Impact of Chinese Tariffs, USDA Report Worksheet & Crop Update - Tuesday, 17 July 2018

Update for July 17th, 2018

 

Last week the USDA released their July numbers. Prior to the report the agency had signaled that they were planning to adjust for the new Chinese tariffs against U.S. crop exports in this July report which many assumed would send another shock to prices.  The market was relieved when world carryover stocks and U.S. stocks were basically left unchanged in the data. It’s expected that the world carryout for corn next year will be down 40.0 million tons from the stocks on August 31, 2018; soybean stocks are predicted to increase by 2.25 million tons which is far less than some had feared.

2018-19 USDA U.S. Yield (bu./acre)

 

USDA

July

2018-19

Average Trade Est.

Range of

Trade Est.

USDA

June

2018-19

Corn

174.0

174.9

172.6-179.5

174.0

Soybeans

48.5

48.6

47.0-49.5

48.5

 

 

2018-19 USDA U.S. Production (billon bu.)

 

USDA

July

2018-19

Average Trade Est.

Range of

Trade Est.

USDA

June

2018-19

Corn

14.230

14.269

14.045-14.683

14.040

Soybeans

4.310

4.314

4.200-4.402

4.280

 

 

2018-19 Wheat Production (billon bu.)

 

USDA

July 2018

Average Trade Est.

Range of

Trade Est.

USDA

June 2018

All Winter

1.222

1.196

1.178-1.218

1.198

HRW

0.657

0.650

0.634-0.675

0.650

SRW

0.303

0.316

0.305-0.334

0.316

White

0.262

0.229

0.202-0.244

0.232

All Wheat

1.881

1.858

1.825-1.923

1.827

 

 

2017-18 USDA U.S. Grain Carryout (billon bu.)

 

USDA

July 2018

Average Trade Est.

Range of

Trade Est.

USDA
June 2018

Corn

2.027

2.107

2.052-2.177

2.102

Soybeans

0.465

0.507

0.478-0.530

0.505

Wheat

1.100

 

 

1.080

 

 

2018-19 USDA U.S. Grain Carryout (billon bu.)

 

USDA

July 2018

Average Trade Est.

Range of

Trade Est.

USDA

June 2018

Corn

1.552

1.712

1.545-1.922

1.577

Soybeans

0.580

0.471

0.390-0.571

0.385

Wheat

0.985

0.973

0.924-1.021

0.946

 

 

2017-18 USDA World Grain Carryout (million tons)

 

USDA

July 2018

Average Trade Est.

Range of

Trade Est.

USDA

June 2018

Corn

191.73

191.42

189.5-192.88

192.69

Soybeans

96.02

91.76

89.00-93.00

92.49

Wheat

273.50

272.46

271.00-274.50

272.37

 

 

2018-19 USDA World Grain Carryout (million tons)

 

USDA

July 2018

Average Trade Est.

Range of

Trade Est.

USDA

June 2018

Corn

151.96

156.27

151.00-163.00

154.69

Soybeans

98.27

88.15

85.00-92.00

87.02

Wheat

260.88

265.50

262.00-268.00

266.16

 

 

Source: USDA, Bloomberg, Reuters, WSJ

 

For many years the USDA has given early access of crop data to media with the agreement that the news outlets would not publish any of the data until a specified time. Typically that early access gave a 2-second advantage to customers of these media outlets due to the fact that the USDA takes longer to publish the report on its website than it does for the news sites. The USDA has gathered evidence that this 2-second advantage has resulted in millions of Dollars of trade activity following the release of the data to these sources.  Reuters is reporting that the last weeks report on July 12th will be the last report released early to media outlets.

Weather and Washington continue to dominate the attention of producers across the country.  The markets have been struggling with the newly imposed Chinese tariffs but concerns over the NAFTA negotiations also weight on the minds of everyone in agriculture.  It is very probable that if we see any escalation in tensions with either Mexico or Canada the corn market will likely face additional pressure. Corn condition ratings for this past week fell by -3% from the previous week to 72% Good to Excellent. This rating still exceeds last year’s 64% Good to Excellent rating for this same week which ended in a record yield of 176.6 bushels per acre average.  Some analyst believe that the USDA’s current estimate of a 174.0 bushel average for this season is too conservative and predict that we could actually be headed towards a 180 bushel average.  The reasoning given for this high expectation comes from crop conditions found in the big production states of Iowa, Illinois, Nebraska and Minnesota which all have ratings of +75% Good to Excellent…remember the top 4 producing states are responsible for producing 55% of the total U.S. corn crop. In this week’s crop conditions report only one state posted an improvement in ratings, all of the others remained the same or fell slightly:

