Grains

In their Friday report, USDA noted that as of September 1 corn stocks were up 130 million bushels more than the average trade guess. Soybeans were 37 million bushels more and wheat stocks were 37 million bushels more than pre-report trade expectations. Those figures were negative news to an already pressured commodity market. Immediately following the release of the report, corn fell 7 cents and soybeans fell 10 cents. “There's more grain in the bin on September one than what the market expected,” explains AgriTalk host Chip Flory. “On soybeans, to get there [USDA] had to go back and adjust the 2017 soybean crop.” USDA pushed the 2017 soybean crop up 19 million bushels, adding 0.2 bushels per acre. While they didn’t change planted or harvested acres they did revise yield because otherwise the report would have shown a huge negative residual use, something USDA tries to avoid, Flory explains. What Will It Mean For Markets? “Look at [these September 1 stocks] as the supply side cushion for the 2018-19 marketing year,” Flory explains. “Now we're already harvesting that new crop supply, but we just added 130 million bushels of corn to total supplies. We just added 40 million bushels of soybeans to total supplies for the 2018-19 marketing year.” While additional supply for soybeans is negative, adding 130 million bushels of corn can change some attitudes, Flory says. “It makes it easier for us to get to a 2 billion bushel carry at the end of the 18-19 marketing year, so, they're negative for the market there's no question,” he says. According to Flory, the market will continue to tell farmers to plant more corn acres and a few less soybean acres next year. “I would love it if there had to be competition for those acres,” Flory says. “If corn actually had to bid to get those acres that it needs for 2019. Unfortunately, soybeans are just kind of standing off to the sideline and saying go ahead and have those acres now.” Wheat could also see a resurgence of acres for next year’s growing season. Extremely poor soybean basis combined with improved seeding conditions will likely mean more wheat throughout the Northern plains, Flory says.

China is ramping up its extreme discourse for the United States’ use of tariffs to resolve ongoing trade issues. On the heels of the U.S. following through on its promise to slap tariffs on $200 billion worth of Chinese goods, China fired back with more than just tariffs. Just this week, China placed a four-page advertisement in the “Des Moines Register” to highlight the impacts tariffs are having on Iowa’s soybean farmers. The lengthy advertisement said it was “paid for and prepared solely by China Daily, an official publication of the People’s Republic of China.” It’s a tactic that comes at a time when growing U.S. soybean supplies are also weighing on soybean prices. As the trade battle continues to sprout twists and turns, export season is now entering a critical time. Fall doesn’t just mark harvest in the U.S., it’s also the time when China typically starts coming back to the U.S. as the main supplier of soybeans. However, with trade tensions heating up instead of cooling off, some economists fear that instead of fixing trade issues, the Trump Administration is creating long-term demand destruction. “I'm very concerned that we'll see changes in Chinese policy, changes investment - not just in China, but around the world - that will make it tougher for the U.S. to reclaim those markets, even if the current trade disputes are resolved,” says Pat Westhoff, Director of the University of Missouri’s Food and Policy Research Institute (FAPRI). Westhoff says the real concern is once a country loses demand that’s taken years to cultivate, the trust and demand may take even longer to get back. “I think if things get resolved tomorrow, we might see things quickly snap back, but if it takes even a few more months, we're going to start seeing some investments occur - some policy changes occur,” he says. Looking at the numbers, the trade dispute with China is already eating into critical soybean buys. In 2017, China became the top buyer of U.S. ag goods, overtaking Canada. The USDA already cut China’s soybean imports to 95 million metric tons in 2018-2019, the first decline in 15 years. While Westhoff thinks China will need to come to the U.S. at some point to satisfy its growing appetite for soybeans, it won’t be near the levels the U.S has become accustomed to. That means the U.S. will need to make that demand up elsewhere, which he says is highly unlikely. “We've seen increased imports by the European Union of U.S. soybeans, and that's been very helpful,” Westhoff says. “But again, if you look at the overall numbers, we have to have Brazil stop exporting to everybody else - and we would have to take over all those markets - for things to actually balance at the end of the day. That’s unless we're going to be able to sustain a significant share of the soybean market, which is going to be tough to see happen.” Westhoff says there’s just not enough demand from other countries - at both the prices and quantities the U.S. wants - to make up for China’s lost U.S. purchases.

