As Importer’s Need for Corn and Soybeans Seen Rising, Few Countries Currently Competing with U.S. for Export Demand

Bloomberg News reported last week that, “China’s corn imports could more than double to 17 million tons in 2020-2021 from a year earlier on prospects for a smaller domestic harvest and a recovery in demand for hog feed, according to the head of the logistics information department at COFCO Trading Co.

“The increase in imports would also be to meet commitments under the U.S. trade deal, Wang Baichao said during an online seminar on Tuesday. Imports were 7.6 million tons in 2019-2020, he said. China has already booked more than 10 million tons of U.S. corn for 2020-2021, including 8.8 million tons which have not been shipped, according to the U.S. Department of Agriculture.”

The Bloomberg article explained that, “Because of a near record price gap between domestic and Chicago corn prices, imports of sorghum and barley, which are used to replace corn and are not subject to quotas, are also likely to expand more than expected, Wang said. Overseas purchases of sorghum totaled 3.7 million tons in 2019-2020, while barley imports were almost 6 million tons.”

“China’s Corn Imports Seen Doubling on Lower Crop and Price Rally,” Bloomberg News (October 27, 2020).

And on Friday, Market Intel update from the American Farm Bureau Federation stated that,

China is on pace to import its largest amount of corn on record.

“With tightening supplies from weather impacts on production and rising demand as the country recovers from African Swine Fever, the pace at which China still needs corn is rising. Domestic corn prices are climbing to new highs, making global producers like the U.S. attractive alternatives for less expensive corn. There is an additional incentive to purchase U.S. corn to help meet commitments established in the Phase 1 agreements. As of October 22, accumulated exports of corn totaled 1.9 MMT, outstanding sales totaled 8.7 MMT, and total commitments stand at 10.6 MMT.

“China Could Be Looking to Import More Corn,” by Shelby Myers. Market Intel- American Farm Bureau Federation (October 29, 2020).

“If China decides to raise its low-tariff-rate quota on corn imports, it will import its largest amount on record. China could still import more corn above the TRQ but will be required to pay tariffs of up to 65% of the purchase price.

“As more purchases are fulfilled, USDA will also need to increase its estimate of Chinese imports for the World Agricultural Supply and Demand Estimates, changing the U.S. and global landscape of new crop year corn supply, demand and prices.”

“China Could Be Looking to Import More Corn,” by Shelby Myers. Market Intel- American Farm Bureau Federation (October 29, 2020).

Meanwhile, Reuters writer Mark Weinraub reported on Thursday that, “Mexican grains buyers booked deals to buy their largest volume of corn from the United States since last Decemberthe U.S. Agriculture Department said Thursday, a development that could point to growing import demand from its southern neighbor.

“The sale for 1.433 million tonnes of U.S. corn occurred after Mexico’s most productive farmers warned they may not be able to meet demand with domestic supplies after deep government spending cuts.”

The Reuters article noted that, “The sale came as corn prices hover around their highest since August 2019 and China discusses importing millions of additional tonnes of corn over the next year.”

On Thursday, the weekly Grain Transportation Report, from USDA’s Agricultural Marketing Service (AMS), stated that, “As a major mode for bringing grain to market, barges move roughly half of all grain destined for export, including about 60 percent of exported corn and 50 percent of exported soybeans. Although flat at the start of the year, grain traffic on the Mississippi River has risen considerably in the past 6 weeks.”

The AMS report pointed out that, “In recent weeks, exports to China out of the Mississippi Gulf have grown substantially.”

“Grain Transportation Report.” USDA- Agricultural Marketing Service (October 29, 2020).

Also last week, Bloomberg writer Michael Hirtzer reported that, “Harvests of America’s biggest crops are advancing at the fastest pace in years,  replenishing coffers for shippers at a time when few other countries are competing with the U.S. for export demand.

“Importers such as China and Mexico have been gobbling up large amounts of U.S. agricultural goods.”

Mr. Hirtzer indicated that, “The American corn harvest was 72% complete as of Oct. 25, above the year-ago pace of 38% and the quickest in five years for the country’s most widely grown crop, according to U.S. Department of Agriculture dataSoybeans, the second-biggest crop, were 83% harvested, versus 57% a year ago and the fastest in four years.”

“Rapid Harvest Means Export Tailwinds for American Farmers,” by Michael Hirtzer. Bloomberg News (October 30, 2020).

And more broadly with respect to corn and soybean exports, Reuters writer Tom Polansek reported last week that, “COVID-19 outbreaks are increasing governments’ food-security concerns, and importers need U.S. corn and soybeans for the first time in a long time to meet demand, Archer Daniels Midland Chief Executive Officer Juan Luciano said on Friday.”

‘For the very first time in a long time, the world needs the U.S. supply for both soybeans and corn,’ Luciano said.

China’s government is discussing permits for millions of tonnes of additional corn imports over the next year, Reuters has reported, amid a surge in animal-feed demand,” the Reuters article added.

Source: Keith Good, Farm Policy News

Prevalence of Corn and Soybeans across the Midwest

Relative acres of corn and soybeans vary across Illinois. Northern Illinois has more corn than soybeans acres and southern Illinois has more soybean than corn acres (see farmdoc dailyOctober 13, 2020). We provide more information on corn relative to soybean acres across the Midwest in this article. As acreages shift across the nation, this will serve as useful background.

