained just to pork. Canadian exports to China had been experiencing a big jump in 2019 when compared to last year. With the ban, Canadian companies now have to find other markets to ship their products to.
USDA Will Defend Trade Aid at WTO
The World Trade Organization has been receiving complaints about the aid money that U.S. farmers are getting from the government. However, Ag Secretary Sonny Perdue says he’s not concerned that the payments will be a problem. “We had to design a program very carefully to make sure we do not violate the WTO limit,” he said to reporters in Washington. “We feel like we’re safely within those confines and we’re prepared to defend that should anyone challenge it.” China, India, the European Union, Ukraine, and Australia have all fired off criticism at the USDA’s two aid packages for farmers that could total up to $28 billion in assistance designed to counteract retaliatory tariffs implemented on U.S. farm goods. Australia calls the aid a “dangerous precedent” that could distort world markets. China says they appreciate that the U.S. respects the interest of its farmers. “We would appreciate it if the U.S. can also respect the WTO rules,” China says. An Agri-Pulse report says several member countries in the WTO are fearful that the U.S. will give its farmers a third trade assistance package next year, which Perdue says he won’t rule out.
ASF Claims More Territory in Asia
A Pork Checkoff news release says in just 30 days, the African Swine Fever Virus is claiming more territory across all parts of Asia. Statistics from the Food and Agriculture Organization say that ASF is now in Cambodia, China, Laos, Mongolia, North Korea, and Vietnam. Experts predict its relentless march won’t stop there. The death loss continues to grow. In Vietnam, officials say more than 2.5 million pigs have been culled from the national herd due to ASF. The disease has spread to almost every province in the nation. Pork makes up 75 percent of the total meat consumption in Vietnam, which is a country of 95 million people. The Chinese picture doesn’t look a whole lot better. The Chinese government and larger private producers are doing what they can to improve the situation but it’s still a struggle. The nation’s swine herd shrank nearly 21 percent on the year to a level not seen since the early 1990s. Dutch lender Rabobank forecasts the herd will decline between 20 and 30 percent in 2019 from the previous year. China had a record herd size of 428 million head in 2018. A senior analyst at Rabobank says Chinese farmers haven’t tried to rebuild their herds in spite of calls from the government to do so. They’re worried that they could lose their stock again due to the disease. The Rabobank analyst says it typically takes two or three years to have a recovery of stock. However, with the size of China’s herd, it will likely take up to five years.
Rural Mainstreet Index Above Growth Neutral in June
The Creighton University Rural Mainstreet Index climbed above growth neutral in June. The monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture shows a positive growth in the region. “Higher agricultural commodity prices and rebuilding from recent floods boosted the RMI for the month,” says Dr. Ernie Goss, founder of the index. “Despite the negatives from the ongoing trade war, almost 70 percent of the rural bankers support either raising or continuing tariffs.” Jeff Bonnet is president of the Havana National Bank in Illinois, who says estimates go as high as 15 to 20 million acres that farmers couldn’t get planted to crops. Bonnet says, “Based on this information, corn prices should be nearly six dollars per bushel, if not more. What are we missing here?” It’s the sixth time in the past seven months that the Rural Mainstreet Index climbed above growth neutral. Unfortunately, more than one in four bank CEOs reported rising loan defaults due to farmer financial woes. Almost half the bankers say that because of crisis-level farm income, farmers in their area have responded by selling the farm, or otherwise leaving it.
Perdue Tells Farm Co-Ops to Call Congress on USMCA
Ag Secretary Sonny Perdue met with members of the National Council of Farmer Cooperatives earlier this week. He told their executives to talk to Congress about voting on the U.S.-Mexico-Canada agreement on trade. Noting that he can’t directly encourage lobbying, Perdue told members they should follow their “hearts and minds” in talking with Congress. Perdue told the executives in attendance that he’s very positive about the role of Speaker of the House Nancy Pelosi, saying she’s “taking her deliberations on the USMCA very seriously.” He says there are some tweaks that are “doable” to satisfy Democrats who are critical of the bill. He covered a wide variety of topics, including the Market Facilitation Program. He says details should be coming shortly, noting that the USDA has been “opaque” about the details because the administration didn’t want the aid program to influence planting decisions. As the planting season is all but wrapped up, it’ll be much more time appropriate to release more detailed information.
Thursday, June 27, 2019
Washington Insider: Estimated Cost of Trade War
The urban press sees the threats of an intensifying global trade war as big news and spends considerable effort trying to describe how big that threat may be. For example, this week Bloomberg is reporting that the world economy runs the risk of having to foot a $1.2 trillion bill if the U.S.-China trade war escalates.
Bloomberg Economics says it is aiming directly at the challenge confronting U.S. President Trump and his Chinese counterpart Xi Jinping as they meet at the two-day Group of 20 summit in Osaka which begins on June 28.
One outcome of the talks, Bloomberg says, would be a replay of the Trump-Xi meeting at the G-20 in Buenos Aires in 2018 and could mean an easing of tensions. Tariffs could stay on hold and Chinese tech-giant Huawei could gain some breathing space from U.S. sanctions.
By contrast, a misstep could trigger 25% tariffs on all trade between the world’s two largest economies. Such an event, coupled with a major market drop, could take a $1.2 trillion bite out of global GDP by the end of 2021, Bloomberg economist Dan Hanson says. Numerous companies agree.
Even if the talks lead to tariffs at existing levels, the damage to Chinese, U.S. and global growth is already significant. An earlier Bloomberg report showed for the thousands of categories of Chinese goods that saw tariffs imposed from July 2018, U.S. imports from China were down 26% year-on-year in the first quarter of 2019.
Besides putting pressure on China, tariffs may also be reducing the appeal of locating production in China.
In the first quarter of 2019, sales of product categories where China faces tariffs were up by 30% in Taiwan, more than 20% in Vietnam, and by 17% in South Korea relative to the same period last year—a sharp acceleration from the growth rates recorded in the few quarters before the tariffs were introduced.
For example, Giant Manufacturing Co. saw the writing on the wall early on. The world’s biggest bicycle maker started moving production of U.S.-bound orders out of its China facilities to its home base in Taiwan as soon as it heard the U.S. threats of tariff action in September.
There’s also evidence of other “dodges and diversions.” Imports of TVs from China, which are not subject to tariffs, have soared, while imports of tariffed TV parts have plummeted. A similar trend is evident in imports of tariffed and non-tariffed categories of liquid crystal displays—evidence of tariff dodging by reclassification of products, or buyers looking for near-substitutes to keep costs down.
And while Bloomberg sees “lots of workarounds,” U.S. imports from other countries are up, but not by nearly enough to offset the drop in Chinese supply.
Also, third countries’ exports of the tariffed categories are being reduced by both the disruptions of the market and from weakened Chinese and U.S. demand.
The OECD says China tops that list, with 3.9% of GDP tied up in trade with the U.S. The U.S., with a larger economy and smaller role for exports, is less exposed. Still, trade with China is equal to 1.3% of GDP. China’s nearby neighbors—economies like Taiwan, Korea, and Malaysia—face significant exposure through integration into Asia’s electronics supply chain.
In addition, countries with high exposure to the trade war haven’t just seen exports drop, they’ve also seen capital spending and manufacturing employment suffer. Eight of the 10 most exposed economies have seen drops in capital-spending growth since the third quarter of 2018. Lower capital spending doesn’t just dent growth today, it dents growth in the future as well.
Still, Bloomberg thinks that if Trump and Xi stay focused on commercial interests “a deal remains there for the taking.” China and the U.S. would both benefit from a more open Chinese market with stronger protections for intellectual property. Chinese reformers would see the short-term costs as a price worth paying for a long-term increase in efficiency.
If the negotiations are expanded to consider the larger geopolitical issues, a deal looks harder to do. The incentives for President Trump to stand tough on China are rising. The lesson of past presidential elections is that “bashing Beijing” is a vote-winning strategy with few downsides. For Xi, too, domestic politics matter. A deal that looks like a one-sided win for the U.S. would not be acceptable in Beijing.
Bloomberg says it has surveyed U.S. economists and that many see a 50% probability of an extended truce, with existing tariffs remaining in place while talks resume. A partial deal that actually winds down tariffs has a 20% probability.
That compares to a one-in-four chance of no progress, leading to more U.S. tariffs applied and retaliatory China measures.
Clearly, concerns about an economic slowdown are growing and could affect the upcoming elections. These are important possibilities producers should watch closely in the weeks and months ahead, Washington Insider believes.
Bloomberg Economics says it is aiming directly at the challenge confronting U.S. President Trump and his Chinese counterpart Xi Jinping as they meet at the two-day Group of 20 summit in Osaka which begins on June 28.
One outcome of the talks, Bloomberg says, would be a replay of the Trump-Xi meeting at the G-20 in Buenos Aires in 2018 and could mean an easing of tensions. Tariffs could stay on hold and Chinese tech-giant Huawei could gain some breathing space from U.S. sanctions.
By contrast, a misstep could trigger 25% tariffs on all trade between the world’s two largest economies. Such an event, coupled with a major market drop, could take a $1.2 trillion bite out of global GDP by the end of 2021, Bloomberg economist Dan Hanson says. Numerous companies agree.
Even if the talks lead to tariffs at existing levels, the damage to Chinese, U.S. and global growth is already significant. An earlier Bloomberg report showed for the thousands of categories of Chinese goods that saw tariffs imposed from July 2018, U.S. imports from China were down 26% year-on-year in the first quarter of 2019.
Besides putting pressure on China, tariffs may also be reducing the appeal of locating production in China.
In the first quarter of 2019, sales of product categories where China faces tariffs were up by 30% in Taiwan, more than 20% in Vietnam, and by 17% in South Korea relative to the same period last year—a sharp acceleration from the growth rates recorded in the few quarters before the tariffs were introduced.
For example, Giant Manufacturing Co. saw the writing on the wall early on. The world’s biggest bicycle maker started moving production of U.S.-bound orders out of its China facilities to its home base in Taiwan as soon as it heard the U.S. threats of tariff action in September.
There’s also evidence of other “dodges and diversions.” Imports of TVs from China, which are not subject to tariffs, have soared, while imports of tariffed TV parts have plummeted. A similar trend is evident in imports of tariffed and non-tariffed categories of liquid crystal displays—evidence of tariff dodging by reclassification of products, or buyers looking for near-substitutes to keep costs down.