In their Monday crop progress report, USDA noted what farmers know well, harvest continues throughout farm country. In fact, 16% of corn and 9% of soybeans are harvested. Many North Carolina farmers rushing to harvest prior to Hurricane Florence’s arrival did just that. Illinois farmers lead the pack in corn harvest, with 28% of the state’s crop out of the field. That’s 15 percentage points ahead of the five-year-average. Colorado corn harvest is lagging. Only 1% of the crop has been harvested there, compared to the five-year-average of 4%. It appears farmers in North Carolina got as much corn out of the field as they could prior to Hurricane Florence making landfall last week. Seventy-six percent of the state’s corn crop is harvest, despite farmers there only having 2.7 days of weather suitable for field work. Unfortunately, many of their soybeans were left in the field to weather the storm. Farmers there have only harvested 4% of their soybeans. While that’s on track with their five-year-average of 3%, it’s unclear at this point how those beans will survive the wind and flooding experiences by many in the area. In total, farmers have harvested 14% of the nation’s soybean crop. As anticipated, Louisiana producers have harvested the most soybeans, at 66%. North Dakota is harvesting the fastest compared to their five-year-average. USDA reports 21% of their soybeans are harvested, compared to the 8% average.

The world got one of its first public images of the biggest ag company on the globe Tuesday in Germany as leadership from Bayer and former Monsanto employees spoke to a roomful of journalists at the newly minted Bayer AG Future of Farming Dialogue for 2018. Liam Condon, president of Bayer Crop Science, and Bob Reiter, head of research and development, laid out plans for the new company’s direction, now three weeks into the merger. “Since day one on the 21st of August it's been a little bit like Christmas when you get to open up all the toys, and you see how wonderful they are,” says Condon. “Now we're unpacking the toys, and there's a tremendous amount of excitement in the organization.” Two stalwart competitors, now teammates, sharing a stage and a glowing message about the future of agriculture where innovation is the payout, following two years of acquisition paperwork. “We brought Bayer and Monsanto together, because we believed ensuring food security in a sustainable manner is a massive challenge that requires a complete step up in agriculture,” says Condon. “It’s literally a transformation of agriculture that we have set out for ourselves.” Those are lofty goals from a company expecting to spend upwards of $2.3 billion dollars on research and development annually. “We have 8,000 scientists in the labs and in the fields,” touts Condon. “This is a phenomenal number who are working on creating more innovation [and] faster every day.” The man overseeing that mission and working on his third full week as a newly minted German resident is former Monsanto executive Bob Reiter. “As I began to visit our research teams around the world the first question I get asked is, ‘who can I call,’” says Reiter. “So, the most important job I think I have over the next six months is how to get those [scientists] connected.” He’s now leading two teams of scientists from two agribusiness giants that have often spent time working to solve similar issues. Reiter shares an example of synergy from the stage, explaining that both companies have teams of scientists trying to win the battle against the stink bug. Today, both of those teams can collaborate, compare notes and work together to solve the same issue. “The greatest innovations in mankind has happened at the interface between disciplines of science that typically don't talk to each other,” says Reiter. “Innovation only matters if it really helps our customers be successful.” The new Bayer leadership team outlined goals built on combining Monsanto’s seed and plant breeding strength with Bayer’s crop protection portfolio. The intent is to cut in half the time it takes to deliver new, innovative products. Rather than a 20-year-long slog, the pipeline process would take 10 years or less. “What we clearly aim to do is to set