Corn and Soybean Ratios Across the Midwest

Acres planted to corn and soybeans were obtained for Crop Reporting Districts (CRDs) from Quick Stats, a website maintained by the National Agricultural Statistical Service (NASS), an agency of the U.S. Department of Agriculture. Planted acres were averaged from 2015 to 2019 for both corn and soybeans. Then, average corn acres were divided by average soybean acres to arrive at ratios of corn-soybean acre ratios. A ratio value of 1.0 means that corn acres equal soybean acres. Values above 1.0 indicate that corn acres exceed soybean acres, typically a result of more corn-after-corn acres in these CRDs, particularly in the heart of the Corn Belt. Values below 1.0 indicate that soybeans exceed corn acres, likely driven by more frequent rotations of soybeans-after-soybeans or use of double-crop soybeans in a rotation with a winter crop in these CRDs.

A map of corn-soybean acre values was prepared that includes all CRDs extending from North Dakota in the northwest, to Kansas in the southwest, to Ohio and Michigan in the east (see Figure 1). To be included in the map, the CRD had to have at least 10,000 acres in each crop. Corn-soybean ratio values above 1.0 are indicated by orange, with darker orange being associated with higher values. Corn-soybean ratio values below 1.0 are indicated by the green, with darker green being associated with lower corn-soybean ratio values. Near white coloring indicates values near 1.0.

Several areas have values above 2.5. The upper part of lower Michigan has several CRDs with values above 2.5. Central South Dakota, central Nebraska, and western Kansas have higher values.

Values above 2.0 are predominant in Wisconsin. A line of CRDs from northeast Wisconsin, northwest Illinois, to northeast Iowa had ratios above 2.0. Then values tend to become lower for CRDs away from this line. Similarly, there is a line of high ratios in central Nebraska and western Kansas. Ratio values tend to decline the further Nebraska CRDs were away from this line in central Nebraska.

Two areas have ratios below 1.0. CRDs in North Dakota, South Dakota, and upper Minnesota have values below 1.0. Ratios also tend to be below 1.0 from Ohio, through eastern and southern Indiana, southern Illinois, Missouri, and eastern Kansas.

For CRDs east of the Mississippi, higher ratios are associated with northern CRDs. Ratios then decrease for more central CRDs, reaching lower levels in more southern CRDs. The same holds for southern Minnesota, Iowa, and Missouri.

Why the differences?

Many factors will influence the overall corn-soybean acre ratios. Two factors explain much of the variability in the I-states (Illinois, Indiana, and Iowa), which are the heart of the Corn Belt:

  1. Average corn yield — CRD’s with higher average corn yields are associated with higher corn-soybean acre ratios.
  2. Corn yield relative to soybean yield — CRD’s with higher corn yields relative to soybean yields are associated with higher corn-soybean acre ratios.

As corn yields increase, corn tends to be more profitable than soybeans. Similarly, as corn yields increase relative to soybean yields, corn tends to be more profitable. Both of the above factors directly influence profitability of corn relative to soybeans.

In a regression analysis, the above two factors explain 61% of the variability in corn-soybean acres’ ratios in the I-states. In these states, corn and soybeans are the major crops accounting for over 90% of acres. Irrigation is used on a small number of acres.

Outside the I-states, the explanatory power of the two variables goes down considerably. Other factors likely influencing decisions include:

  1. Prevalence of other crops. Crops other than corn and soybeans are more prevalent in the Great Plans and Upper Midwest. Wheat has higher acreage shares outside of the I-states and is often used in a rotation with soybeans.
  2. Prevalence of livestock and dairy. Corn may have more acres where livestock and dairy have traditionally been more prevalent. Wisconsin, for example, has dairy and higher values of corn acres relative to soybean acres.
  3. Prevalence of irrigation. Irrigation may influence decisions and economics of corn versus soybeans. Corn is more prevalent where more acres are irrigated in Nebraska and Kansas.

Summary

Values of corn-soybean acre ratios vary across the Midwest. In the eastern Midwest, northern CRDs tend to have higher corn-soybean acre ratios in northern regions, and lower ratio values occur in more southern CRDs. The same holds in southern Minnesota, Iowa, and Missouri. Relationships are more mixed in the Great Plains.

Within the heart of the Corn Belt, higher average corn yields and higher corn yields relative to soybean yields tend to be associated with higher corn-soybean ratio values. Also, the prevalence of other crops, livestock and dairy, and irrigation likely impact corn-soybean acre ratio values.

References

Schnitkey, G., N. Paulson, K. Swanson and J. Coppess. “Acreage Shifts in Illinois.” farmdoc daily (10):182, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, October 13, 2020.

Source: Gary Schnitkey, Krista Swanson, Nick Paulson, Jonathan Coppess and Carl Zulauf, Farmdocdaily

USEPA Approves Three Dicamba Products for Five Years

The United States Court of Appeals for the Ninth Circuit issued a ruling on June 3, 2020 that cancelled the registration of three dicamba products XtendiMax®, FeXapan®, and Engenia® primarily used in dicamba-resistant soybean (Roundup Ready 2 Xtend® soybean).

On Oct 27, 2020, The United States Environmental Protection Agency (USEPA) announced a new 5-year registration for XtendiMax® and Engenia, and re-registered Tavium (a premix of dicamba and S-metolachlor).

To reduce off-target movement of dicamba, USEPA’s 2020 registration features important control measures, including:

  • Requiring a downwind buffer of 240 feet and 310 feet in areas where endangered species are located. The use of hooded sprayers during application may reduce certain buffer requirements.
  • Requiring an approved pH-buffering agent (also called a Volatility Reduction Agent or VRA) be tank mixed with dicamba products to reduce volatility.
  • Prohibiting dicamba application in Roundup Ready 2 Xtend® soybean after June 30, regardless of soybean growth stage.
  • Simplifying the label and use directions so that growers can more easily determine when and how to properly apply dicamba.