  • North Dakota-only state with an improved rating which as +2% to 88% GD/EX
  • A few of the states that showed no change: Iowa 78%, Colorado 70%, Nebraska 86%
  • Some of the states showing a decline in crop conditions: Missouri down a considerable -15% to a low 33% GD/EX, Michigan down 11% to 55% GD/EX, Indiana, Kansas and North Carolina all saw ratings fall by -4%, Minnesota fell by -2%, Illinois, Kentucky, Ohio and Tennessee and Wisconsin all saw a   -1% decrease.

While the top 4 corn production states contribute nearly 55% of the overall production each year it is important to realize the significance of some of these other states.

  • Missouri was the 9th largest corn state last year, Michigan came in 13th place. When you combine their total bushels they produced nearly 6% of the total U.S. corn crop.
  • Kansas is the 7th largest corn production state and currently sits with a 48% GD/EX rating when you combine Kansas with South Dakota the 6th largest corn producer which saw a -5% drop in conditions this week you can account for nearly 10% of U.S. total production. 

 

Soybean prices have fallen $2.25 from the high which was posted at the end of May.  Funds have moved off their long positions and are now short between 50,000 and 60,000 contracts bringing prices to their lowest level in 10 years. Record setting yields in Brazil and the appearance of another healthy U.S. soybean crop are both bearish to the market but both pale in comparison to U.S. Chinese trade tensions. 

 

 

State media in China reports that “They Don’t Need U.S. Soybeans”. According to Reuters, the president of state grains trade COFCO told the People’s Daily in an interview, “China can increase soybean imports from other countries to reduce reliance on buying from the U.S.” There are signs that the trade conflict is already increasing grain and oilseed exports from the Black Sea region where major sellers like Russia are looking to sell more corn, wheat and soybeans to the enormous Chinese market.

There are some reports that U.S. and Chinese officials are planning to meet again soon to discuss a resolution but even if talks resume it’s likely a resolution will take some time to work out.  Of course no one can possibly know how long this trade war may continue or the extent of products it may include but there is a lot of speculation around the subject. To get a feel for what the U.S. may be looking at Bloomberg conducted a survey of 31 economists and analysts regarding how long they feel the tariffs will last and how big they will get.  The results showed an estimated duration of the trade war lasting within a range that stretched from 3 months to 3 years with a median estimate of 12 months.  They also estimate the median value of goods involved at $200 billion with some responses expecting the current $34 billion to hold while some look for the entire $505 billion in annual imports from China to be affected.

The graph below shows a run-down of the states that are being hit the hardest by the Chinese tariffs on U.S. goods.  We are all aware of the fact that farm and seafood-producing states will be hit the hardest along with auto manufacturing states.

 

 

Big changes are expected across the U.S. as our weather pattern changes. A sharp southerly dip in the jet stream will bring near to slightly below normal temperatures across the Midwest and Northeast this week.  In contrast the Southwest and southern Plains regions will see widespread, sweltering temps topping 100 degrees. Increasing opportunities for rainfall are expected in the later part of the week throughout the Midwest and East.  This slow moving area of low pressure is also capable of producing some localized heavy rainfall totals in some areas.

 

 

 

CROP CONDITIONS REPORT

 

Corn Silking - Selected States

[These 18 States planted 92% of the 2017 corn acreage]

-----------------------------------------------------------------

                 :            Week ending            :          

                 :-----------------------------------:          

      State      : July 15,  :  July 8,  : July 15,  : 2013-2017

                 :   2017    :   2018    :   2018    :  Average 

-----------------------------------------------------------------

                 :                    percent                   

                 :                                              