And while Bloomberg sees “lots of workarounds,” U.S. imports from other countries are up, but not by nearly enough to offset the drop in Chinese supply.
Also, third countries’ exports of the tariffed categories are being reduced by both the disruptions of the market and from weakened Chinese and U.S. demand.
The OECD says China tops that list, with 3.9% of GDP tied up in trade with the U.S. The U.S., with a larger economy and smaller role for exports, is less exposed. Still, trade with China is equal to 1.3% of GDP. China’s nearby neighbors—economies like Taiwan, Korea, and Malaysia—face significant exposure through integration into Asia’s electronics supply chain.
In addition, countries with high exposure to the trade war haven’t just seen exports drop, they’ve also seen capital spending and manufacturing employment suffer. Eight of the 10 most exposed economies have seen drops in capital-spending growth since the third quarter of 2018. Lower capital spending doesn’t just dent growth today, it dents growth in the future as well.
Still, Bloomberg thinks that if Trump and Xi stay focused on commercial interests “a deal remains there for the taking.” China and the U.S. would both benefit from a more open Chinese market with stronger protections for intellectual property. Chinese reformers would see the short-term costs as a price worth paying for a long-term increase in efficiency.
If the negotiations are expanded to consider the larger geopolitical issues, a deal looks harder to do. The incentives for President Trump to stand tough on China are rising. The lesson of past presidential elections is that “bashing Beijing” is a vote-winning strategy with few downsides. For Xi, too, domestic politics matter. A deal that looks like a one-sided win for the U.S. would not be acceptable in Beijing.
Bloomberg says it has surveyed U.S. economists and that many see a 50% probability of an extended truce, with existing tariffs remaining in place while talks resume. A partial deal that actually winds down tariffs has a 20% probability.
That compares to a one-in-four chance of no progress, leading to more U.S. tariffs applied and retaliatory China measures.
Clearly, concerns about an economic slowdown are growing and could affect the upcoming elections. These are important possibilities producers should watch closely in the weeks and months ahead, Washington Insider believes.
Another Small Refiner Exemption From RFS Obligations Withdrawn/Ineligible
Data from EPA now shows there are 38 small refiner exemption (SRE) requests pending for the 2018 compliance year as of June 24.
There were 40 SRE requests received by EPA and the data now shows that two have been declared ineligible or have been withdrawn from consideration.
SREs continue to be a major focus with US biofuel interests, with the White House ordering a review of the SRE process after President Donald Trump was hit with criticism at an Iowa event. Farmers told Trump that while they appreciated the administration’s efforts to approve year-round sales of E15, the SREs were effectively more than offsetting the benefit from the potential expanded ethanol sales.
There were 40 SRE requests received by EPA and the data now shows that two have been declared ineligible or have been withdrawn from consideration.
SREs continue to be a major focus with US biofuel interests, with the White House ordering a review of the SRE process after President Donald Trump was hit with criticism at an Iowa event. Farmers told Trump that while they appreciated the administration’s efforts to approve year-round sales of E15, the SREs were effectively more than offsetting the benefit from the potential expanded ethanol sales.
USMCA action by the end of this year expected by key Democrat
Members of a working group appointed by House Speaker Nancy Pelosi, D-Calif., met Tuesday afternoon with U.S. Trade Representative Bob Lighthizer to discuss drug pricing provisions in the U.S.-Mexico-Canada Agreement (USMCA), Ways and Means Trade Chairman Earl Blumenauer, D-Ore., said. Blumenauer said Congress should be able to ratify USMCA by the end of the year.
While issues important to Democrats must be addressed, the lawmaker said he recognizes that Mexico’s newly elected president and the country will suffer if the U.S. takes too long to approve the agreement.
Meanwhile a group of Democratic lawmakers laid out their demands for supporting USMCA, including the reinstatement of Mandatory Country of Origin Labeling (COOL), something that few expect will happen.
While issues important to Democrats must be addressed, the lawmaker said he recognizes that Mexico’s newly elected president and the country will suffer if the U.S. takes too long to approve the agreement.
Meanwhile a group of Democratic lawmakers laid out their demands for supporting USMCA, including the reinstatement of Mandatory Country of Origin Labeling (COOL), something that few expect will happen.
Drumroll Begins for USDA Planting Estimates
Typically, corn is shoulder high by now and soybeans are well on their way to canopying, but if there is one word we can't use in 2019, it is "typically." The first clue came in May when we were comparing the slow pace of corn planting to 2013. Then, in late May, we were comparing the planting pace to 1993 and 1995.
Sometime in early June, it became obvious that comparing to previous years was futile as we had never seen so much rain cover so much of the Corn Belt for such an extended time during planting season. In 2019, we stand on a path untraveled, and it has made the process of estimating row-crop acres more difficult than usual.
It is important to understand that Friday's acreage estimates from USDA begin with surveys conducted in the first two weeks of June. This year, farmers were still struggling with planting in early June, looking for a day here or there when conditions were dry enough to get in the field, even if just for a few hours before the next showers fell.
The other tricky factor hiding in USDA's numbers that many seem to forget is that the three-crop total of corn, soybeans and wheat in USDA's acreage estimate in June is 220.2 million acres (ma), down 5.9 ma from last year. In other words, USDA has already factored in a smaller planting area in addition to the 3 ma reduction seen in June's planting estimate.
Given this year's difficult weather and late planting, USDA's June 28 estimates will not be as accurate as other years and will need to be updated on Aug. 12. Some may be tempted to dismiss Friday's estimates, but that would be a mistake. Even with its flaws, USDA's June effort will be the most credible measurement attempt that the market has available and it will narrow the range of guesses moving forward. In short, Friday's acreage estimates, flawed as they are, could set the tone for corn prices into harvest.
CORN
As we look to Dow Jones' survey of 17 analysts, we see corn plantings estimated in a range from 84.3 ma to 88.8 ma, resulting in an average guess of 87.0 ma. If true, that would potentially take USDA's estimate of U.S. ending corn stocks from the current 1.675 billion bushels (bb) down to a more bullish estimate of roughly 1.3 bb. With the level of uncertainty running high in 2019, it won't take much of a swing in the acreage estimate to have dramatic consequences for corn stocks. That is why Friday's number is so important for prices moving forward.
As potentially bullish as the acreage estimate is, the same cannot be said for June 1 corn stocks. It is clear that export activity for U.S. corn slowed in the third quarter of 2018-19, especially in the final half of May as corn prices moved higher. Dow Jones' survey expects USDA to find 5.308 bb of corn on hand as of June 1, roughly the same as a year ago. If true, that means U.S. corn demand will have totaled 11.26 bb through three quarters of 2018-19, a lower amount for the second consecutive season.
SOYBEANS
For soybeans, traders have to wonder if fewer corn acres translated to more soybean acres. Or were planting conditions so difficult that even soybeans lost acres in 2019? Monday's Crop Progress report from USDA suggests the latter, saying 85% of soybeans were planted as of June 23, short of the five-year average of 97% for this time of year.
Persistent and relentless rainfall in the eastern Midwest through June also supports the notion that soybean acres were lost. Dow Jones' survey expects USDA to peg soybean plantings at 84.6 ma Friday, the same as forecast in the March Prospective Plantings report and the June WASDE report.
If Dow Jones' survey is close, the U.S. soybean crop will have a chance to fall below 4 bb for the first time since 2015. While prospects for a smaller crop help trim expectations for new-crop ending soybean stocks, we can't yet say it will be bullish for soybean prices because, once again, we can't confidently predict demand without knowing whether China will be a willing participant in 2019-20.
As things currently stand, soybean demand has suffered without China in 2018-19, and Dow Jones' survey expects USDA to find 1.86 bb of soybean stocks in the U.S. on June 1, the most ever for that date. With U.S. soybean shipments down 24% in 2018-19, it is difficult to imagine anything other than a bearish report of soybean stocks Friday.
Once again, trade with China is the key to higher soybean prices, and talks are said to be taking place ahead of this week's G20 meeting in Japan.
WHEAT
For wheat, Friday's USDA reports just don't hold the same drama as they do for corn and soybeans. Any impact on Friday's wheat prices is likely to come from corn. USDA's current wheat planting estimate of 45.8 ma is the lowest in 100 years and is not likely to change much, if at all, on Friday.
June 1 wheat stocks in the U.S. will represent the ending supply of 2018-19 and are expected to land near 1.1 bb, an amount that has been anticipated for months. It is difficult to imagine any surprise for wheat prices in Friday's reports and, unless corn has a surprise, Friday's trading in wheat is apt to be more about weather conditions around the world.
While USDA's Grain Stocks reports are likely to be bearish Friday, there is plenty of room to be stunned by a surprise in USDA's estimates of row-crop plantings. Again, because of this year's difficult field conditions, USDA's planting estimates in June will need to be refined later. But what we do learn Friday is apt to set a direction for prices into harvest.
Join us Friday at noon CDT for DTN's post-report webinar where I will review USDA's estimates and answer questions. Sign up for Friday's webinar at: https://dtn.webex.com/…
QUARTERLY STOCKS (million bushels)
6/1/19 Avg High Low 3/1/19 6/1/18
Corn 5,308 5,497 5,099 8,605 5,305
Soybeans 1,856 1,962 1,700 2,716 1,219
Wheat 1,092 1,113 1,021 1,591 1,099
ACREAGE (million acres) USDA USDA
6/28/19 Average High Low 3/29/19 2018-19
Corn 87.03 88.80 84.30 92.80 89.13
Soybeans 84.59 86.50 83.00 84.60 89.20
Cotton 13.80
All Wheat 45.67 46.10 45.00 45.80 47.80
Winter 31.48 31.70 30.80 31.50 32.54
Spring 12.61 13.00 12.00 12.80 13.20
Durum 1.47 1.80 1.30 1.42 2.07
Sometime in early June, it became obvious that comparing to previous years was futile as we had never seen so much rain cover so much of the Corn Belt for such an extended time during planting season. In 2019, we stand on a path untraveled, and it has made the process of estimating row-crop acres more difficult than usual.