entirely new standards in the market,” says Condon. “We want to generate more innovation faster than anybody out there and make sure it’s innovation that really helps our growers in the field.” One piece of that puzzle lies in the data both companies bring to the business. Monsanto and its subsidiary Climate Corp tout a litany of data around major row crops like corn, soybeans, cotton and canola. Bayer brings its own data set and a global connection to cereal grains from its European Union roots. Michael Stern, the new head of digital farming for the company says, “I think it's going to drive the fundamental data that we have to help provide better information to growers in a much broader way.” Stern and his counterpart Jim Swanson, chief information officer of the Bayer Crop Science division, both lay out a future where the company’s calculated 40 major decisions a farmer makes each season is guided by data, artificial intelligence and machine learning. “Internally, we're growing our data by 33% every year,” says Stern. “We [Climate] grew by 2 petabytes [1 million gigabytes] just last year alone.” Now covering 60 million acres, Fieldview by Climate Corp is on track to reach 80 or even 100 million acres by next year. New algorithms are already helping the company pick variety winners for the farm with a new product called the Seed Placement Advisor. “With our first algorithm we were able to go ahead and pick the right hybrid to put in the field, and 80% of the time it saw a greater than 6 bu. advantage versus the wrong hybrid placed in that field,” says Swanson. This year, the data is still coming in, but Swanson says so far, they’re winning 100% of the time with a 14-bu.-per-acre advantage. Those are tangible results the company expects only to grow as the merger of data and information continues. “We can do over a billion simulations of crop genomes to determine the best phenotype in silica, in the computer, before we ever put a single seed in the ground,” says Stern. “That gives us more opportunities to test and learn through machine learning, it saves as we're putting the seeds in the ground until later and we actually have more insight.” “We see great opportunities, and how we bring our capabilities together will fundamentally change how we can invent and create for our customers,” says Reiter. The pledge to farmers before the merger and now is an agribusiness giant capable of overcoming obstacles like limited resources, people, market share or even the growing burden of regulatory red tape. “We have got to get the story of modern agriculture out there; we can't do it alone,” says Condon. “But we have to be at the forefront, and that's a commitment that we’re making.” With plenty of headwinds blowing in the face of this well-seasoned infant business, collaboration between each faction of the merger is no longer an option. It’s a requirement for survival. “You can’t really tell anymore who's from Bayer and who's from Monsanto,” preaches Condon. “It’s just a genuine bunch of people who are all completely clear about the direction they want to go, and now we’re just trying to get things done.”

Soybean harvest is underway, according to USDA. In their Monday Crop Progress report, the agency noted that 6% of the Nation’s soybeans had been harvested as of September 16. That pace is double the five-year-average of 3%. Louisiana and Mississippi lead the pack with 51% and 33% of their soybeans harvested respectively. However, both states are actually behind compared to last year when 60% of the Louisiana’s and 37% of Mississippi’s soybeans were out of the field this same week. Soybean harvest is severely delayed in Arkansas where farmers have only combined 9% of their crops compared to 24% this week last year. Many farmers in Arkansas were unable to get their crops out of the field prior to tropical storm Gordon making landfall and stalling harvest for a solid week. Meanwhile, Minnesota, North Dakota, South Dakota and Tennessee are all ahead of normal harvest pace for soybeans by five to eight percentage points. Corn and cotton harvest continues to move along throughout farm country. USDA says farmers have harvested 9% of the corn crop and 13% of the cotton crop.

