Grains

Winter wheat harvest is in full force across the South, and a couple extra bushels could be seen on yield monitors. The USDA has revised its production outlook on Tuesday with the release of its June World Agricultural Supply and Demand Estimates (WASDE). Winter wheat production is pegged at 1.2 billion bushels, a 1 percent increase from its forecast in May. However, production is still down roughly 6 percent compared to June 2017 levels. The national average yield increased from the May WASDE to 48.4 bushels per acre, but it is still lower than 1.8 bushels smaller than the June 2017 report. For the first time in six years, the USDA sliced its forecast of Russian wheat, and the markets jumped a nickel at the news. The Russian wheat crop is struggling and shrinking from dry conditions and cold, soggy fields in the northern part of the country that delayed planting. “The Russian wheat crop estimate was lowered by 3.5 million tons that was much more than anticipated, and I think the optimism there is that Russia’s completely dominated global wheat trade for the past several years,” said Brian Grete, Pro Farmer editor. “This now opens the door for potential U.S. exports down the road.” So far this year, wheat futures have seen 22 percent gains in Chicago, making the crop one of the top-performing commodities on the board. The next big report from the USDA will be its June Acreage Report on June 29.

The back and forth on trade has agriculture’s head spinning. From China to renegotiating the North American Free Trade Agreement (NAFTA), President Donald Trump’s trade agenda is full in 2018. U.S. Department of Agriculture Secretary Sonny Perdue continues to hear concerns in the field over retaliatory tariffs and market uncertainty, but he told AgDay he’s confident agriculture will come out ahead. “I am optimistic overall,” said Perdue. “The president’s made the decision certainly on NAFTA not to withdraw, but to negotiate separately with Canada and Mexico believing that we can get a better deal with Canada and with Mexico separately. Honestly based on some of the differences and the needs there, that's true.” During an interview at the White House, Perdue told AgDay said the differences are stark when it comes to trade relations between the U.S. and Canada versus the U.S. and Mexico. He said agriculture sees many obstacles on getting products like dairy into Canada, with Canada’s 270 percent tariff on dairy products He thinks agriculture has fared better in getting ag goods across the southern border. Instead, it's auto that's a contentious issue with trading partners there. “I believe we come out with a better deal with both and hopefully sooner rather than later, because trying to get a triangulation, it was very frustrating and we were all running into different timelines of the window shutting,” said Perdue. Trump’s top economic advisor Larry Kudlow said the president shouldn't be blamed for trade conflicts. Instead, he says the system is broken, and it's that system Trump is trying to fix. “President Trump is basically saying we're open for business and we will reward success, not punish it, and that's created tremendous improvement in confidence from across the board,” said Kudlow. While the Trump administration strives to make headway, the administration is also threatening tariffs on $50 billion worth of Chinese goods. Kudlow says open markets is an integral part of the president's plan, but when it comes to China, it's what he deems as unfair trade practices that the administration wants to halt. “We have to defend America in those areas, and at the end of it, any deal we have with China, however long it might take, we'll expand export markets for everybody and that includes farmers and agriculture,” said Kudlow. “In the meantime we have to defend the country, we have to defend the country's interests including their [farmers’] interests as well.” Perdue says China's offer to possibly purchase $70 to $100 billion worth of ag goods if the president doesn't follow through on his tariff threat is a starting point and a move that could open the door for more agriculture goods into China. “Doubling agricultural imports from $20 to $40 billion over two to three years, you can imagine how good that would be for U.S. agriculture,” said Perdue. “It's the gamut; it's soybeans, it's rice, it's wheat, it's other products that we grow, it’s dried distillers grains (DDGs), ethanol, those kinds of things.” Perdue said he continues to defend agriculture's angst at the White House, while also putting faith in the president's plan. “I think while there's anxiety and identify empathize with anxiety, I truly want them to know that President Trump understands that, and I would just ask them to trust him to get us through this negotiation patch,” said Perdue. “I believe he's very sincere when he says he wants them to not only survive, but to thrive in the future.” It’s a future that's currently cloudy, as those in farm country hope for more clarity in the days ahead.