For more information, See the full labels of the three dicamba products on EPA docket: https://beta.regulations.gov/docket/EPA-HQ-OPP-2020-0492/document

Dicamba off-target injury has been documented in Nebraska on sensitive soybean and other sensitive broadleaf crops in last three years; therefore, care must be taken when applying dicamba based products not only in soybean, but also dicamba based products labeled in corn.

More information will be shared on this topic as it becomes available.

Source: University of Nebraska CropWatch

Rising Feed Prices Affect Backgrounding Decisions

As feed prices rise, calf prices tend to trend lower, according to Karl Hoppe, the North Dakota State University Extension livestock systems specialist based at NDSU’s Carrington Research Extension Center.

Feed prices have risen since last summer. For example, corn prices have increased $1 per bushel in some North Dakota markets.

Backgrounding cattle is a management and feeding program in which cattle are fed for a period of time after weaning and before they are placed in finishing feedlots. Backgrounding calves are similar to stocker cattle except in the northern tier states, where snow covers the ground in the winter and cattle are fed a forage-based ration instead of being sent to “stocker” grazing.

Backgrounding does several things. It provides time for calves to get through the stress of weaning and develop immunity through vaccines recently administered. Backgrounding adapts calves to a feeding bunk and totally mixed rations that may include grains, silages, distillers grains and hays. Backgrounding also delays marketing of calves for 35, 90 or more days after weaning.

“One of the challenges of backgrounding cattle is getting calves onto feed,” Hoppe says.

When calves are nursing the cow, they also graze with the cow. Calves may not have been exposed to a feed bunk prior to weaning and starting the backgrounding period. This creates a new environment where calves are eating unfamiliar feeds in an unfamiliar place without the mother cow to nurse or show where feed and water are located.

Calves eventually will figure out where to get feed and water but not without stress. This stress can lead to respiratory or digestive illnesses.

“Getting calves through this stress via good backgrounding management is key to survival success,” Hoppe says.

One option for feeding success is to feed the cows and calves a ration similar to the weaning ration before weaning. The unfamiliar smells of silage and distillers grains make calves hesitate to eat those feeds. The cow has experience with these feeds and will show the calves that the new feeds won’t make the calves sick.

While improving the health of the calf is one goal of backgrounding, growing the calves to heavier weights is another goal. Weight gain goals are based on average daily gain (ADG) goals and days on feed (DOF).

If a 200-pound weight gain is desired, this can be accomplished in multiple combinations of ADG and DOF. Two options to reach 200-pound gains can be 1.8 pounds of ADG for 110 days or 3 pounds of ADG for 67 days. Ration costs usually will be more expensive for the 3 pounds of ADG grain-based ration.

However, the feed cost of gain and total cost of gain are usually lower with high-grain rations. A lower cost of gain means high profit potential.

“Be careful to not feed backgrounded calves so they become too fat or fleshy,” Hoppe cautions. “Cattle buyers discount heavy, fleshy calves. The discounts can erode the profits from higher ADG calves that have been fed too long before marketing.”

Coproduct feeds are an excellent source of high protein and high-fiber feeds that work well in backgrounding rations. Coproducts feeds – wheat midds, distillers grains, beet pulp – are competitively priced for inclusion into backgrounding rations. Go to https://tinyurl.com/CoproductsPriceList for a list of coproducts available in North Dakota.

Backgrounding also provides a delay in marketing for one to five months. With a lower cost of gains, adding weight can be profitable depending on markets. To discuss options and markets, a video program will be available on Nov. 17 at https://www.ag.ndsu.edu/livestockextension/2021-2022-backgrounding-cattle.

The topics and speakers for the backgrounding video program are:

  • Feed and rations for backgrounding in fall 2020 – Hoppe
  • Market outlook for backgrounding calves in fall 2020 – Tim Petry, NDSU Extension livestock economist
  • Budgets and scenarios for backgrounding calves in fall 2020 – Bryon Parman, NDSU Extension agricultural finance specialist
  • Health concerns for backgounding calves in fall 2020 – Gerald Stokka, NDSU Extension veterinarian and livestock stewardship specialist

For more information about backgrounding calves or the video program, contact an Extension agent in your county or Hoppe at 701-652-2951 or karl.hoppe@ndsu.edu.

Source: North Dakota State University

Ag Economy Barometer Rises to Record High On Improving Financial Conditions

Farmer sentiment hit a new record high in October as the Purdue University-CME Group Ag Economy Barometer climbed to a reading of 183, a 27-point increase compared to September. The reading easily eclipsed the previous record high set back in February, before the pandemic’s onset. Both of the barometer’s sub-indices also set new record highs in October. Producers were more optimistic about the future as the Index of Future Expectations rose to 186, 23 points higher than in September, and especially about the current situation, as the Index of Current Conditions reached 178, 36 points higher than in September. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted from October 19-23, 2020.