With predicted record yield in parts of the country, farmers have the opportunity to meet or exceed 2017 profit margins, according to a new study from University of Illinois. Farmers who marketed grain in earlier months are likely money ahead as prices have turned for the worse in recent months. “Gross revenue in 2018 could be near 2017 levels as long as yields are exceptional and some pre-harvest hedging occurred before May,” said Gary Schnitkey, Department of Agricultural and Consumer Economics at the University of Illinois in a recent press release. USDA recently pegged corn production up 241 million bu. over last month at 14.827 billion bushels with a national yield average at 181.3 bu. per acre. Soybeans are projected to be a record 4,693 million bu., up 107 million with a record yield of 52.8 bu. per acre. With unchanged soybean export numbers, ending stocks could hit 845 million bu., up 60 million from the previous month. These announcements from USDA further depressed corn and wheat prices this week, putting more pressure on net returns on-farm. Economists at the University of Illinois used this new information to compile anticipated 2018 returns for high-productivity farmland in Illinois. You can easily exchange estimates in the equations for what you expect on your farm to estimate your returns. Soybean returns are helped by the Market Facilitation Program (MFP), that gives about 83 cents per bu. For Illinois’ expected yield of 70 bu. per acre that’s a $58 increase. Corn sees less of a benefit at .005 cents per bu. for a total of $1 per acre for the state’s anticipated yield average of 233 bu. per acre. Don’t expect ARC payments on corn or soybeans in Illinois at least, according to Schnitkey. There is a chance some PLC payments could be made on corn, but it’s unlikely in soybeans. However, some revenue protection payments could be made. “Current futures levels suggest harvest prices near $3.65 for corn and $8.45 for soybeans,” Schnitkey said. “If actual yields equal the trend-adjusted APH yields used in calculating revenue guarantees, the corn price hasn’t fallen enough to trigger revenue protection payments at the 85% coverage level.” Soybeans prices, however, have declined 17% which could trigger payments if yields are lower than anticipated. If yields reach their anticipated record high in both corn and soybeans don’t expect a crop insurance payment. According to Schnitkey, MFP payments and high yields will help keep 2018 gross revenue higher, but 2019 is a concern. “Gross revenue in 2019 will be projected much lower because there likely will not be an opportunity to price 2019 grain at relatively high levels and MFP payments likely will not occur in 2019,” he said.

Scientists have already warned that climate change likely will impact the food we grow. From rising global temperatures to more frequent "extreme" weather events like droughts and floods, climate change is expected to negatively affect our ability to produce food for a growing human population. But new research is showing that climate change is expected to accelerate rates of crop loss due to the activity of another group of hungry creatures — insects. In a paper published Aug. 31 in the journal Science, a team led by scientists at the University of Washington reports that insect activity in today's temperate, crop-growing regions will rise along with temperatures. Researchers project that this activity, in turn, will boost worldwide losses of rice, corn and wheat by 10-25 percent for each degree Celsius that global mean surface temperatures rise. Just a 2-degree Celsius rise in surface temperatures will push the total losses of these three crops each year to approximately 213 million tons. "We expect to see increasing crop losses due to insect activity for two basic reasons," said co-lead and corresponding author Curtis Deutsch, a UW associate professor of oceanography. "First, warmer temperatures increase insect metabolic rates exponentially. Second, with the exception of the tropics, warmer temperatures will increase the reproductive rates of insects. You have more insects, and they're eating more." In 2016, the United Nations estimated that at least 815 million people worldwide don't get enough to eat. Corn, rice and wheat are staple crops for about 4 billion people, and account for about two-thirds of the food energy intake, according to the UN Food and Agriculture Organization. "Global warming impacts on pest infestations will aggravate the problems of food insecurity and environmental damages from agriculture worldwide," said co-author Rosamond Naylor, a professor in the Department of Earth System Science at Stanford University and founding director of the Center on Food Security and the Environment. "Increased pesticide applications, the use of GMOs, and agronomic practices such as crop rotations will help control losses from insects. But it still appears that under virtually all climate change scenarios, pest populations will be the winners, particularly in highly productive temperate regions, causing real food prices to rise and food-insecure families to suffer." To investigate how insect herbivory on crops might affect our future, the team looked at decades of laboratory experiments of insect metabolic and reproductive rates, as well as ecological studies of insects in the wild. Unlike mammals, insects