It is important to understand that Friday's acreage estimates from USDA begin with surveys conducted in the first two weeks of June. This year, farmers were still struggling with planting in early June, looking for a day here or there when conditions were dry enough to get in the field, even if just for a few hours before the next showers fell.
The other tricky factor hiding in USDA's numbers that many seem to forget is that the three-crop total of corn, soybeans and wheat in USDA's acreage estimate in June is 220.2 million acres (ma), down 5.9 ma from last year. In other words, USDA has already factored in a smaller planting area in addition to the 3 ma reduction seen in June's planting estimate.
Given this year's difficult weather and late planting, USDA's June 28 estimates will not be as accurate as other years and will need to be updated on Aug. 12. Some may be tempted to dismiss Friday's estimates, but that would be a mistake. Even with its flaws, USDA's June effort will be the most credible measurement attempt that the market has available and it will narrow the range of guesses moving forward. In short, Friday's acreage estimates, flawed as they are, could set the tone for corn prices into harvest.
CORN
As we look to Dow Jones' survey of 17 analysts, we see corn plantings estimated in a range from 84.3 ma to 88.8 ma, resulting in an average guess of 87.0 ma. If true, that would potentially take USDA's estimate of U.S. ending corn stocks from the current 1.675 billion bushels (bb) down to a more bullish estimate of roughly 1.3 bb. With the level of uncertainty running high in 2019, it won't take much of a swing in the acreage estimate to have dramatic consequences for corn stocks. That is why Friday's number is so important for prices moving forward.
As potentially bullish as the acreage estimate is, the same cannot be said for June 1 corn stocks. It is clear that export activity for U.S. corn slowed in the third quarter of 2018-19, especially in the final half of May as corn prices moved higher. Dow Jones' survey expects USDA to find 5.308 bb of corn on hand as of June 1, roughly the same as a year ago. If true, that means U.S. corn demand will have totaled 11.26 bb through three quarters of 2018-19, a lower amount for the second consecutive season.
SOYBEANS
For soybeans, traders have to wonder if fewer corn acres translated to more soybean acres. Or were planting conditions so difficult that even soybeans lost acres in 2019? Monday's Crop Progress report from USDA suggests the latter, saying 85% of soybeans were planted as of June 23, short of the five-year average of 97% for this time of year.
Persistent and relentless rainfall in the eastern Midwest through June also supports the notion that soybean acres were lost. Dow Jones' survey expects USDA to peg soybean plantings at 84.6 ma Friday, the same as forecast in the March Prospective Plantings report and the June WASDE report.
If Dow Jones' survey is close, the U.S. soybean crop will have a chance to fall below 4 bb for the first time since 2015. While prospects for a smaller crop help trim expectations for new-crop ending soybean stocks, we can't yet say it will be bullish for soybean prices because, once again, we can't confidently predict demand without knowing whether China will be a willing participant in 2019-20.
As things currently stand, soybean demand has suffered without China in 2018-19, and Dow Jones' survey expects USDA to find 1.86 bb of soybean stocks in the U.S. on June 1, the most ever for that date. With U.S. soybean shipments down 24% in 2018-19, it is difficult to imagine anything other than a bearish report of soybean stocks Friday.
Once again, trade with China is the key to higher soybean prices, and talks are said to be taking place ahead of this week's G20 meeting in Japan.
WHEAT
For wheat, Friday's USDA reports just don't hold the same drama as they do for corn and soybeans. Any impact on Friday's wheat prices is likely to come from corn. USDA's current wheat planting estimate of 45.8 ma is the lowest in 100 years and is not likely to change much, if at all, on Friday.
June 1 wheat stocks in the U.S. will represent the ending supply of 2018-19 and are expected to land near 1.1 bb, an amount that has been anticipated for months. It is difficult to imagine any surprise for wheat prices in Friday's reports and, unless corn has a surprise, Friday's trading in wheat is apt to be more about weather conditions around the world.
While USDA's Grain Stocks reports are likely to be bearish Friday, there is plenty of room to be stunned by a surprise in USDA's estimates of row-crop plantings. Again, because of this year's difficult field conditions, USDA's planting estimates in June will need to be refined later. But what we do learn Friday is apt to set a direction for prices into harvest.
Join us Friday at noon CDT for DTN's post-report webinar where I will review USDA's estimates and answer questions. Sign up for Friday's webinar at: https://dtn.webex.com/…
QUARTERLY STOCKS (million bushels)
6/1/19 Avg High Low 3/1/19 6/1/18
Corn 5,308 5,497 5,099 8,605 5,305
Soybeans 1,856 1,962 1,700 2,716 1,219
Wheat 1,092 1,113 1,021 1,591 1,099
ACREAGE (million acres) USDA USDA
6/28/19 Average High Low 3/29/19 2018-19
Corn 87.03 88.80 84.30 92.80 89.13
Soybeans 84.59 86.50 83.00 84.60 89.20
Cotton 13.80
All Wheat 45.67 46.10 45.00 45.80 47.80
Winter 31.48 31.70 30.80 31.50 32.54
Spring 12.61 13.00 12.00 12.80 13.20
Durum 1.47 1.80 1.30 1.42 2.07
Thursday Watch List
Markets
In addition to keeping one eye on the weather forecast and one eye on trade news, there are plenty of reports on Thursday's docket. Weekly export sales, jobless claims and an update of first quarter U.S. GDP start the day off at 7:30 a.m. CDT. An index of pending home sales at 9 a.m. is followed by natural gas inventory at 9:30 a.m. CDT. Thursday's reports end at 2 p.m. with the release of USDA's quarterly hogs and pigs report.
Weather
Light to moderate rain is in store for the northern Midwest Thursday. Other primary crop areas will be dry. Temperatures will continue trending to seasonal to above-normal levels. Warmer and drier conditions will be favorable for row crop development and winter wheat harvest.
In addition to keeping one eye on the weather forecast and one eye on trade news, there are plenty of reports on Thursday's docket. Weekly export sales, jobless claims and an update of first quarter U.S. GDP start the day off at 7:30 a.m. CDT. An index of pending home sales at 9 a.m. is followed by natural gas inventory at 9:30 a.m. CDT. Thursday's reports end at 2 p.m. with the release of USDA's quarterly hogs and pigs report.
Weather
Light to moderate rain is in store for the northern Midwest Thursday. Other primary crop areas will be dry. Temperatures will continue trending to seasonal to above-normal levels. Warmer and drier conditions will be favorable for row crop development and winter wheat harvest.
Pressure Mounting on Trump, Xi to Get Agreement in Place
U.S. President Donald Trump and Chinese President Xi (Zhee) Jinping will meet Saturday on the sidelines of the G-20 political summit in Osaka, Japan. Politico says both leaders are under mounting economic and political pressure to end their trade war. It’s a high-stakes meeting that may or may not mark a turning point in the negotiations after talks slammed to a halt back in May. Each side’s top trade official got things going with a phone call this week. U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He spoke on the phone on Monday. Lighthizer and U.S. Treasury Secretary Steven Mnuchin (Muh-NOO-chin) are expected to get together with their Beijing counterparts before Trump and Xi go face-to-face on this weekend. Trump’s trade war is taking a huge toll on U.S. farmers and causing major uncertainty for American businesses. Financial conditions in agriculture have gotten much worse, with that weakness starting to show up in lending data and threatening the broader rural economy. Xi faces economic growth in China that’s lagging, food prices are soaring, and his administration could take a hard knock if Trump follows through on his latest tariff threat.
Mnuchin: the U.S., China Trade Deal 90 Percent Done
Treasury Secretary Steven Mnuchin (Muh-NOO-chin) told CNBC that the U.S. and China are getting much closer to a trade deal than people realize. He’s also optimistic that progress will be made when Presidents Trump and Xi meet face-to-face this weekend at the G-20 in Osaka, Japan. “We’re about 90 percent of the way there and I think there’s a definite path forward to completing this,” he said on CNBC. Mnuchin also says he’s confident that Trump and Xi will make additional progress in the stalled trade talks. “The message we want to hear is that they want to come back to the table and continue,” he says. “I think there’s a good outcome for their economy and the U.S. economy to get balanced trade and continue to build on the relationship between the two countries.” What he didn’t provide to CNBC was additional details on what the final 10 percent of the agreement entails, or what some of the more important sticking points still are. The outcome of Saturday’s meeting is very important to the global economy and financial markets, which have been shaken up by the 1.5-year trade dispute between the economic giants. A survey of investors says they don’t expect a deal this weekend, but they don’t expect any new tariffs either.
Perdue Says Farmers Are “A Casualty” in Trade War
Secretary of Agriculture Sonny Perdue acknowledged in an interview earlier this week that farmers are “casualties” in President Trump’s trade war with China. Perdue told CNN he didn’t think a trade deal was likely this weekend when Trump and Chinese President Xi meet in Japan. He’s now hoping a deal can be reached by the end of this year. The administration has set aside aid money for farmers, who make up a key group of voters that pushed Trump over the top in the last presidential election. However, they’ve been among the hardest-hit groups in the country by this trade dispute with China, once a top market for U.S. soybeans. “I think they are one of the casualties in the trade war, yes,” Perdue says. “We knew going in that when you throw a penalty flag on China, any retaliation would come right at the American farmer.” Perdue tells CNN that he’s told the president “you can’t pay the bills with patriotism,” adding that the president understands that. That why Trump is trying to supplement the damage they’re facing from the trade disruption with market facilitation payments. The trade dispute escalated earlier this month after Washington and Beijing raised tariffs on each other’s goods. It’s left U.S. farmers sitting on record volumes of soybeans as China halted purchases.
House Passes Ag Appropriations in Minibus Spending Bill
The U.S. House passed H.R. 3055, a minibus of appropriations that does include the fiscal year 2020 Ag Appropriations Bill. The Hagstrom Report says the final vote was split mostly along party lines. The Ag section of the bill covers the Agriculture Department, as well as the Food and Drug Administration, the Commodity Futures Trading Commission, and the Farm Credit Administration. The funding runs from October 1 of this year through September 30, 2020. New York Democrat Nita Lowey is Chair of the House Appropriations Committee, who says that “The bill makes important investments that will strengthen communities and improve millions of lives. It invests billions into America’s infrastructure, strengthens and modernizes public housing, and delivers on the promise of broadband to rural communities.” House Ag Appropriations Subcommittee Chair Sanford Bishop of Georgia says, “Few people may recognize the far-reaching jurisdiction of the agriculture subcommittee. From food safety and agricultural research to rural development and nutrition assistance, the programs touch the lives of every citizen on a daily basis.” He says that why they rejected the administration’s “draconian cuts” to programs that assist America’s rural communities and vulnerable populations.