The late summer/fall rally in commodity prices, combined with government program payments arising from the second round of the Coronavirus Food Assistance Program (CFAP 2), appeared to be the primary drivers behind the sentiment improvement. Corn and soybean prices continued to rally despite the fact that U.S. corn yields are expected to set a new record high and soybean yields are projected by USDA to be the fourth highest on record. The combination of good yields and rallying crop prices set the stage for an additional boost in farmer sentiment. Of particular note this month was producers’ response to the question regarding their farms’ financial condition today vs. a year earlier. Twenty-five percent of survey respondents said their farm was better off financially now than at the same time last year. Although at first glance that might not sound very positive, it’s by far the most positive response farmers have provided since the inception of the barometer survey in fall 2015, and was up 11 points compared to a month earlier. The previous record high response to this question occurred in November 2019 when just 16 percent of respondents said their farm was better off financially than in the year ago period.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-October 2020.
Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-October 2020.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-October 2020.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-October 2020.

Unsurprisingly, given the strength in both the Current and Future Expectations Indices, the Farm Capital Investment Index also set a new record high in October with a reading of 82, nine points higher than in September. The previous record high for the investment index was 75 set back in December 2015. This month’s reading also pushed the investment index 10 points above its February 2020 reading, which was before the pandemic’s influence was felt in the U.S. agricultural sector. Responses to the follow-up question regarding farmers’ upcoming farm machinery purchasing plans were the most positive received since this question was first posed in March of this year. The percentage of producers expecting to increase their purchases of machinery in the upcoming year rose to 14 percent from 11 percent a month earlier and up from just 4 percent back in May. Perhaps more importantly, the percentage of respondents who plan to reduce their purchases in the next year was 33 percent, down from 40 percent in September, and just half what it was in May when 65 percent of respondents said they planned to reduce their purchases.

Figure 3. Farm Capital Investment Index, October 2015-October 2020.
Figure 3. Farm Capital Investment Index, October 2015-October 2020.
Figure 4. Plans for Farm Machinery Purchase in the Upcoming Year Compared to a Year Ago, March-October 2020.
Figure 4. Plans for Farm Machinery Purchase in the Upcoming Year Compared to a Year Ago, March-October 2020.

Producers’ short-run outlook for farmland values also improved. The percentage of respondents expecting values to rise over the next 12 months rose to 27, up from 23 percent in September. The percentage expecting lower farmland values declined to 9 from 12 percent a month earlier. This contrasts with farmers’ expectations for farmland values over the next five years, which was virtually unchanged compared when compared to their views in September. However, there was a big shift in sentiment evident on the October survey regarding 2021 cash rental rates for farmland. On the October survey, nearly four out of ten (38%) respondents said they expect cash rental rates to increase in 2021, whereas, in September, just 8 percent of producers said they expected to see higher cash rental rates for farmland in 2021.

Figure 5. Farmland Price Expectations, 12 Months Ahead, January 2016-October 2020.
Figure 5. Farmland Price Expectations, 12 Months Ahead, January 2016-October 2020.
Figure 6. Expectations for Farmland Cash Rental Rates in 2021, September-October 2020.
Figure 6. Expectations for Farmland Cash Rental Rates in 2021, September-October 2020.

Producers became more optimistic about trade with China in October than they were in September as nearly six out of 10 respondents (59%) said they expect to see China fulfill the food and agricultural import requirements outlined in the Phase One trade agreement with the U.S. A month earlier, just 47 percent of respondents said they expected to see China meet its commitments to the U.S. When asked for their overall perspective on U.S. ag exports, the percentage of producers expecting exports to rise over the next five years increased to 65 percent in October, up from 58 percent in September and very close to expectations recorded in August when two-thirds of respondents were optimistic about export growth.

Figure 7. Do You Think It’s Likely or Unlikely that China Will Fulfill the Phase One Trade Agreement with the U.S.?, September-October 2020.
Figure 7. Do You Think It’s Likely or Unlikely that China Will Fulfill the Phase One Trade Agreement with the U.S.?, September-October 2020.

Wrapping Up

Farmer sentiment during October was the most optimistic it’s been since the Ag Economy Barometer survey began in fall 2015. The barometer reached a record high reading of 183 in October and was up 27 points from September. Farmers became more optimistic about both the future as well as the current situation on their farms. This month saw more farmers than ever before in the life of the barometer survey indicate their farms’ financial situation was better than a year earlier. Producers also became more optimistic about farmland values over the next year and nearly 40 percent of respondents said they expect higher cash rental rates for farmland in 2021 than in 2020. The Farm Capital Investment Index also reached a new record high in October with a reading of 82, up 9 points from just a month earlier. In a follow-up question, over half of respondents said they were going to hold their upcoming farm machinery purchases steady with a year earlier, compared to just less than a third who planned to do so back in April. Finally, farmers were more optimistic about trade with China, with 59 percent now expecting China to fulfill its Phase One trade agreement with the U.S., compared to 47 percent who felt that way in September.

Source: James Mintert and Micheal Langemeier, Purdue University

German Pork “Effectively Trapped in Europe” Due to African Swine Fever, as China Rebuilds Herds

Late last week, Bloomberg News reported that, “China is flying in record numbers of pigs to improve genetics and boost productivity while rapidly rebuilding the nation’s hog population after it was decimated by African swine fever.

“Some 15,346 live swine worth $32 million arrived by air in the first nine months of the year, customs data show. That’s an all-time high, according to Genesus Inc., an international genetics company. The value jumped from $3 million in all of 2019, $13 million in 2018 and $21 million in 2017, the customs data show.

China has also imported a record volume of meat this year to ease pork shortages.

The Bloomberg article noted that, “The hog population is recovering: the number of breeding sows rose 28% from a year earlier to 38 million by the end of September, according to the National Bureau of Statistics. Many farms kept sows for breeding purposes, many of them originally used for meat and less productive, according to Lin Guofa, a senior analyst at Bric Agriculture Group.”

