Farm Program Payments and News out of China - Thursday, 05 October 2017

The U.S. Secretary of Agriculture, Sonny Perdue, announced that over $9.6 billion in payments to producers will be begin this week.  Producers that signed up for either the ARC or PLC will begin to receive approximately $8 billion in payments for the 2016 crop year while those enrolled in CRP will share $1.6 billion in payments.  The producers that enrolled base acres of barley, corn, grain sorghum, lentils, oats, peanuts, dry peas, soybeans, wheat and canola will be receiving their payments now while other covered commodities will receive their payments in the upcoming months.

Ethanol production remains strong but with the advancement of electric vehicles there is a lot of discussion regarding the long-term effect these alternative energy vehicles may have on the market.  There are those close to the subject that believe, “ethanol is imbedded so deep in our nation it will never go away” while others say, “it will become a thing of the past in less than 10 years”.  An Exchange Traded Fund (ETF) by the name of Global X Lithium Battery Tech has seen tremendous growth in 2017. This fund has expanded by more than 50% this year with investments of $451.5 million raising its assets to $676.8 million. Let’s hope that there is still plenty of room for the ethanol industry if this market continues to grow.

There has been an ongoing discrepancy between private analysts and the USDA.  It’s believed that this comes from the majority of the attention of private firms being focused on conditions found in the heart of the U.S. Corn Belt while the USDA also factors in fringe areas that the others tend to overlook. Kevin Van Trump of the Van Trump Report believes that this trend may be changing, “I feel like more private analyst and large traders inside the trade are starting to gravitate more towards the USDA’s current 169.9 bushel per acre average estimate and believing the fact U.S. producers are again going to harvest another strong crop.  The players that were thinking we could eventually drift down to an average yield of 165 to 166 are starting to adjust higher.”

It’s that time of year again for insurance prices to be calculated the daily fall harvest price averages for corn and soybeans. The chart below shows the current price for corn and soybean, the list shown beneath those prices for 2017 is a comparison to previous years.

  • 2017 Fall Harvest Price: Corn $3.51^4
  • 2017 Fall harvest Price: Soybeans $9.57^2

2016 Fall Harvest Price: Corn $3.49 per bushel; Soybeans $9.75 per bushel.
2015 Fall Harvest Price: Corn $3.83 per bushel; Soybeans $8.91 per bushel.
2014 Fall Harvest Price: Corn $3.49 per bushel; Soybeans $9.65 per bushel.
2013 Fall Harvest Price: Corn $4.39 per bushel; Soybeans $12.87 per bushel.
2012 Fall Harvest Price: Corn $7.50 per bushel; Soybeans $15.39 per bushel.
2011 Fall Harvest Price: Corn $6.32 per bushel; Soybeans $12.14 per bushel.
2010 Fall Harvest Price: Corn $5.46 per bushel; Soybeans $11.63 per bushel.

 

 

 

Agrimoney reports that the USDA’s Beijing bureau has reported that China may be facing tightening corn supplies.  Last year China held more than half of the world’s corn stocks, but new reforms have caused an upheaval in farm subsidies and changes implemented to boost domestic consumption have tightened supplies. The bureau expects Chinese corn stocks to be cut to a five year low of 79.2 MMT.  While that level of supply still represents nearly 40% of the global corn supply the inventory would equal a -28% reduction from their high last season. This trend is expected to continue as the guaranteed price scheme for farmers to aid in this build-up of inventory has been eliminated and the country is working to increase domestic demand for the grain, most recently from biofuel plants. This plan to increase the production levels of bioethanol gasoline is not expected to have any significant impact on the grain market in the near future.  Chinese officials believe that the current stockpile of corn they have on hand will satisfy the added usage for the next 3-5 years.  The country is working to have nationwide use of bioethanol gasoline by 2020. Due to the stockpile of corn in the country producers in China reduced acres planted to corn this year by -4.45 million acres to 86.5 million acres but additional reductions of 3.21 million acres are forecasted for 2018.

U.S. soybean exports to China are running at least 2 weeks behind schedule because suppliers are struggling to locate soybeans that meet the quality requirements following the extensive crop damage caused by the recent hurricanes.  The poor quality of soybeans harvested in the Mississippi Delta and low water levels on the Mississippi River are causing delays of 10-12 days vs the usual shipping wait time of 5 days. China had been aggressively purchasing U.S. soybeans following the nearly 10% decline in soybean prices since July but these delays are now forcing some Chinese buyers to book cargoes out of ports in the U.S. Pacific Northwest which typically export wheat not soybeans.

Heavy rains are forecasted for a large portion of the western and northwestern Midwest.  The eastern Midwest is not expected to receive as much precipitation which will assist producers in those areas with few disruption to harvest.  Temps are expected to be near normal with no freeze threats through the weekend.

Accuweather released their winter forecast for the U.S.  They are expecting the developing La Niña to bring abundant snow to the Rockies and deliver bitterly cold air to the Midwest.  Forecasters predict low temperature in the northern Plains are likely to plummet to minus -30 degrees Fahrenheit at various points throughout the season and sub-zero temps are predicted “on a regular basis”. The extreme cold is a trade-off for less snowfall this season.  Last winter some parts of the U.S. received 140% of their yearly snow totals, this year Accuweather predicts much less snowfall and drier conditions overall.  The map shown below gives more specific information by region.

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