Animal Antibiotic Sales are Dropping
The incentives that companies use to help develop new antibiotics for food animals are coming under pressure. A USDA research economist says those incentives are being pressured by high development costs, changing markets, and shifting consumer trends. The trade industry website Meating Place Dot Com says sales in antibiotics in both the U.S. and Europe are dropping, and incentives for companies that manufacture new branded or generic products are slipping as well. Those pharma companies have to cope with research-and-development costs that could run for 10 years from the first idea to market. The companies also have to contend with regulations that ban the use of medically important antibiotics which are used to treat humans. They also have to respond to growing consumer demand for food from animals that haven’t been treated with antibiotics. It’s becoming more expensive for companies to develop alternatives, even if it’s reforming earlier antibiotics. Livestock farmers who can’t use antibiotics to treat their animals are in for slower animal growth rates, a higher cull rate, and even could be affected by growing ineffectiveness of the current drugs. Industry experts say government regulators want to see non-medically important antibiotics developed for animals to treat bacterial infections once they appear.
Brain Drain Coming for Economic Research Service
U.S. Department of Agriculture economists have been saying for some time that Ag Secretary Sonny Perdue’s plan to move the Economic Research Service from Washington to Kansas City won’t be a positive for the agency. Those economists say the potential move was causing a “brain drain” of veteran scientists. An Agri-Pulse report says nearly 70 percent of the employees at the ERS who’ve been ordered to make the move to Kansas City will leave the agency instead. A survey from American Federal Government Employees says even more than that are considering quitting. Now that the first group of agency employees is set to be relocated by August first, that number will likely accelerate. USDA gave the workers tapped for relocation until July 15 to make a decision, just one month after Perdue announced the final site selection. The secretary says the move will save money and improve customer service by bringing the agency closer to farming regions. However, some ERS economists say they see it as retaliation for their reports that cast an unflattering light on Trump administration policies. Not a single employee in the Information Services Division said they were likely to move. About 90 percent of the employees that study topics like food assistance, climate change, and the rural economy are thinking of quitting.
Wednesday, June 26, 2019
Agriculture Secretary Behind Livestock Industry Push to Change FDA Oversight
OMAHA (DTN) -- Arguing against regulations classifying livestock as drugs, the National Pork Producers Council wants the Food and Drug Administration to yield regulatory oversight to USDA for gene-edited animals raised for food.
Agriculture Secretary Sonny Perdue also told farmers over the weekend he would lobby President Donald Trump to make that happen.
On a call with reporters Tuesday, leaders with the National Pork Producers Council (NPPC) explained that gene-editing technology could create opportunities to make pigs resistant to diseases such as porcine reproductive and respiratory syndrome (PRRS).
Experts reiterated gene editing is a targeted process that doesn't necessarily lead to inserting a new gene. Often the focus is to eliminate a gene that is tied to disease susceptibility. Such technology in breeding could lead to reduced antibiotic use by the livestock industry.
"As a veterinarian, that's what excites me most about this technology is it offers a powerful new tool to combat, particularly diseases of livestock that are caused by viruses," said Dan Kovich, deputy director of science and technology for NPPC.
FDA regulations, though, treat the genes in gene-edited animals as a pharmaceutical, creating massive regulatory challenges right up to the point of incinerating research animals raised to resist a disease.
"It stretches incredulity and no other country on earth is proposing to regulate editing as a drug," Alison Van Eenennaam, a specialist in animal genomics and biotechnology at the University of California-Davis. "It's just kind of outlying with what's being proposed in other countries."
NPPC leaders said that an executive order should require FDA to reconsider its regulatory regime around gene editing.
Speaking at an event Sunday in Council Bluffs, Iowa, Agriculture Secretary Sonny Perdue told farmers that USDA should have at least some oversight of gene-edited animals. Perdue said he would ask President Donald Trump to require FDA to share its authority.
"When it comes to gene editing, we got the ball on plants, and FDA thinks they have got the ball on animals," Perdue said. "I'm going to try to persuade the president they need to share that ball. They need to hand it off sometimes." Perdue added, "The president signed an executive order insisting that we do that."
President Donald Trump earlier this month signed an executive order telling regulators to simplify how they regulate biotechnology in both crops and animals. Perdue said the executive order requires agencies across the federal government "to come together and talk about what is the right policy to make more safe, more resilient and more sustainable crops using biotechnology, both in animals and in plants going forward."
Perdue then pointed to the future need to feed 10 billion people, saying the U.S. needs "all of the tools in the toolbox." Trade competitors will take over if the U.S. doesn't lead in biotechnology, Perdue said. "If we don't put these very safe biotechnology uses to work here at home, guess who is going to do it? Brazil is going to do it, Canada is going to do it, Europe is going to do it," the secretary said.
Until now, the livestock industry has been restrained when it comes to producing transgenic animals because of the regulations, Van Eenennaam said. Under that field, a genetically modified salmon is the only animal food product approved by FDA. Gene editing shouldn't have to undergo the complicated regulations for transgenic animals, she said.
"The hope with gene editing is you are not introducing novel DNA," Van Eenennaam said on the call with NPPC leaders. "It's a deletion or removal of a few strands of DNA to make that disease-resistant pig." She added, "That's what breeding programs are based upon. There's no transgenic DNA to trigger GMO regulation."
Van Eenennaam and others also cited multiple instances of livestock researchers and companies going overseas to continue their work. Earlier this year, Texas A&M biologist Charles Long moved a project on gene-edited cattle to Brazil.
At the moment, there are no gene edits commercialized in swine, but NPPC officials projected that other countries will quickly advance such animals and products. Last month, a British animal genetics company, Genus, announced an agreement to work in collaboration with a Chinese livestock and genetics company to scale the PRRS-resistant gene edits in China.
"As a U.S. pork producer, it certainly has us looking at exporting some of our breeding animals into China and positioning ourselves to take advantage of what we believe will be a successful employment of that technology obviously outside of U.S. borders," said Bradley Wolter, president of The Maschhoffs, an Illinois-based hog producer.
If a PRRS-resistant hog were developed in another country, competitors could see as much as a 15% improvement in herd efficiency. "That would be game-changing for the U.S. pork industry," Wolter said.
Agriculture Secretary Sonny Perdue also told farmers over the weekend he would lobby President Donald Trump to make that happen.
On a call with reporters Tuesday, leaders with the National Pork Producers Council (NPPC) explained that gene-editing technology could create opportunities to make pigs resistant to diseases such as porcine reproductive and respiratory syndrome (PRRS).
Experts reiterated gene editing is a targeted process that doesn't necessarily lead to inserting a new gene. Often the focus is to eliminate a gene that is tied to disease susceptibility. Such technology in breeding could lead to reduced antibiotic use by the livestock industry.
"As a veterinarian, that's what excites me most about this technology is it offers a powerful new tool to combat, particularly diseases of livestock that are caused by viruses," said Dan Kovich, deputy director of science and technology for NPPC.
FDA regulations, though, treat the genes in gene-edited animals as a pharmaceutical, creating massive regulatory challenges right up to the point of incinerating research animals raised to resist a disease.
"It stretches incredulity and no other country on earth is proposing to regulate editing as a drug," Alison Van Eenennaam, a specialist in animal genomics and biotechnology at the University of California-Davis. "It's just kind of outlying with what's being proposed in other countries."
NPPC leaders said that an executive order should require FDA to reconsider its regulatory regime around gene editing.
Speaking at an event Sunday in Council Bluffs, Iowa, Agriculture Secretary Sonny Perdue told farmers that USDA should have at least some oversight of gene-edited animals. Perdue said he would ask President Donald Trump to require FDA to share its authority.
"When it comes to gene editing, we got the ball on plants, and FDA thinks they have got the ball on animals," Perdue said. "I'm going to try to persuade the president they need to share that ball. They need to hand it off sometimes." Perdue added, "The president signed an executive order insisting that we do that."
President Donald Trump earlier this month signed an executive order telling regulators to simplify how they regulate biotechnology in both crops and animals. Perdue said the executive order requires agencies across the federal government "to come together and talk about what is the right policy to make more safe, more resilient and more sustainable crops using biotechnology, both in animals and in plants going forward."
Perdue then pointed to the future need to feed 10 billion people, saying the U.S. needs "all of the tools in the toolbox." Trade competitors will take over if the U.S. doesn't lead in biotechnology, Perdue said. "If we don't put these very safe biotechnology uses to work here at home, guess who is going to do it? Brazil is going to do it, Canada is going to do it, Europe is going to do it," the secretary said.
Until now, the livestock industry has been restrained when it comes to producing transgenic animals because of the regulations, Van Eenennaam said. Under that field, a genetically modified salmon is the only animal food product approved by FDA. Gene editing shouldn't have to undergo the complicated regulations for transgenic animals, she said.
"The hope with gene editing is you are not introducing novel DNA," Van Eenennaam said on the call with NPPC leaders. "It's a deletion or removal of a few strands of DNA to make that disease-resistant pig." She added, "That's what breeding programs are based upon. There's no transgenic DNA to trigger GMO regulation."
Van Eenennaam and others also cited multiple instances of livestock researchers and companies going overseas to continue their work. Earlier this year, Texas A&M biologist Charles Long moved a project on gene-edited cattle to Brazil.
At the moment, there are no gene edits commercialized in swine, but NPPC officials projected that other countries will quickly advance such animals and products. Last month, a British animal genetics company, Genus, announced an agreement to work in collaboration with a Chinese livestock and genetics company to scale the PRRS-resistant gene edits in China.
"As a U.S. pork producer, it certainly has us looking at exporting some of our breeding animals into China and positioning ourselves to take advantage of what we believe will be a successful employment of that technology obviously outside of U.S. borders," said Bradley Wolter, president of The Maschhoffs, an Illinois-based hog producer.