Also with respect to pork supply issues, Bloomberg writer Birgit Jennen reported on Saturday that, “Germany confirmed the first case of swine fever in the state of Saxony, signaling that the disease is spreading beyond its initial hotspot in Brandenburg.”

The Bloomberg article stated that, “A wild boar was first diagnosed with swine fever in Brandenburg on Sept. 10 and there are now 117 cases nationwide. The disease currently affects only wild boars, and no pigs have been infected, the ministry says.”

And in more recent news on the impacts African Swine Fever is having on pork supply and export variablesReuters writers Michael Hogan and Nigel Hunt reported recently that, “Germany’s meat processors are sending pork chops and bacon previously earmarked for Asia to supermarkets across the European Union after China, South Korea and Japan banned German imports due to an outbreak of African Swine Fever in wild boars.”

Germany’s meat has since been effectively trapped in Europe, displacing supplies from rival producers including Spain, Denmark and the Netherlands who continue to sell huge volumes to China, where millions of animals have been slaughtered.

The Reuters article added that, “Opportunities to sell cuts such as shoulder meat and hams that were originally destined for Asian markets have, however, opened up as rivals focus on satisfying strong demand particularly from China which has a huge appetite for pork.”

Meanwhile, in a separate issue regarding German pork production,  Bloomberg writers Megan Durisin and Brian Parkin reported last week that, “Germany warned that its farms could face a glut of more than 1 million pigs by year-end as coronavirus measures cause backlogs at slaughterhouses.

“German Pig Backlog May Cram 1.2 Million Extra Hogs on Farms,” by Megan Durisin and Brian Parkin. Bloomberg News (October 28, 2020).

“The nation’s abattoirs have been operating at reduced capacity for much of the year because of Covid-19 outbreaks and workplace precautions. That has slowed pig sales in Europe’s top pork producer, and the current  surplus of about 400,000 slaughter-ready pigs could triple by the end of the year.”

Source: Keith Good, Farm Policy News

China Has Purchased 71% of Its Phase One Target and Could Issue More Corn Import Permits

news release from USDA on Friday stated that, “The Office of the U.S. Trade Representative (USTR) and [USDA] today issued a report highlighting the progress made to date in implementing the agricultural provisions in the U.S.-China Phase One Economic and Trade Agreement, which is delivering historic results for American agriculture.

“Since the Agreement entered into force, the United States and China have addressed a multitude of structural barriers in China that had been impeding exports of U.S. food and agricultural products. To date, China has implemented at least 50 of the 57 technical commitments under the Phase One Agreement. These structural changes will benefit American farmers for decades to come.

China also has substantially ramped up its purchases of U.S. agricultural products. To date, China has purchased over $23 billion in agricultural products, approximately 71% of its target under the Phase One Agreement.

Friday’s update added that, “Highlights outlined in the report include:

  • Corn: Outstanding sales of U.S. corn to China are at an all-time high of 8.7 million tons.
“Corn sales to China are also at an all-time record. American farmers have never sold as much corn to China as they are selling right now.” (Interim Report on Agricultural Trade between the United States and China.  USTR and USDA (October 23, 2020)).
  • Soybeans: U.S. soybeans sales for marketing year 2021 are off to the strongest start in history, with outstanding sales to China double 2017 levels.
“U.S. soybean exports to China are off to a strong start in the current marketing year, averaging over 1.1 million tons per week since the beginning of September according to ESR data.”  (Interim Report on Agricultural Trade between the United States and China.  USTR and USDA (October 23, 2020)).
  • Sorghum: U.S. exports of sorghum to China from January to August 2020 totaled $617 million, up from $561 million for the same period in 2017.
“China has purchased nearly all available old crop U.S. supplies. New crop sales to China remain strong.” (Interim Report on Agricultural Trade between the United States and China.  USTR and USDA (October 23, 2020)).
  • Pork: U.S. pork exports to China hit an all-time record in just the first five months of 2020.
“As of October 8, 2020, total accumulated pork sales to China in 2020 are eight times greater than those accumulated by the same date in 2017.” (Interim Report on Agricultural Trade between the United States and China.  USTR and USDA (October 23, 2020)).
  • Beef: U.S. beef and beef products exports to China through August 2020 are already more than triple the total for 2017.
“As of October 8, 2020, total accumulated beef sales to China in 2020 were over 25 times greater than those accumulated over the same period in 2017.” (Interim Report on Agricultural Trade between the United States and China.  USTR and USDA (October 23, 2020)).

Bloomberg’s Mike Dorning and Isis Almeida reported on Friday that, “The Trump administration says China has met 71% of its farm-good purchases under the phase one trade deal. Whether that’s the most accurate way to measure the progress is still up for debate.”

The article noted that, “The USTR was never clear in the agreement about how it would calculate progress, but the text of the deal calls for product to be purchased and imported into China in 2020. If travel time is considered — as much as a month from parts of the U.S. to China — that may also rule out most of the December shipments.

“‘The agreement explicitly calls for the goods to be imported into China, so on its face, compliance would seem to require not just an outstanding sale, but also delivery within the calendar year,’ said Seth Meyer, associate director at the University of Missouri’s Food & Agricultural Policy Research Institute and former chairman of the USDA’s World Agricultural Outlook Board.”

Meanwhile, Reuters writers Naveen Thukral and Hallie Gu reported on Friday that, “China’s government is discussing permits for millions of tonnes of additional corn imports over the next year, three industry sources told Reuters, amid a surge in animal feed demand and after storms and drought damage tightened domestic supplies.