Corn and soybeans are in better shape this year than during the same week in 2017, according to the latest USDA Crop Progress Report. The majority, 77%, of the nation’s corn crop is rated good to excellent, compared to 67% on the same week last year. Minnesota and Wisconsin continue to be the darlings of the Corn Belt with 90 and 91% of their corn rated good to excellent, respectively. Illinois has the most corn rated excellent, at 27%. Wisconsin followed closely behind with 26% of the corn crop rated excellent. Without a doubt, Texas corn is struggling the most. Suffering from drought, 9% of the state’s crop is rated very poor, 10% poor and 35% fair. Only 1% of the Texas corn crop is rated excellent.

In a historic moment, Bayer will likely complete its acquisition of Monsanto this Thursday. The $66 billion deal has been in the works for nearly two years, leaving many farmers wondering what it means for them and their operations. "Compared to farmers' expectations from two years ago of how the combined Bayer/Monsanto would impact their business, the regulator-required divestment and corresponding asset reshuffling should result in considerably less impact than farmers once thought," says Garrett Stoerger, partner at Verdant Partners. "With Bayer selling virtually all of its seeds and traits business to BASF, and on-boarding all of Monsanto's product portfolio, choices are still out there - just owned by someone new." While the deal closes this Thursday, the companies won't be fully integrated just yet. The U.S. Department of Justice (DOJ) has required that Bayer complete divestments before fully integrating with Monsanto - which will take about two months. At that time, the Monsanto name will be retired, though brands such as Dekalb, Asgrow, Channel, Lewis, etc. will remain intact. "Hopefully nothing [changes for farmers]," says Liam Condon, Bayer president of the crop science division. "For the initial two-month period nothing changes for Monsanto customers or Bayer customers so they shouldn't notice a difference. After we integrate I would initially not expect any immediate short-term changes because we're placing a huge emphasis on continuity and want no surprises for customers." Still, some farmers and farm organizations are concerned there will be less competition, resulting in higher prices at the farm gate. "Bayer's acquisition of Monsanto culminates the latest and most disturbing round of consolidation amongst the handful of companies that control both U.S. and global agricultural markets," says Roger Johnson, president of the National Farmers Union. "Three massive companies now control the markets that supply agricultural inputs like seeds, traits and chemicals. This extreme consolidation drives up costs for farmers and it limits their choice of products in the marketplace." Bayer, for its part, says that's untrue. DOJ approved the deal and had seen the potential for concerns on competition and pricing. However, they approved it with adequate remedies, Condon says. "DOJ went out of its way to make sure all competitive issues were addressed, to come up with a comprehensive package to make sure competition remains strong with no negative impact on pricing." As a result of this merger, BASF is taking major steps into the seed market by buying Bayer's field crops businesses. Because BASF owns Thurston Genetics it might have more opportunity in the corn seed market than even Bayer did, according to Todd Martin, CEO and president of the Independent Seed Professionals Association. In addition, other mergers created a stronger FMC and AMVAC from buying company divestures. As far as service at the farm gate for Monsanto's branded products, Stoerger expects limited staffing changes to happen at the retail level. Instead, he anticipates most of those type of changes will occur at the corporate level. If he's right, it means you'll continue receiving service from the familiar faces you're working with now. "The vast majority [of synergies from the acquisition] are infrastructure, not people costs," Condon says. "The whole deal is about innovation and growth, so we expect to add headcount over time. There will be some changes in some jobs, but this is an innovation engine and we will be investing. Over time, my assumption is there will actually be more employment as opposed to less." BASF will also gain a large number of employees with the divestments it purchased. This could lead to an environment within the newly combined Bayer/Monsanto that has less field-level overlap, since many of the former Bayer employees will now be at BASF. The acquisition has potential impact on independent seed companies, too. One area farmers and independent seed companies are watching closely is genetic and trait licensing programs. These programs allow independent companies, with smaller budgets, to still gain access to the latest genetic and trai "Monsanto had always maintained a strong licensing presence and Bayer has also perpetuated licensing and recognized the value in independent seed companies," Martin says. "We believe competition is driven by independent seed companies, and licensing is an important tool we need to maintain."