If a PRRS-resistant hog were developed in another country, competitors could see as much as a 15% improvement in herd efficiency. "That would be game-changing for the U.S. pork industry," Wolter said.
Washington Insider: War of Words Over Fed Policy
The New York Times said Monday that President Trump continued his assault on the Federal Reserve “blaming the central bank for reining in a U.S. economy that is on track to reach its longest expansion in history.”
For its part, the Times noted that the President’s criticism of the Fed comes at an “odd moment” since as of July 1, the U.S. will have experienced the longest economic expansion on record, ten years and running. The unemployment rate is at its lowest level in nearly 50 years, and inflation – though quiescent – has at least gotten close to the central bank’s 2% goal. By lifting rates from near zero and shrinking the massive volume of government-backed bonds on its balance sheet, the central bank has bought itself precious space to fight the next economic downturn when it comes, NYT said.
In addition, the Fed has already signaled that it is prepared to cut rates at its next meeting, with Fed Chairman Jerome Powell reiterating last week that officials will take steps to sustain the economic expansion.
Still, Trump continues to blame the Fed for not doing more sooner to goose an economy that, “according to most metrics, was not in need of additional goosing,” the Times said.
First quarter growth came in at a solid 3.1%. The Dow Jones industrial average has been climbing steadily this month, buoyed in part by promises of coming Fed rate cuts, and output growth trackers suggest that the economy probably grew around 2% in the second quarter – roughly in-line with the rate that most economists think it can sustain, given its demographics and investment level.
Still, Trump tweeted on Monday that the Fed “doesn’t know what it is doing,” and that without rate increases, the Dow Jones industrial average would be “thousands of points higher” and gross domestic product growth would be in the “4’s or even 5’s.”
The Fed lifted interest rates nine times between late 2015 and the end of last year, with four increases coming under Powell, whom Trump selected to lead the central bank. The tightening cycle was historically slow, as central bankers tested whether very-low unemployment would send inflation rocketing higher. So far it has not and when the economy showed signs of cooling heading into 2019, the Fed stopped raising rates. It is now poised to cut them as global growth slows and inflation remains tepid.
The President is correct that the Fed’s rate increases were meant to slow the economy, the Times thinks. The central bank’s job is to keep growth on a stable glide path, sacrificing booms to fend off high inflation and job-costing busts. And it is also true that the central bank’s moves have been controversial at times. The decision to raise rates for a final time last December, amid tight financial conditions and low inflation, drew criticism from economists and others across the political spectrum and spurred stock market turmoil.
Still, the Times thinks Fed discomfort is natural. “I don’t think the Fed can ever sit back on its achievements and feel comfortable,’’ said Mark Spindel, founder and chief investment officer at Potomac River Capital and the co-author of a book on politics and the Fed. “Trump is trying to foam the runway in case there is a slowdown.”
However, most economists say the major risks to the expansion come not from the Fed but from the administration’s trade war with China and slowing global growth. These include tariffs on $250 billion worth of Chinese goods and threats to tax all Chinese imports if a planned meeting with President Xi Jinping does not go well later this week.
The Fed itself is worried that trade woes, along with other factors, could weigh heavily on the economy and said at its meeting last week that it is open to cutting interest rates soon. If it does lower rates, it’s possible that it will also stop shrinking its swollen balance sheet, another policy the President objects to regularly because he sees that as draining stimulus from the economy.
Now, a growing number of experts project rate cuts this year – Powell noted that many of those who have not incorporated expected rate cuts into their baseline projections see them as increasingly likely. Following the recent announcement, investors have entirely priced in a cut in July and see the possibility for even lower rates come the Fed’s September meeting.
But, even as the Fed leans toward doing precisely what President Trump is urging, he has redoubled attacks. “What he’s done is he raised interest rates too fast,” the President charged over the weekend. “I think the economy’s so strong we’re going to bull through it. But I’m not happy with his actions.”
It is quite usual for executives to complain about monetary policy but an independent central bark is widely seen as essential for stable and vigorous economic growth. Thus, while tensions between the Executive and the Fed are normal, they should be watched very closely as they evolve, Washington Insider believes.
For its part, the Times noted that the President’s criticism of the Fed comes at an “odd moment” since as of July 1, the U.S. will have experienced the longest economic expansion on record, ten years and running. The unemployment rate is at its lowest level in nearly 50 years, and inflation – though quiescent – has at least gotten close to the central bank’s 2% goal. By lifting rates from near zero and shrinking the massive volume of government-backed bonds on its balance sheet, the central bank has bought itself precious space to fight the next economic downturn when it comes, NYT said.
In addition, the Fed has already signaled that it is prepared to cut rates at its next meeting, with Fed Chairman Jerome Powell reiterating last week that officials will take steps to sustain the economic expansion.
Still, Trump continues to blame the Fed for not doing more sooner to goose an economy that, “according to most metrics, was not in need of additional goosing,” the Times said.
First quarter growth came in at a solid 3.1%. The Dow Jones industrial average has been climbing steadily this month, buoyed in part by promises of coming Fed rate cuts, and output growth trackers suggest that the economy probably grew around 2% in the second quarter – roughly in-line with the rate that most economists think it can sustain, given its demographics and investment level.
Still, Trump tweeted on Monday that the Fed “doesn’t know what it is doing,” and that without rate increases, the Dow Jones industrial average would be “thousands of points higher” and gross domestic product growth would be in the “4’s or even 5’s.”
The Fed lifted interest rates nine times between late 2015 and the end of last year, with four increases coming under Powell, whom Trump selected to lead the central bank. The tightening cycle was historically slow, as central bankers tested whether very-low unemployment would send inflation rocketing higher. So far it has not and when the economy showed signs of cooling heading into 2019, the Fed stopped raising rates. It is now poised to cut them as global growth slows and inflation remains tepid.
The President is correct that the Fed’s rate increases were meant to slow the economy, the Times thinks. The central bank’s job is to keep growth on a stable glide path, sacrificing booms to fend off high inflation and job-costing busts. And it is also true that the central bank’s moves have been controversial at times. The decision to raise rates for a final time last December, amid tight financial conditions and low inflation, drew criticism from economists and others across the political spectrum and spurred stock market turmoil.
Still, the Times thinks Fed discomfort is natural. “I don’t think the Fed can ever sit back on its achievements and feel comfortable,’’ said Mark Spindel, founder and chief investment officer at Potomac River Capital and the co-author of a book on politics and the Fed. “Trump is trying to foam the runway in case there is a slowdown.”
However, most economists say the major risks to the expansion come not from the Fed but from the administration’s trade war with China and slowing global growth. These include tariffs on $250 billion worth of Chinese goods and threats to tax all Chinese imports if a planned meeting with President Xi Jinping does not go well later this week.
The Fed itself is worried that trade woes, along with other factors, could weigh heavily on the economy and said at its meeting last week that it is open to cutting interest rates soon. If it does lower rates, it’s possible that it will also stop shrinking its swollen balance sheet, another policy the President objects to regularly because he sees that as draining stimulus from the economy.
Now, a growing number of experts project rate cuts this year – Powell noted that many of those who have not incorporated expected rate cuts into their baseline projections see them as increasingly likely. Following the recent announcement, investors have entirely priced in a cut in July and see the possibility for even lower rates come the Fed’s September meeting.
But, even as the Fed leans toward doing precisely what President Trump is urging, he has redoubled attacks. “What he’s done is he raised interest rates too fast,” the President charged over the weekend. “I think the economy’s so strong we’re going to bull through it. But I’m not happy with his actions.”
It is quite usual for executives to complain about monetary policy but an independent central bark is widely seen as essential for stable and vigorous economic growth. Thus, while tensions between the Executive and the Fed are normal, they should be watched very closely as they evolve, Washington Insider believes.
US, China Officials Spoke Monday on Trade Issues
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin held a telephone discussion with Chinese Vice Premier Liu He Monday, according to a statement from the Chinese Ministry of Commerce.
The two sides exchanged views on trade based on instructions from leaders of the two countries, the statement said, and the two sides agreed to maintain communications. The call took place at the request of the U.S., the Xinhua news agency said.
Commerce Ministry spokesman Geng Shuang provided no details on the coming talks between President Donald Trump and Chinese President Xi Jinping, but said China remained committed to develop relations between the two sides “based on coordination and cooperation.”
The two sides exchanged views on trade based on instructions from leaders of the two countries, the statement said, and the two sides agreed to maintain communications. The call took place at the request of the U.S., the Xinhua news agency said.
Commerce Ministry spokesman Geng Shuang provided no details on the coming talks between President Donald Trump and Chinese President Xi Jinping, but said China remained committed to develop relations between the two sides “based on coordination and cooperation.”
Administration Says Trump Still Wants Structural Changes in China
President Donald Trump and Chinese President Xi Jinping will meet Saturday during the G20 summit in Osaka, Japan, with a senior administration official not willing to commit to whether the talks are aimed at restarting the talks between the two sides that broke down in May or whether they are aimed at reaching a more formal agreement.
"It is really just an opportunity for the president to maintain his engagement as he has very closely with his Chinese counterpart,” the official said. “Even as trade frictions persist, he has got the opportunity to see where the Chinese side is since the talks last left off. The president is quite comfortable with any outcome.”
Trump remains insistent that there needs to be “structural real reform in China across a number of issues and a number of sectors, and nothing about that has changed," another administration official stated, noting the breakdown in talks have not changed the “ultimate goal” of the effort.
"It is really just an opportunity for the president to maintain his engagement as he has very closely with his Chinese counterpart,” the official said. “Even as trade frictions persist, he has got the opportunity to see where the Chinese side is since the talks last left off. The president is quite comfortable with any outcome.”
Trump remains insistent that there needs to be “structural real reform in China across a number of issues and a number of sectors, and nothing about that has changed," another administration official stated, noting the breakdown in talks have not changed the “ultimate goal” of the effort.
Wednesday Watch List
Markets
Trading in grains may be quiet until Friday's USDA reports, but forecasts will still be watched and any trade news still gets attention. Wednesday has a report on U.S. durable goods orders at 7:30 a.m. CDT, followed by the U.S. Energy Department's weekly inventories at 9:30 a.m.