A round of new import orders from China would make it the world’s top importer of corn for the first time and likely drive up global prices of corn and other grains. That would amplify food inflation caused by disruptions to global supply chains due to the coronavirus pandemic.

The Reuters article explained that, “Two China-based sources and a Singapore-based trader with knowledge of import discussions said Beijing was considering issuing more lower-tariff quotas for buyers to ease the domestic shortage. These quotas encourage imports by  exempting  shipments from most of the 65% tariffs that would otherwise be levied by Chinese customs.”

“Exclusive: China eyes more corn imports as shipments surge, set to become top buyer,” by Naveen Thukral and Hallie Gu. Reuters News (October 23, 2020).

Thukral and Gu pointed out that, “Beijing routinely issues 7.2 million tonnes in annual low-tariff quotas for corn imports, and meets most of its 280 million tonnes of annual demand through domestic crops. China has never before used its full annual quota.

“Analysts have estimated it may need more than four times that quota, or 30 million tonnes, in the 2020-2021 October to September crop year.”

“Exclusive: China eyes more corn imports as shipments surge, set to become top buyer,” by Naveen Thukral and Hallie Gu. Reuters News (October 23, 2020).

The Reuters article added that, “Even before further additional quotas are awarded, Chinese importers have ordered more than double the annual allowance. They have booked around 12 million tonnes of corn imports from the United States and around 5 million tonnes from elsewhere including Ukraine for the crop year, according to a Singapore-based international trading source and two other people with knowledge of the deals.

That would put China just behind Mexico, the world’s largest importer. Mexico is forecast to import 18.3 million tonnes, according to United States Department of Agriculture (USDA) estimates.”

And more specifically on corn demand variables relating to animal feed in China, Reuters News reported on Wednesday that, “[Chinese] pig producers have built 12,500 new large-scale pig farms in the first three quarters of the year and restarted more than 13,000 empty farms, Wei Baigang, the head of the development and planning division of the ministry, said at the briefing.

“Wei said the recovery of the hog herd had been ‘better than expected‘ after African swine fever wiped out at least 40% of China’s pigs in 2019.”

“Through September, pig stocks were 370 million, or 84% of the level in 2017, before the disease hit, said Wei, while breeding sows reached 38.22 million, or 86% of 2017 levels,” the Reuters article said.

With respect to Chinese wheat purchases, Bloomberg writers Anatoly Medetsky and Megan Durisin reported last week that, “China is set to buy the most wheat in a quarter century and has already booked large amounts from the U.S. and France.”

“Wheat’s Drought Battle and Surging Demand: Why Prices Are Flying,” by Anatoly Medetsky and Megan Durisin. Bloomberg News (October 20, 2020).

More broadly, the Bloomberg article stated that, “Rising grain costs are already feeding through to pricier meals, with a United Nations’ gauge of food prices at a seven-month high. That could further hurt economies battered by the pandemic and put more pressure on nations suffering from hunger crises.”

“Wheat’s Drought Battle and Surging Demand: Why Prices Are Flying,” by Anatoly Medetsky and Megan Durisin. Bloomberg News (October 20, 2020).

Also last week, Bloomberg writers Fabiana Batista, Agnieszka de Sousa, and Mai Ngoc Chau reported that,

Wild weather is wreaking havoc on crops around the world, sending their prices skyrocketing.

“On wheat farms in the U.S. and Russia, it’s a drought that’s ruining harvests. The soybean fields of Brazil are bone dry too, touched by little more than the occasional shower. In Vietnam, Malaysia and Indonesia, the problem is the exact opposite. Torrential downpours are causing flooding in rice fields and stands of oil palm trees.

The sudden emergence of these supply strains is a big blow to a global economy that has been struggling to regain its footing after the shock of the Covid-19 lockdowns. As prices soar on everything from sugar to cooking oil, millions of working-class families that had already been forced to scale back food purchases in the pandemic are being thrust deeper into financial distress.”

Source: Keith Good, Farm Policy News

Prevented Plant at Historic Highs Again in 2020

In March, the USDA’s Prospective Planting report initially sized up 2020 acreage at 97.0 million for corn and 83.5 million for soybeans. The June acreage report walked corn acreage back considerably, and most recently, the October WASDE has pegged 2020 planted acreage at 91.0 million for corn and 83.1 million for soybeans. How did this happen? In the shuffle of all the uncertainty and chaos of 2020, Mother Nature dealt another significant supply management program to corn and soybean producers. This week’s post considers the mostly overlooked 2020 prevented plant situation.

Prevented Plant Acres

Figure 1 plots total prevented plant acreage across the U.S. since 2007. Additionally, the annual total is split into three categories: corn, soybeans, and other crops.

As one would expect, 2019 stands out. With 19.6 million acres of total prevented plant reported, those levels were more than double the previous highs (9.6m in 2011, 9.4m in 2013). 2019 also stood out as recent years – 2016 to 2018 – were among the lowest years of prevented planting.

It’s surprising how the prevented plant situation in 2020 has gone mostly unnoticed. While significantly below 2019’s record-high, prevented planting in 2020 is at the second-highest level in 14 years of data. Currently, 10 million prevented plant acres have been reported, of which 6 million are of corn and 1.5 million are of soybeans.

Figure 1 also plots the series average in black (6.1 million acres). It’s worth pointing out – in this case – the average is tricky. There is a lot of variation in these data. About three years come in around average (2010, 2014, 2015), with a few years considerably above average, and several years well below average. This means we must be careful with how we think about what are “normal” prevented plant conditions.