are ectothermic, which means that their body temperature tracks the temperature of their environment. Thus, the air temperature affects oxygen consumption, caloric requirements and other metabolic rates. The past experiments that the team studied show conclusively that increases in temperature will accelerate insect metabolism, which boosts their appetites, at a predictable rate. In addition, increasing temperatures boost reproductive rates up to a point, and then those rates level off at temperature levels akin to what exist today in the tropics. Deutsch and his colleagues found that the effects of temperature on insect metabolism and demographics were fairly consistent across insect species, including pest species such as aphids and corn borers. They folded these metabolic and reproductive effects into a model of insect population dynamics, and looked at how that model changed based on different climate change scenarios. Those scenarios incorporated information based on where corn, rice and wheat — the three largest staple crops in the world — are currently grown. "Temperate regions are currently cooler than what's optimal for most insects. But if temperatures rise, these insect populations will grow faster," said co-author Scott Merrill, a researcher at the University of Vermont's College of Agriculture and Life Sciences and the Gund Institute for Environment. "They will also need to eat more, because rising temperatures increase insect metabolism. Together, that's not good for crops." For a 2-degree Celsius rise in global mean surface temperatures, their model predicts that median losses in yield due to insect activity would be 31 percent for corn, 19 percent for rice and 46 percent for wheat. Under those conditions, total annual crop losses would reach 62, 92 and 59 million tons, respectively. The researchers observed different loss rates due to the crops' different growing regions, Deutsch said. For example, much of the world's rice is grown in the tropics. Temperatures there are already at optimal conditions to maximize insect reproductive and metabolic rates. So, additional increases in temperature in the tropics would not boost insect activity to the same extent that they would in temperate regions – such as the United States' "corn belt." The team notes that farmers and governments could try to lessen the impact of increased insect metabolism, such as shifting where crops are grown or trying to breed insect-resistant crops. But these alterations will take time and come with their own costs. "I hope our results demonstrate the importance of collecting more data on how pests will impact crop losses in a warming world — because collectively, our choice now is not whether or not we will allow warming to occur, but how much warming we're willing to tolerate," said Deutsch.

Four Farm Bureau leaders, including American Farm Bureau Federation (AFBF) President Zippy Duval, had a chance to express their trade concerns directly to President Trump on Wednesday. U.S. Vice President Mike Pence invited Duval, Texas president, Russell Boening, Illinois president, Richard Guebert state?? and AFBF vice president Scott VanderWal – who is also president of the South Dakota Farm Bureau – to the White House for a meeting with himself, Agriculture Secretary Sonny Perdue and Ambassador Gregg Doud, chief agricultural negotiator in the Office of the U.S. Trade Representative. “Farmers and ranchers are counting on the Administration to fight for strong trade deals that expand our markets—now more than ever as we face the worst farm economy in 12 years,” AFBF President Zippy Duvall said. “This White House has been the most ag-focused in recent memory, and we are grateful to have a seat at the table with our nation’s leaders to discuss the importance of agriculture to our rural economies and the importance of trade to farmers and ranchers across the country.” President Trump unexpectedly stopped by the meeting to hear the farmers’ concerns around trade. All four state Farm Burueau presidents said they are confident the Trump Administration has the best interest of America’s farmers and ranchers in mind while they are negotiating trade deals. “After the meeting today, I feel more positive about the trade situation,” Boening said. “The fact that agriculture leaders across the country were brought into the White House to have a meeting with the vice president to me amplifies the fact that they understand the importance of agriculture to this country.” According to Guebert, the president’s comments to the group centered on thanking farmers for their support during these negotiations. He also spent time thanking Secretary Perdue for the aid package and explaining some kinks that Farm Bureau leadership believes need to be worked out for the plan to be effective. VanderWal expressed his concerns for young farmers who don’t have much capital on hand or who haven’t experienced consistently low commodity prices. “When we get into harvest and combines are rolling and the check comes, and it isn’t for as much as we told the banker it was going to be, that’s going to cause some problems,” he said. The leaders weren’t shy about expressing their concerns about the trade tensions either. “We talked about China and the importance of that,” VanderWal said. “[We’re] hoping a deal with China could be less than a year away.”