Weather
Wednesday will be mostly dry in primary crop areas. The exception will be in the western Midwest, where showers and thunderstorms will fire up. Temperatures will be seasonally warm in the Midwest and above normal in the Plains, offering better row crop development and winter wheat harvest conditions.
Trading in grains may be quiet until Friday's USDA reports, but forecasts will still be watched and any trade news still gets attention. Wednesday has a report on U.S. durable goods orders at 7:30 a.m. CDT, followed by the U.S. Energy Department's weekly inventories at 9:30 a.m.
Weather
Wednesday will be mostly dry in primary crop areas. The exception will be in the western Midwest, where showers and thunderstorms will fire up. Temperatures will be seasonally warm in the Midwest and above normal in the Plains, offering better row crop development and winter wheat harvest conditions.
Ag Lenders Are Feeling Squeezed by the Struggling Economy
President Donald Trump’s trade war seems to be pushing the rural economy closer and closer to a meltdown. Politico says economic challenges in agriculture are weighing heavier on banks that lend to farmers and ranchers. Farmers are getting slammed on all sides by retaliatory tariffs, unusually bad weather, as well as a five-year drop in farm incomes. Even the African Swine Fever outbreak in China will affect U.S. farmers because it will put a big dent in the demand for American soybeans, even if the trade war with Beijing is finally resolved. Iowa corn and soybean farmer Grant Kimberly tells Politico that agriculture has seen more than its share of “black swans” in the past couple of years. “We’ve had bad weather, we’ve had African Swine Fever, and we’ve had trade wars,” he says. “I’d say this is pretty unprecedented territory. We haven’t seen anything like this since the 1980s.” During the first quarter of 2019, the farm loan default rate hit the highest level it’s been at in seven years. One in five farm borrowers increased the amount of debt they carried over from 2018 to the first quarter of this year. Producers are estimated to hold approximately $427 billion in debt this year, the most since the 1980s farm crisis.
Justice Department Intervenes in Poultry Price-Fixing Court Case
The U.S. Department of Justice intervened last week in a price-fixing lawsuit against some of the nation’s biggest poultry companies. The Fern Dot Org website says that could signal that the department’s own grand jury investigation into the chicken sector might result in criminal indictments. The Justice Department asked the U.S. District Court in northern Illinois to stop discovery in a class-action lawsuit brought by food distributor Maplevale Farm, saying in a motion that a “limited stay is needed to protect the grand jury’s investigation.” The stay applies to all “defendant employee and former employee depositions” and was granted on a temporary basis. There will be a hearing later this week on the DOJ request for a six-month stay. A professor at the University of Wisconsin-Madison law school calls the development “significant.” The investigation signals that the DOJ feels “there are serious violations here that require the grand jury inquiry and the potential for criminal indictments.” The lawsuit alleges that the companies colluded on price hikes by relying on Agri Stats, a secretive information sharing service used by poultry companies. The suit also says those companies manipulated prices up to artificially high levels.
Farmers’ Working Capital “Critically Low”
The agriculture sector is suffering from working capital that’s fallen to critically low levels. That news is from the forecasting firm Agricultural Economic Insights. The firm recently analyzed data put out by the Economic Research Service, saying the declines in working capital are stark. Brent Gloy, a Nebraska farmer and economist, writes that “Working capital is projected to fall by 25 percent from last year to this year. This is right on the heels of a 30 percent decline from 2017 through 2018.” Gloy says the current level of working capital amounts to just 31 percent of what was available back in 2014. It’s only 23 percent of the working capital that was available in 2012. He says, “The Market Facilitation Payments are large enough to actively move the needle on financial conditions in the Ag sector. However, they will clearly not rebuild working capital to levels that are necessary to give long-term financial stability to the American agricultural sector.” Gloy also says the declines in the farm sector’s working capital are substantial and should cause some serious concerns about the financial health of the farm sector.
Pelosi: Deportation Delay Won’t Lead to Immigration Deal
Agriculture may be waiting a while for the nation to improve the immigration program it relies on to provide farm laborers. President Donald Trump agreed to a two-week postponement of mass deportation of illegal immigrants while asking Congress to work out an agreement on changes to the nation’s asylum laws. House Speaker Nancy Pelosi had asked the president to delay the deportations. However, she says Congress will not be working out a deal with Republicans to reform asylum laws. Instead, Pelosi tells the Washington Examiner that the two-week delay will simply give activists and the religious community more time to speak out against the deportations. Trump pulled back on plans last week to round up thousands of illegal immigrants, with an emphasis on deporting those who posed security and safety risks. Trump, along with many Republicans, want to change the asylum laws, which they think makes it too easy to get into the United States. Many of the 100,000 illegal immigrants apprehended at the southern border each of the past three months claimed asylum. Pelosi says there will be no negotiating on the asylum laws. She says Democrats instead want a complete overhaul of the immigration system, as well as a pathway to citizenship for the illegal immigrants already in the country.
Pork Exports to Taiwan Jumping in 2019
While Taiwan is still a relatively small market for U.S. pork to date, exports are surging so far in 2019. Through April, U.S. pork shipments to Taiwan totaled 8,819 metric tons, an incredible 80 percent higher than last year. Drovers’ Ag Web Dot Com says those pork exports also took a significant jump in cash value, coming in 55 percent higher than last year at $19.3 million. Taiwan is also a tremendous place to send U.S. beef exports. Exports topped $500 million dollars for the first time in 2018. Last year’s exports totaled 60,000 metric tons and came in at $550 million, nearly doubling in volume and more than doubling in value over a period of just five years. Joel Haggard is the U.S. Meat Export Federation’s senior vice president for the Asian Pacific. He feels Taiwan is an excellent opportunity for future growth in U.S. exports. Beef’s presence continues to expand in Taiwan’s restaurants and retail stores. Taiwan is also a new market for U.S. lamb exports. Lamb producers regained access to the Taiwanese market back in 2016.
USDA Still Has Over $2 Billion to Invest in Rural America
The U.S. Department of Agriculture has more than $2 billion available this year to invest in community facilities and infrastructure projects in rural areas. “Modern and accessible education, health care, public safety, and municipal services are the foundation for a high quality of life,” says Acting Assistant to the Secretary for Rural Development Joel Baxley. “The USDA is committed to be a strong partner for rural communities to build the facilities they need for their essential services, as well as improve the infrastructure those services rely on to operate in rural America.” USDA is already making those kinds of investments in rural communities across the country and has additional funding available through the Community Facilities Direct Loan Program. More than 100 types of projects are eligible for funding under the USDA’s Community Facilities Program. Eligible applicants include municipalities, public bodies, nonprofit organizations, and federally-recognized Native American tribes. Congress appropriated $2.8 billion for the Community Facilities direct loans and grants in the fiscal year 2019.
Tuesday, June 25, 2019
As Planting Winds Down, Farmers Take Stock of Their Crops and Empty Fields
ROCKVILLE, Md. (DTN) -- June is nearing an end, but you wouldn't know it from looking at many corn and soybean fields this year.
"It's looking great -- if it was the first of May," Missouri farmer Bob Birdsell said of his corn crop, which he finished planting June 14, unthinkably late in most years.
But at least it's all in, which is more than Birdsell can say of his soybeans at the moment. "Beans would have been planted, if we hadn't had a tractor fire," he said. "The planting tractor caught fire on a Friday night and it was the following Tuesday at 5 p.m. before we were able to get another tractor to pull the planter."
That about sums up the 2019 planting season for many of DTN's Agronomy Advisers, a group of farmers and ranchers who report on their operations and current events in agriculture each month.
Just when you thought it couldn't get worse -- it did.
Now that one of the most challenging planting seasons in history is finally trickling to an end, farmers are taking stock of what they have and what they don't have. Crops got a late, challenging start to life. Disease, insects and unknown weather loom on the horizon. Empty fields sit, in need of a plan and management. No time to rest.
THE LOST FIELDS OF 2019
For some growers, the 2019 planting season never really happened. "It's nearly July and we haven't really started planting yet," said Josh Miller, whose fields in southern Illinois sit between the Ohio and Mississippi rivers. "Many of our acres are underwater from the rivers," he explained. "They've been underwater since about February."
Miller will file for prevented planting on the majority of his acres this year and manage only a fraction of the corn and soybeans he planned for. Instead of scouting and tending to developing crops, he will spend much of his summer repairing holes and leveling fields roiled by floodwaters. "For some of the acres, the plan is to use summer cover crops, kill them in early fall, and plant winter wheat," he added.
Likewise, in southeastern Michigan, Raymond Simpkins spent June waiting for a break in the weather that never came. When he checked in with DTN, the skies had just dropped another 1.1 inches of rain on his land. "We had precipitation 118 out of 170 days by last week," he said. "I will leave around 500 acres idle -- got about 140 acres of beans in." Simpkins plans to use tillage to control weeds on those empty fields this summer.
He is worried about the dairies in his region. "Many of the large dairies in our area have no corn planted, and can't get forage made," he said.
In the Texas Panhandle, cool conditions and persistent rains have hijacked the cotton planting season, too, added farmer and rancher Mike Lass. "Our cotton is looking like an old Clint Eastwood western, 'The Good, the Bad and the Ugly,'" he joked. "I'd say we're going to lose at least 50% of our cotton acres in the area. Most acres have been replanted with corn or milo."
TAKING STOCK OF CORN
Of the Agronomy Advisers, only Miller was still hoping to plant some corn acres in the coming week. Most were done, but far later than they would prefer. In north-central Missouri, Kyle Samp wrapped up corn replanting on June 8. In northeastern Nebraska, Kenny Reinke sprayed out his sparse wheat fields and finished corn planting on June 1.
Like the season behind it, the corn crop is late and highly variable. Birdsell's crop ranges from newly emerged to 6-leaf plants, he noted. Some growers were surprised their corn looked as good as it did -- but they know its resiliency to the future stresses is already compromised. "Corn is going to be especially vulnerable to two to three weeks of poorly timed hot and dry," noted Kyle Samp, of north-central Missouri.
"My biggest fear looking forward right now is late-season growing conditions," said Reinke. "This is a crop that can't afford a shortened growing season. It needs growing degree units to push it along all the way through the growing season -- guessing right now, we're looking at pollination in the 20s of July."