Finally, prevented plant acreage in 2012 hit a low of 1.3 million total acres. Roughly 250,000 acres of corn were reported, along with 160,000 acres of soybeans. This highlights three key points. First, there is always some-level of prevented planting. In fact, you can count on more than a million acres to go unplanted each year. The critical question is the level of prevented planting for a given year.

Second, the range of observations (1.3 million in 2012 to 19.6 million in 2020) is wider than most might expect.

Finally, be careful when thinking about the implication of favorable planting conditions and final yields; the favorable planting conditions of 2012 are not what most of us remember about that year.

prevented plant acres. 2020
Figure 1. U.S. Prevented Plant Acres, 2007-2020. Data Source: USDA FSA. (Oct. 2020 data)

Corn and Soybeans

Over the last decade, corn and soybean acres have trended higher, making it tricky to think about prevented plant influence on an acre basis. Figure 2 shows corn and soybean prevented plant acres reported as a share of planted acres. For 2020, prevented planting equals 6.7% of planted corn acres and 1.8% for soybeans.

Tire tracks with rainwater in an arable field under a dark cloudy sky

This chart also reveals that prevented plant is much more common for corn than soybeans. These data don’t support the comments we frequently hear about farmers prioritizing getting their corn acres planted and finishing with whatever soybean acres they can. Only twice in fourteen years (14% of observations) have relative soybean prevented plant acres exceeded corn (2007, 2015). On average, prevented plant accounts for 2.9% of planted corn acres and 1.5% of planted soybean acres.

2020 Prevented Plant
Figure 2. Corn and Soybean Prevented Plant Acres, Relative to Planted Acres. 2007-2020. Data Source: USDA FSA (Oct. 2020 Data) and aei.ag calculations.

Implications

In March, the USDA projected U.S. producers would plant 180.5 million acres of corn and soybeans. Currently, however, the USDA reports only 174.1 million combined acres were planted. The adjustment – a 6.4 million-acre contraction – is a 3.5% reduction. For comparison, a 3.5% change in corn yields – assuming 177 bushels per acre – is 6 bushels.

It becomes tempting to size up the influence on corn and soybean production. However, don’t lose sight of the big picture. For the second year in a row, Mother Nature has implemented an effective supply management program that limited overall corn and soybean production. The large prevented plant acreage of 2019 and 2020 has had a large influence on production. Furthermore, the reduced acreage has helped offset the reductions and uncertainties about usage. In short, prevented planting has been a big source of improvement to the corn and soybean outlook in 2020.

For some context on the magnitude, prevented plant in 2019 and 2020 has been 29.8 million acres. That is roughly the same as the total prevented plan acreage of the preceding six years (2013-2018).

Finally, similar to ad hoc government programs, producers – and the market – can’t plan on another year of “good luck” from prevented plant acreage. At some point, we can expect below-average prevented plant outcomes, which will have a burdensome effect on the balance sheets.

Wrapping it Up

Prevented plant in 2020 appears to be another case of “the starting point matters.” This year’s prevented plant situation is mostly in the shadow of 2019’s record-shattering level but stands as the second-highest prevented plant acreage in 14 years of data.

That said, it’s critical to recognize the current outlook for corn and soybeans has benefited from back-to-back low-probability outcomes in terms of planting conditions. At some point, conditions will return to something more “normal,” if not historic lows, and cause challenges.

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Source: Agricultural Economic Insights

Be Smart About Fall N

It’s October 26 and there is snow falling outside my window in Columbia. The precip over the past week may have slowed down fall field operations a little, but we’re at or ahead of average on corn and soybean harvest according to USDA—unlike the past two years. This probably carries over to other field operations as well.

I hope that none of you have applied anhydrous yet for next year’s corn. In my opinion, October is too risky—even if it’s snowing.

Timing Risk level
Before 50⁰ 8
1st day <50⁰ 7
1 week <50⁰ 6
1 month <50⁰ 5
50⁰ in spring 3
Sidedress 1

We are just now getting to where soil temperatures at 6 inches average around 50⁰ across the whole state. This is often used as a guideline for when to apply anhydrous. The most dangerous thing about this guideline is that some people interpret it to mean that it’s “safe” to apply anhydrous once soil temperature falls to 50. That’s way too simple. Waiting until after 50 reduces the risk, but not by a lot. The later you wait, the lower the risk than the N will be lost before the corn needs it. Here’s my gut feeling about risk level (1 to 10 scale where 10 is high risk):

The truth is that ammonia still converts to nitrate (vulnerable to loss) at 50 degrees. It’s slow, but it goes.  Once the ground is frozen, it stops—but we have a lot of years where it never freezes at anhydrous depth.

But—the later you wait, the higher the risk of not having enough time to get all field operations done when they should be. That risk is different for every farm and every farmer. It is also higher than it was 50 years ago—we have more wet days when you can’t get in the field than we used to.

So it’s a balancing act. The longer you wait, the less risk of losing the N before your corn needs it, but the greater the risk of running short of field time.

Here are my three take-home messages about fall N for corn—I’ll go into more detail on each. Tailor them for your operation.

  1. Pencil in 8 bushel loss if weather is average
  2. Have a plan for how and when to apply more N if weather is wetter than average
  3. Probably better to apply a full rate on a limited number of fields than a limited rate on all fields

Pencil in 8 bushel loss if weather is average

This is based on a three-year study covering about 50 farm fields that got fall anhydrous. In the year with average November-March precip, we were able to increase yield an average of 8 bushels by adding some sidedress N. This showed that N loss was holding the crop back a little. If you’re willing to lose some yield to improve logistics, I’m okay with that.

