Weather Issues and Export News - Wednesday, 14 March 2018

Update for March 14th, 2018

U.S. export demand for corn was increased by +175 million bushels to 2.225 billion for 2017/18 by the USDA with the major destinations being Japan, Mexico, Columbia and Taiwan the past few weeks. The agency also increased their estimate of corn used for ethanol by +50 million bushels in their report bringing the total projected to 5.575 billion bushels which is up by +143 million bushels from 2016/17.  The Energy Information Administration reports strong growth in weekly ethanol use and the outlook for ethanol exports is also encouraging.  The demand for ethanol in Brazil has swelled recently with the extensive use of flex-fuel vehicles and the countries ethanol mandated minimum of 27%.  Since the price of ethanol in Brazil is priced around $2.30 per gallon many feel that U.S. ethanol will becomes more attractive since the price at Gulf Ports in the U.S. is around $1.50 per gallon. In addition to a possible increase in U.S. ethanol sales to Brazil ethanol demand has been on the rise in China. 

It’s important to remember that even though the USDA reduced U.S. corn ending stocks by -225 billion bushels this still leaves us with the 2nd highest stock-to-use ratio since 2005/06, with an excess of 2.127 billion bushels according to information from the USDA, Economic Research Service.

 

 

Soybean exports have fallen off recently due to difficulties with barge movement on sections of the Mississippi River and its major tributaries.  Excessive rainfall has temporarily suspended barge traffic on the Ohio, Illinois, Tennessee, Arkansas and Mississippi Rivers and the USDA is warning that even with no additional precipitation it could take several weeks for normal barge movement to resume.  This only complicates the current situation the U.S. faces with its burdensome ending supply of an estimated 555 million bushels of soybeans. The graph below shows how the current supply of U.S. soybeans stack up against totals from the last 25 years.

 

 

Reuters is reporting that according to the American Soybean Association, “We have heard directly from the Chinese that U.S. soybeans are a prime target for retaliation” (against tariffs imposed by the Trump administration on steel and aluminum imports). The ASA also stated, “The idea that we’re the only game in town, and these partners have no choice but to purchase from the U.S. is flatly wrong.”

The Pacific Rim Trade Pact which was initially designed to enhance trade between several Pacific countries and the U.S. has been signed but without U.S. participation.  World Grain reports that the new agreement named the Comprehensive and Progressive Agreement for Trans-Pacific Partnership includes the countries of Japan, Canada, Mexico, Singapore, Brunei, New Zealand, Chili, Australia, Peru, Vietnam and Malaysia. This newly formed agreement opens up Japan’s highly protected ag market to receiving shipments of beef and pork from Australia and Canada.

German Heinzenknecht with the Applied Climatology consultancy says that the soybean crop in Pampas, Argentina is “dead in terms of crop yields”.  Reuters also reports that many professionals in that region also believe that the forecasted rainfall simply will not be able to restore the crops that have suffered through the worst drought in 30 years that began last November.  Rainfall last weekend  in Argentina was light and scattered with most areas receiving under 0.20 inches of rain and now the latest models for both short and long-range outlooks have turned drier than previously forecasted.  Dr. Cordonnier’s most recent update shows that soybeans in Argentina are rated 75% poor to very poor with soil moisture approximately 85% short to very short.  He warns, “The only way to stabilize the crop would be if Argentina received a heavy wide spread rain event on the order of 1-2 inches with 80% coverage followed by one or two rainfall events of equal intensity.”  All rainfall that is currently forecast for the country is expected in the northwestern portion of the country, missing most of the major crop producing regions.

 


The Climate Prediction Center has found warmer water building beneath the ocean’s surface giving us a 62% chance that the Pacific Ocean will return to a neutral phase sometime between April and June.According to Australia’s Bureau of Meteorology the La Niña weather pattern that developed last fall has ended. This makes this La Niña weather pattern the shortest we have seen since 2008.  This recent La Niña disrupted weather patterns around the globe, bringing drought conditions from southwest Kansas to northern Texas as well as devastating crops in Argentina. 

 

NOAA has a new drought monitoring and early warning guidance tool.  This new and experimental instrument called EDDI measures the atmospheric evaporative demand also known as “the thirst of the atmosphere” in specific areas and across a specific period of time.  This “atmospheric thirst” is responsible for the drying out of soil and vegetation. EDDI will be able to alert NOAA to agricultural droughts, hydrologic droughts and give more precise warnings for fire-weather risk.  The map below shows a 3 month outlook which as you can see shows much of the southern and eastern tiers of the continental U.S. have experienced ED3 while ED4 levels of atmospheric dryness are found over a large portion of the Southwest, Midwest and parts of the central and southern Great Plains.

 

As we look ahead into the last week of March outlooks indicate a shift to cooler temps across the Corn Belt and northern Plains. Precipitation is expected to be above normal for the majority of the country with an exception of the southern Plains, especially the driest parts of northern Texas, western Oklahoma and western Kansas.

 

 

 

 

 

 

 

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