Given the ample moisture around, disease seems inevitable, Samp added. "Disease is creeping in on some of this corn, but it's hard to decide whether to throw some resources at this corn or just let it be," he said. "Northern corn leaf blight and gray leaf spot have been found in our area."
BEANS VS. PREVENTED PLANTING
Soybeans are still going into the ground, and soon growers will have to decide if it is more profitable to plant them or declare prevented planting on those acres.
In central Ohio, Keith Peters just received another devastating 5 inches of rainfall on top of his saturated acres. More than 200 acres of his corn and soybeans are lost to floods, and he still has one wet field of soybeans to plant. Samp also has one final field of beans left to go in Missouri, with similar weather.
"Today's rain may have sealed its fate, but I'm not going to make [prevented planting] official until after July 1," he said.
All but 10% of Charles Williams' soybean acres were planted in northeastern Arkansas. What's left is at the mercy of the rivers, he said. "River forecasts don't look particularly favorable for planting at this time, but we'll see."
The decision is complicated by low prices and new government policies rolled out this month, which require acres to be planted in order for farmers to receive trade aid payments for them. "Many people have planted beans on their prevented planting corn acres since the disaster money will be paid on planted acres, however these people regret doing this since the full prevented planting [payments] would have probably paid more," noted Reed Storey, of east-central Arkansas, who squeezed in his final soybean planting on June 15.
In Missouri, Samp has tried hard not to let the rollercoaster of federal ag policy changes this spring affect his agronomic decisions, for just this reason. "All the chatter on the government programs has been such a mess that I've tried to tune it out," he said. "If we had a real program that we knew the rules for, we might have factored it in, but it's pretty difficult when even the rule makers don't know the rules."
To add to the complexity, it's difficult to return unused treated soybean seed, which does not hold up well in storage and is coated with chemicals that make its disposal complicated. (See the DTN story here: https://www.dtnpf.com/…)
"We have mostly all treated seed, so we will do our best to get it in the ground," Birdsell said. If he doesn't, he will take advantage of USDA's recent decision to move the grazing and haying date for cover crops on prevented planting acres to September 1 from November 1.
Williams isn't making any plans for his potential prevented acres just yet -- for now, he's focused on the crops he does have in the ground.
"Weather is, as always, key," he said. "This next month should be the tale of it."
"It's looking great -- if it was the first of May," Missouri farmer Bob Birdsell said of his corn crop, which he finished planting June 14, unthinkably late in most years.
But at least it's all in, which is more than Birdsell can say of his soybeans at the moment. "Beans would have been planted, if we hadn't had a tractor fire," he said. "The planting tractor caught fire on a Friday night and it was the following Tuesday at 5 p.m. before we were able to get another tractor to pull the planter."
That about sums up the 2019 planting season for many of DTN's Agronomy Advisers, a group of farmers and ranchers who report on their operations and current events in agriculture each month.
Just when you thought it couldn't get worse -- it did.
Now that one of the most challenging planting seasons in history is finally trickling to an end, farmers are taking stock of what they have and what they don't have. Crops got a late, challenging start to life. Disease, insects and unknown weather loom on the horizon. Empty fields sit, in need of a plan and management. No time to rest.
THE LOST FIELDS OF 2019
For some growers, the 2019 planting season never really happened. "It's nearly July and we haven't really started planting yet," said Josh Miller, whose fields in southern Illinois sit between the Ohio and Mississippi rivers. "Many of our acres are underwater from the rivers," he explained. "They've been underwater since about February."
Miller will file for prevented planting on the majority of his acres this year and manage only a fraction of the corn and soybeans he planned for. Instead of scouting and tending to developing crops, he will spend much of his summer repairing holes and leveling fields roiled by floodwaters. "For some of the acres, the plan is to use summer cover crops, kill them in early fall, and plant winter wheat," he added.
Likewise, in southeastern Michigan, Raymond Simpkins spent June waiting for a break in the weather that never came. When he checked in with DTN, the skies had just dropped another 1.1 inches of rain on his land. "We had precipitation 118 out of 170 days by last week," he said. "I will leave around 500 acres idle -- got about 140 acres of beans in." Simpkins plans to use tillage to control weeds on those empty fields this summer.
He is worried about the dairies in his region. "Many of the large dairies in our area have no corn planted, and can't get forage made," he said.
In the Texas Panhandle, cool conditions and persistent rains have hijacked the cotton planting season, too, added farmer and rancher Mike Lass. "Our cotton is looking like an old Clint Eastwood western, 'The Good, the Bad and the Ugly,'" he joked. "I'd say we're going to lose at least 50% of our cotton acres in the area. Most acres have been replanted with corn or milo."
TAKING STOCK OF CORN
Of the Agronomy Advisers, only Miller was still hoping to plant some corn acres in the coming week. Most were done, but far later than they would prefer. In north-central Missouri, Kyle Samp wrapped up corn replanting on June 8. In northeastern Nebraska, Kenny Reinke sprayed out his sparse wheat fields and finished corn planting on June 1.
Like the season behind it, the corn crop is late and highly variable. Birdsell's crop ranges from newly emerged to 6-leaf plants, he noted. Some growers were surprised their corn looked as good as it did -- but they know its resiliency to the future stresses is already compromised. "Corn is going to be especially vulnerable to two to three weeks of poorly timed hot and dry," noted Kyle Samp, of north-central Missouri.
"My biggest fear looking forward right now is late-season growing conditions," said Reinke. "This is a crop that can't afford a shortened growing season. It needs growing degree units to push it along all the way through the growing season -- guessing right now, we're looking at pollination in the 20s of July."
Given the ample moisture around, disease seems inevitable, Samp added. "Disease is creeping in on some of this corn, but it's hard to decide whether to throw some resources at this corn or just let it be," he said. "Northern corn leaf blight and gray leaf spot have been found in our area."
BEANS VS. PREVENTED PLANTING
Soybeans are still going into the ground, and soon growers will have to decide if it is more profitable to plant them or declare prevented planting on those acres.
In central Ohio, Keith Peters just received another devastating 5 inches of rainfall on top of his saturated acres. More than 200 acres of his corn and soybeans are lost to floods, and he still has one wet field of soybeans to plant. Samp also has one final field of beans left to go in Missouri, with similar weather.
"Today's rain may have sealed its fate, but I'm not going to make [prevented planting] official until after July 1," he said.
All but 10% of Charles Williams' soybean acres were planted in northeastern Arkansas. What's left is at the mercy of the rivers, he said. "River forecasts don't look particularly favorable for planting at this time, but we'll see."
The decision is complicated by low prices and new government policies rolled out this month, which require acres to be planted in order for farmers to receive trade aid payments for them. "Many people have planted beans on their prevented planting corn acres since the disaster money will be paid on planted acres, however these people regret doing this since the full prevented planting [payments] would have probably paid more," noted Reed Storey, of east-central Arkansas, who squeezed in his final soybean planting on June 15.
In Missouri, Samp has tried hard not to let the rollercoaster of federal ag policy changes this spring affect his agronomic decisions, for just this reason. "All the chatter on the government programs has been such a mess that I've tried to tune it out," he said. "If we had a real program that we knew the rules for, we might have factored it in, but it's pretty difficult when even the rule makers don't know the rules."
To add to the complexity, it's difficult to return unused treated soybean seed, which does not hold up well in storage and is coated with chemicals that make its disposal complicated. (See the DTN story here: https://www.dtnpf.com/…)
"We have mostly all treated seed, so we will do our best to get it in the ground," Birdsell said. If he doesn't, he will take advantage of USDA's recent decision to move the grazing and haying date for cover crops on prevented planting acres to September 1 from November 1.
Williams isn't making any plans for his potential prevented acres just yet -- for now, he's focused on the crops he does have in the ground.
"Weather is, as always, key," he said. "This next month should be the tale of it."
Corn, Bean Inspections Bearish
OMAHA (DTN) -- Corn and soybean inspections were bearish while wheat inspections were neutral in the latest USDA export inspections report, according to DTN Senior Analyst Dana Mantini.
Corn inspections totaled 24.3 million bushels (mb) for the week ended on Thursday, June 20, 2019, which is below the 42.1 mb needed each week to reach USDA's export estimate of 2.200 billion bushels (bb). Inspections for 2018-19 now total 1.633 bb, down 6% from the previous year. The overall pace of corn inspections is bearish in 2018-19, Mantini said.
Soybean inspections totaled 25.1 mb for the week ended on Thursday, June 20, 2019, below the 31.0 mb needed weekly to reach USDA's export estimate of 1.700 bb. Inspections for 2018-19 now total 1.335 bb, down 26% from the previous year. The overall pace of soybeans inspections is bearish in 2018-19, Mantini said.
Wheat inspections totaled 14.9 mb for the week ended on Thursday, June 20, 2019, below the 17.4 mb needed weekly to reach USDA's export estimate of 900.0 mb. Inspections for 2018-19 now total 45.0 mb, up 6% from the previous year. The overall pace of wheat inspections is neutral in 2018-19, Mantini said.
Corn inspections totaled 24.3 million bushels (mb) for the week ended on Thursday, June 20, 2019, which is below the 42.1 mb needed each week to reach USDA's export estimate of 2.200 billion bushels (bb). Inspections for 2018-19 now total 1.633 bb, down 6% from the previous year. The overall pace of corn inspections is bearish in 2018-19, Mantini said.
Soybean inspections totaled 25.1 mb for the week ended on Thursday, June 20, 2019, below the 31.0 mb needed weekly to reach USDA's export estimate of 1.700 bb. Inspections for 2018-19 now total 1.335 bb, down 26% from the previous year. The overall pace of soybeans inspections is bearish in 2018-19, Mantini said.
Wheat inspections totaled 14.9 mb for the week ended on Thursday, June 20, 2019, below the 17.4 mb needed weekly to reach USDA's export estimate of 900.0 mb. Inspections for 2018-19 now total 45.0 mb, up 6% from the previous year. The overall pace of wheat inspections is neutral in 2018-19, Mantini said.
Washington Insider: Ramping Up For Talks With China
The coming trade talks with China expected at the end of June and could decide whether tensions between these two huge economies will ease enough to allow for a resumption of negotiations, or whether the U.S. will place tariffs on another $300 billion worth of Chinese goods, as the President has threatened.