Adding extra N in the fall could make up some or all of this yield gap in an average-rainfall year, but would be wasted money in a dry year and would not provide nearly enough N in a wet year with high N loss. It’s not clear to me that you can come out ahead that way. There is a much wider range of possible outcomes—more uncertainty—with anhydrous applied in the fall than applied in the spring.

In the other two years of this study, November-March precip was less than half of the long-term average. In these years, April soil samples showed that the anhydrous was essentially all there. And sidedress N only increased yield in a couple of fields that got excessive rain in May. The November-March precip may cause leaching loss directly, but also sets up soil moisture conditions that will cause loss with typical April-June rainfall.

Have a plan for how and when to apply more N if weather is wetter (and warmer) than average

Both warm and wet conditions contribute to N loss. Eventually it always gets warm, so wet is more important.

Fall anhydrous application can be a risk worth taking, but only if you do what your crop needs when N is lost.aerial image of field

Field-average yield was 45 bushels below yields in the dark green areas in this field that received anhydrous around Thanksgiving. Excess February-June rain was the reason. Coming back with more N would have helped.

Here’s an example of what can happen. This field received a full rate of anhydrous ammonia around Thanksgiving. Soil temperatures were below 50° and were fairly normal through the winter. Early-winter precip was normal, but it started getting wetter in February and continued through June. This image was taken in August. When yields came in from the combine, field-average yield was 45 bushels below the yield in the dark-green areas. This field is well-drained, so the excess rain did not hurt the corn directly—it hurt it by taking away its nitrogen.

Will more N help? I’ve done on-farm tests in four states and six years where there had been excess spring rain. Yield response to extra N was highly profitable except in one state in one year. And the worse the corn looks, the more it responds. I imagine that there is corn that is so damaged that replacing lost N doesn’t make sense, but I haven’t seen it personally.

How do you know whether you’ve lost your N? This is where it gets tricky. I believe that looking at the crop is the most reliable indicator, but there’s no time to walk all your fields. Images work best. Planet Labs will let you have a free 2-week trial to look at their satellite images, which they acquire almost daily for most fields. There are also computer models that will give you decent information, but you probably don’t have time to sign them up by the time you think you might have a problem.

Probably better to apply a full rate on a limited number of fields than a limited rate on all fields

Either way, you’re not putting all your eggs in one basket. You’re limiting your risk as far as N that is lost. But if you put a full rate on a limited number of fields, and have weather that doesn’t cause any loss, you don’t have to go back. That’s where you gain a logistical advantage.

You may also gain a logistical advantage by having a service provider be the one who comes back to finish your N program after you’ve put on 2/3 of it as fall anhydrous. But as long as you’re paying them to run the field, why not a higher rate? Why not put it all on then? You pay less for N by putting it on in the fall, but average loss for fall N probably eats away most or all of your price differential. And it adds uncertainty. Did you lose N, or didn’t you? This is a much harder question to answer when you put your N down on November 2 than when you put it down on June 2.

Source: University of Missouri

For Safety’s Sake, Don’t Take Drying Shortcuts with Stored Corn

Wet weather conditions are causing concerns with the 2020 corn crop going into storage. Proper management of stored grain will be the key to eliminating risks to human health and safety later in the season.

Grain that goes into the bin with higher moisture content presents a host of possible issues.

  • It can freeze or bind.
  • Mold issues can arise.
  • An environment susceptible to insect problems can be created.
  • Higher volumes of bin fines can result.

All of these issues ultimately affect grain flow efficiencies, which can lead to a number of safety hazards. These conditions can cause grain to become bridged or line the sidewall of the bin, resulting in the need for bin entry into an unstable environment.

Producers will need to monitor bin conditions and test the moisture level of the product more frequently throughout the storage season. Do not take short cuts by reducing the adequate drying time needed when putting the crop in the bin.

Establishing best management practices for safety at the bins now and following those throughout the storage cycle will be a good layer of defense in eliminating hazards.

Start with a “no bin entry” policy. This is the absolute best form of protection from becoming a victim.

If entry must occur, proceed with caution by following these steps:

  • Turn off all power to the bin that is being entered. Lockout any equipment that could be started while a person is inside.
  • Monitor the air quality in the bin before entry.
  • Wear a harness and lifeline for fall protection.
  • Wear an N-95 mask to eliminate respiratory hazards.
  • Have an observer outside the bin and maintain constant visual communication during entry. Ideally in the event of entry a team of 3 would be on hand. One person in the bin, one person at the opening and one person on the ground.
  • While completing tasks inside the bin always be aware of your surroundings and changing conditions.
  • Do not by-pass or dismantle guards.

In incidents of entrapment or engulfment, response time is crucial and having preplanned for events of this nature can help first responders save critical time. Follow these emergency plans at each of your stored grain facilities:

  • Post emergency numbers at the bin, including gas, electric and other utility suppliers.
  • Number and label bins so first responders can identify where they need to be when called.
  • Keep your vendor(s) or installer(s) information in a known location for contact in the event of mechanical or structural questions during an emergency.
  • Inquire with your local fire department about the type of rescue equipment and training they have to respond to grain entrapment situations.

As the wet harvest season continues, keep drying down that grain. By keeping your crop in good condition throughout its storage life you can prevent grain entrapment risks in the future.

Have a happy and healthy harvest from the OSU Ag Safety and Health team!

Source: Ohio State University

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