Colorado ........:     8           4          17          13    

Illinois ........:    59          76          93          57    

Indiana .........:    36          49          74          39    

Iowa ............:    33          35          68          32    

Kansas ..........:    52          48          64          53    

Kentucky ........:    74          62          77          63    

Michigan ........:    13           5          26          15    

Minnesota .......:    18           8          45          19    

Missouri ........:    77          76          91          68    

Nebraska ........:    42          31          65          38    

North Carolina ..:    92          82          90          92    

North Dakota ....:    10           6          33          11    

Ohio ............:    31          30          63          27    

Pennsylvania ....:    21          13          28          27    

South Dakota ....:    10          10          48          17    

Tennessee .......:    89          83          91          83    

Texas ...........:    69          68          76          75    

Wisconsin .......:     4           6          30          11    

                 :                                               

18 States .......:    37          37          63          37    

-----------------------------------------------------------------

 

Corn Condition - Selected States: Week Ending July 15, 2018

[These 18 States planted 92% of the 2017 corn acreage]

----------------------------------------------------------------------------

      State     : Very poor :   Poor    :   Fair    :   Good    : Excellent

----------------------------------------------------------------------------

                :                          percent                         

                :                                                          

Colorado .......:     4           6          20          62           8    

Illinois .......:     2           4          14          51          29    

Indiana ........:     2           6          20          52          20    

Iowa ...........:     2           4          16          54          24    

Kansas .........:     6          14          32          42           6    

Kentucky .......:     -           2          14          69          15    

Michigan .......:     5          15          25          47           8    

Minnesota ......:     2           5          16          52          25    

Missouri .......:     8          17          42          29           4    

Nebraska .......:     1           2          11          61          25    

North Carolina .:     7          20          37          32           4    

North Dakota ...:     -           1          11          68          20    

Ohio ...........:     1           3          15          56          25    

Pennsylvania ...:     1           8          25          54          12    

South Dakota ...:     3           4          24          52          17    

Tennessee ......:     -           2          15          51          32    

Texas ..........:    11          21          35          33           -    

Wisconsin ......:     1           4          13          48          34    

                :                                                          

18 States ......:     3           6          19          51          21    

                :                                                          

Previous week ..:     2           5          18          54          21    

Previous year ..:     3           8          25          51          13    

----------------------------------------------------------------------------

-  Represents zero.                                                         

 

Soybeans Blooming - Selected States

[These 18 States planted 96% of the 2017 soybean acreage]

------------------------------------------------------------------------

                :               Week ending               :            

                :-----------------------------------------:            

      State     :  July 15,   :   July 8,   :  July 15,   :  2013-2017 

                :    2017     :    2018     :    2018     :   Average  

------------------------------------------------------------------------

                :                        percent                       

                :                                                      

Arkansas .......:     83            81            89            66     

Illinois .......:     52            64            79            48     

Indiana ........:     47            54            70            46     

Iowa ...........:     51            46            65            45     

Kansas .........:     42            38            59            31     

Kentucky .......:     34            28            39            27     

Louisiana ......:     90            92            96            85     

Michigan .......:     49            27            46            43     

Minnesota ......:     45            32            56            47     

Mississippi ....:     84            79            88            72     

Missouri .......:     41            43            56            28     

Nebraska .......:     64            50            65            53     

North Carolina .:     33            23            38            28     

North Dakota ...:     38            42            67            44     

Ohio ...........:     38            44            66            36     

South Dakota ...:     46            30            53            50     

Tennessee ......:     55            42            58            38     

Wisconsin ......:     34            29            49            36     

                :                                                       

18 States ......:     49            47            65            45     

------------------------------------------------------------------------

 

Soybeans Setting Pods - Selected States

[These 18 States planted 96% of the 2017 soybean acreage]

------------------------------------------------------------------------

                :               Week ending               :            

                :-----------------------------------------:             

      State     :  July 15,   :   July 8,   :  July 15,   :  2013-2017 

                :    2017     :    2018     :    2018     :   Average  

------------------------------------------------------------------------

                :                        percent                       

                :                                                      

Arkansas .......:     61            45            63            39     

Illinois .......:     15            21            44            11      

Indiana ........:     11            19            37            12     

Iowa ...........:     10             7            21             9     

Kansas .........:      6             5            13             4     

Kentucky .......:     14             3            17             7     

Louisiana ......:     79            75            82            65     

Michigan .......:     14             2             9             8     

Minnesota ......:      9             1            15             7      

Mississippi ....:     59            50            63            38     

Missouri .......:     12             4            19             5     

Nebraska .......:      9             1  &nbs

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