The prospects are alarming many in the U.S., especially in the retail sector. Part of the reason, the New York Times reported last week, is that they come amid an ongoing period of troubles. Already battered by the e-commerce revolution, the threat of new tariffs on Chinese imports is seen by many as “disastrous” since the next round will be aimed squarely at consumer goods like footwear, toys and apparel.
Even for healthy chains like Walmart and Costco, the new duties threaten business formulas that helped speed their rapid rise over the last few decades. This threat “couldn’t come at a worse time,” said Mark Cohen, a former Sears executive who is now director of retail studies at Columbia Business School. “It’s a squeeze that can’t be forecast or predicted.”
With profit margins of 5% 10%, Cohen said, sellers of apparel and accessories don’t have much room to maneuver. Adding to the challenge, these chains are beginning preparations for the make-or-break holiday season.
In a letter last month, over 170 shoemakers and retailers called on the President to halt the trade war with China, which supplies almost 70% of shoes sold in the United States.
The industry cannot easily return shoe production to the United States because labor costs are much higher here and there is little capacity for new production, said Matt Priest, chief executive of the Footwear Distributors and Retailers of America.
“I do think it’s catastrophic,” he said. “We are in the middle of right-sizing retail here in the U.S., with fewer brick-and-mortar stores.” The impact will be greater on traditional retailers because they can’t adjust prices as quickly as online retailers, Cohen said. “This is going to cause more stores to close and more people to lose their jobs,” he added.
So far in 2019, American retailers have announced plans to shut more than 7,000 stores, after announcing nearly 6,000 closings last year, according to Coresight Research. By the end of 2019, announced closings could climb to 12,000 stores, it said.
The tariffs could also hurt the broader economy at a time when recession worries have moved to the forefront. The retail sector has shed 50,000 jobs since January.
Torsten Slok, chief economist at Deutsche Bank, estimated that if the duties did take effect and remained in place, they would boost inflation and reduce economic growth on a sector that accounts for 70% of GDP. “My price targets are supposed to be 12-month targets, and now they’re 12-tweet targets,” Mr. Siegel said. He added that the new 25% tariff could have a “cataclysmic” effect on retailers, especially those that are already in pain.
Brian Goldner, chief executive of Hasbro, said the tariffs would be a setback for the toy industry just as it had begun to recover from the liquidation of Toys ‘R’ Us last year.
Hasbro, which makes toys and games like Play-Doh and Monopoly, said that it agreed to join other companies in testifying about the tariffs at a separate hearing the trade representative expects to hold. About two-thirds of the toys Hasbro sells domestically come from China, although it has been expanding production elsewhere in recent years, including in the United States.
Many executives still seemed hopeful, the Times said, that the duties would not be imposed even as they described their efforts to mitigate the damage: leaving China, negotiating with vendors and figuring out new pricing strategies.
Walmart, the nation’s largest chain as well as its biggest private sector employer, faces a broader challenge. Over all, only one-third of the goods it sells come from outside the United States. But China has been a principal source for many items like clothing and electronics.
As China grew into its position as the world’s workshop, Walmart prospered with it, said Richard Vedder, emeritus professor of economics at Ohio University and the author of “The Walmart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy.”
Now, those prices might not be so low, according to the company’s chief financial officer, M. Brett Biggs. “Increased tariffs will lead to increased prices, we believe, for our customers,” he said on a call with reporters last month.
Retailers have mounted a furious lobbying campaign in Washington ahead of the meeting, the Times says.
“We are at a critical juncture for the retail industry, as companies evolve to meet the expectations of customers,” said Matthew Shay, president and chief executive of the National Retail Federation. “The imposition of tariffs just creates a further headwind in an already challenging environment.”
Everybody appears to recognize the high stakes involved in these talks, but everybody is deeply dug in. Certainly, the preparations and the talks themselves should be closely watched as they emerge, Washington Insider believes.
More Funding For ASF Vaccine Research
Rep. Ted Yoho, R-Fla., attached an amendment to the House spending bill last week that would increase vaccine research funds for African swine fever (ASF), the disease gripping China and spreading into neighboring countries.
The measure, which was bundled into the manager’s amendment, was approved by voice vote. Yoho’s amendment would add $5 million to USDA’s Agricultural Research Service (ARS) in the race to develop an ASF vaccine. But most expect a vaccine for ASF is still not yet in the cards. The massive spending bill (HR 3055), which includes five spending bills including agriculture, is slated for more debate on the House floor today.
However, the White House has pledged a veto of the minibus package.
Plus, the Senate has yet to compile their version of the legislation. While the Senate is also expected to reject the administration’s proposed budget levels, there will be differences between the two versions that would need to be worked out. Plus, the potential for a continuing resolution to keep the government funded is rising.
Biodiesel Group Comments on E15 Decision
The Trump administration’s recent move to allow year-round sales E15 will not make up for the gallons lost to small refiner exemptions (SREs) from the Renewable Fuel Standard (RFS), the National Biodiesel Board (NBB) said to EPA Administrator Andrew Wheeler in a letter sent Friday.
The group noted a quote from Wheeler, who said that allowing E15 sales all year “will help make up the difference for any small refinery exemptions going forward.”
However, NBB pointed out, that the E15 waiver “will not provide market growth for biodiesel and renewable diesel,” Kurt Kovarik, NBB head of federal affairs, said in the letter. “EPA is required to repair the demand destruction for biodiesel and renewable diesel resulting from your agency’s flood of unwarranted, retroactive small refinery exemptions.”
Presidents Trump and Xi Will Talk Trade at G-20
U.S. President Donald Trump will be off to the G-20 summit in Japan at the end of this week. He’s scheduled to meet with China’s President Xi (zhee) Jinping face-to-face for a high-stakes discussion on trade, as well as other issues. While most officials don’t expect a long-awaited breakthrough yet, it is possible that Trump could be talked into not putting new tariffs on even more Chinese imports. Politico says Trump has continually preached patience during high-profile negotiations with China, North Korea, Iran, and other nations. It’s both for strategic reasons and as a way to smooth over any frustrations with the slow pace of progress. Politico also says the “no rush” approach could also be a result of Trump’s confidence that the U.S. can simply outlast its adversaries in trade disputes. However, the go-it-alone foreign policy seems to be leaving the U.S. president increasingly isolated from key U.S. allies. Politico says that may become even more apparent during the upcoming G-20 gathering.
New Tariffs Could Hit Pesticides
The pesticide industry is asking the Trump administration to exempt its chemical imports from China from the potential $300 billion in new 25 percent tariffs the president is threatening to impose next month on Chinese goods. CropLife America and a specialty chemical trade group filed comments with the U.S. Trade Representative’s Office. Those comments say the tariffs would hit a wide range of products that farmers rely on to do their jobs. Those products would include glyphosate, 2,4-D, atrazine, and dicamba. The groups say, “Many of the chemicals that would be subject to the proposal are just not available from American sources, and many others are not reasonably available from sources outside of China in the volumes we need and within a useful time period.” An Agri-Pulse report says Chris Novak, President and CEO of CropLife America, was scheduled to speak on Monday during the USTR’s sixth day of hearings on the list of products targeted for the Section 301 tariffs.
NBB says E-15 Rule Alone Doesn’t Undo Economic Damage
The National Biodiesel Board sent a letter to Environmental Protection Agency Administrator Andrew Wheeler highlighting the economic damage caused by small refinery waivers. The biodiesel and renewable diesel industry have been hit hard by the retroactive small refinery exemptions under the Renewable Fuels Standard that the EPA has given out in recent years. At issue in the letter is Wheeler’s recent comments that the approval of year-round E15 sales will make up for the economic damage done by the exemptions. “The E15 waivers will not provide growth for biodiesel and renewable diesel, but small refinery exemptions have had a detrimental impact on demand for those fuels,” the NBB says in its letter. “EPA is required to repair the demand destruction for biodiesel and renewable diesel resulting from the agency’s flood of unwarranted retroactive small refinery exemptions.” The NBB says when they compare the size of the exempted refiners to biodiesel producers, the threat to agriculture is easier to understand. The University of Illinois says the demand destruction for biodiesel and renewable diesel could reach 2.45 billion gallons. The economic loss could reach $7.7 billion in the next few years.
Drought at Record-Low Levels
A Farm Futures report points out that the typical weather-related challenges for farmers during each growing season is extremely dry weather. That’s not been the case this year because of rampant flooding in a good-sized portion of farm country. While this spring did see drought in a few areas of rural America, its influence has steadily dropped over the last few months. The latest updates to the U.S. Drought Monitor say that drought conditions are affecting just over 10 percent of the country. That’s up from a record low of 8.84 percent last month but it’s still among historical low numbers. Brad Pugh (Pew) is a climatologist who put this week’s Drought Monitor Report together. He says, “Excessively wet conditions still continue to hamper the development of corn and soybeans across the Corn Belt. However, drought is intensifying across northern North Dakota due to a serious lack of rainfall since April.” Only 3.1 percent of the Midwest is currently listed under drought conditions, while that number was 15 percent last year at this time. In the Plains, just 5.9 percent of the region is being affected by drought, compared to 49 percent a year ago. Pugh says the chances for above-normal precipitation in the next six to ten days is strong in the eastern U.S., including the Ohio, Tennessee, and Mississippi River Valleys, as well as the southern Great Plains.
Laos Joins List of Countries Affected by African Swine Fever
A Reuters report says China has banned direct and indirect imports of pigs, wild boars, and related products from Laos after the first outbreak of the African Swine Fever virus was found in that country. The southeast Asian nation reported the first outbreaks late last week. China’s General Administrator of Customs says if illegally imported pigs, wild boars, and their products are intercepted by officials at the Chinese border, they’ll be destroyed under the supervision of customs agents. The World Organization for Animal Health says Laos confirmed the first deadly outbreaks of African Swine Fever in a southern province. African Swine Fever is deadly to pigs but doesn’t harm human beings. Officials in Laos say seven separate outbreaks have led to the deaths of almost 1,000 animals. Thailand has officially joined China in banning imports from Laos. ASF has hit the entire country of China hard. Officials report outbreaks in all of its mainland regions, as well as Hainan Island and Hong Kong. The Chinese ASF outbreak was first reported back in August of last year.
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