Warm weather continues to push corn and soybeans along. Monday's USDA Crop Progress report showed the majority of the Nation's corn and soybean conditions to be rated Good to Excellent. The corn recorded to have the best condition might surprise you: Wisconsin. While farmers there had a slow start to planting, the corn crop is now 75% emerged, and 91% of the crop is rated Good - Excellent. Similarly, 88% of the corn in Colorado and Minnesota is rated Good to Excellent. Farmers to the south aren't so lucky. Drought stricken Texas reported the poorest crop condition with 47% of the crop rated Poor to Fair and another 7% of the crop rated Very Poor. Similarly, 42% of the corn in Kansas is rated Very Poor to Fair. Soybeans Soybean planting is moving along at a brisk pace. Since last week, farmers have planted another 10% of their crop. South Carolina farmers are furthest behind with only 54% of their crop planted. Louisiana is the closest to the planting finish line with 97% of the state's beans in the ground. Soybean emergence has continued steadily as well. Warm weather helped 21% of the nation's crop emerge since the last report. The crop is now 68% emerged, above the five-year-average of 52%. In it's first crop conditions report for soybeans in the 2018 growing season, USDA indicated that soybeans are thriving in farm country. Wisconsin is also the garden spot for soybeans this week with 89% of the crop rated Good to Excellent. The soybean crops in Minnesota and Kentucky are both rated 88% Good to Excellent. North Carolina and Missouri tied for the poorest soybean conditions in the report at 54% Good to Excellent.

President Donald Trump's chief Nafta negotiator said the U.S., Canada and Mexico are "nowhere near close to a deal" to update the region's 24-year-old free-trade pact as U.S. lawmakers warn that time is almost up to reach a agreement that can pass the current Congress. "There are gaping differences on intellectual property, agricultural market access, de minimis levels, energy, labor, rules of origin, geographical indications, and much more," U.S. Trade Representative Robert Lighthizer said Thursday in a statement e-mailed by his press office. "We of course will continue to engage in negotiations, and I look forward to working with my counterparts to secure the best possible deal for American farmers, ranchers, workers, and businesses." The Mexican peso and Canadian dollar weakened following Lighthizer's comments. The three countries have been negotiating for nine months to modernize Nafta, and midterm congressional elections in the U.S. and a Mexican presidential campaign this year have raised the urgency for a quick resolution. Trump has threatened to withdraw from the pact if he can't rework it to shrink America's trade deficit and boost manufacturing jobs. Lighthizer's doubts dashed hopes for a quick resolution after Canadian Prime Minister Justin Trudeau earlier on Thursday in New York expressed optimism about reaching an agreement soon, while noting that differences remain. U.S. House Speaker Paul Ryan said earlier in the day there could be a week or two left to reach a deal that American lawmakers could support this year. ˜Feeling Positive' Nafta partners in recent days have been holding high-level meetings to assess if a new trade agreement is within reach. "We're down to the point where a good deal is on the table," Trudeau said. "We know that those last conversations in any deal are extremely important, so I'm feeling positive about this, but it won't be done until it's done." The issues specifically identified by Lighthizer in his comments as areas of difference include a U.S. proposal to open Canada's dairy market and establish seasonal barriers for Mexican agricultural exports; efforts to get Mexico and Canada to raise the threshold at which duties are applied to goods imported from the U.S.; and the rules for regional content in cars built and traded within North America. David MacNaughton, Canada's ambassador to the U.S., said earlier on Thursday that Canadian and American officials would gather in Washington to discuss Nafta. He didn't say who would attend, but his country's Foreign Affairs Minister Chrystia Freeland planned to be in the U.S. capital Thursday for unspecified meetings, according to three people familiar with talks and one Canadian government official who spoke on condition of anonymity. Mexico will send part of its Nafta team to Washington on Monday, and another contingent is already there, Economy Minister Ildefonso Guajardo said Thursday. There's no date for him to meet with Lighthizer and Freeland, Guajardo said. The three cabinet-level officials have been leading the talks. MacNaughton said Canadian and Mexican officials plan to hold discussions in Washington, without saying when. With attention focused on the contentious issues of cars, Trudeau said that Mexico had made proposals that "will go a long way towards reducing the trade deficit the U.S. has with Mexico and indeed even bringing back some auto jobs from Mexico to the United States." Guajardo quickly responded on Twitter, congratulating Trudeau for his remarks. "But a clarification is necessary: any renegotiated Nafta that implies losses of existing Mexican jobs is unacceptable," he said. The U.S. is pushing to tighten the rules of origin, which govern how much regional content a car must have to qualify for Nafta's duty-free benefits. Trudeau said there's a proposal that is "broadly acceptable" to the three countries, though MacNaughton said some work remains. "We're that close on autos," the ambassador said, showing a small gap between his index finger and thumb. Canada and Mexico expressed continued resistance Thursday to the U.S. proposal for a so-called sunset clause that would kill Nafta after five years unless all parties agree to extend it. Trudeau said the idea is still a sticking point, while Guajardo said it was out of the question. "There's still some tough issues," MacNaughton said. "But do we really want to kick this down the road and miss the opportunity to pull all that good work together and get something formally done?"

The U.S. has fallen behind in federal agriculture research and seed breeding investment: China has surpassed the country in spending since 2008. To combat low spending, Representatives Mark Pocan (D-WI) and Darren Soto (D-FL) introduced the Seeds for the Future Act to the House earlier this year. "For farm businesses to stay viable in today's economy, they need to be able to overcome a host of obstacles, including increasingly extreme and unpredictable weather patterns, invasive pests and previously unseen crop diseases," says Kanika Gandhi, policy specialist at the National Sustainable Agriculture Coalition. "The Seeds for the Future Act will increase farmers' access to these 21st century seeds by making much-needed investments in public breeding programs." Funds will focus on helping create seed varieties that take into account the growing challenges farmers deal with today, such as climate, disease, soil and other varying detractors. The Seeds for the Future Act ensures: Federal investments support farmers and researchers who are developing seeds to work for a diverse set of farming operations and locations Priority for "farmer-ready" cultivar development in federal grant programs Commitment to seed diversity and regional adaptation Increased efficiency and coordination within federal agencies More specifically, the Act requires at least $50 million annually to develop farmer-ready public cultivars, with priority for projects based on geographical needs. This effort should lead to regionally adapted choices for farmers. Funds will be available through a competitive grant program. Grants will be no less than five years in length to "ensure that researchers can create enough progress on farmer-ready cultivars to most effectively use public funds," according to the Act. All progress will be reported to USDA to be shared across agencies. This will include public-ready cultivars as well as high priority research, gaps in research and assessments of developed cultivars. This Act was introduced in early March, 2018 under H.R. 5208.

The House version of the Farm Bill, which is expected to have floor time this week, made its way through mark up last week which resulted in 103 amendments, several of which aim to make significant changes to the crop insurance programs. "Amendment topics include the usual controversial proposals on capping crop insurance premium subsidies, means testing for the program, changing the sugar program, etc.," says Jim Wiesemeyer Pro Farmer policy analyst. An amendment from Reps. Michael Burgess (R-TX) and Earl Blumenauer (D-OR) , "caps spending on Agriculture Risk Coverage and Price Loss Coverage programs at 110% of CBO-predicted levels for fiscal years 2021 through 2025." Rep. Darin LaHood (R-IL) aims to simplify the program with his amendment, which "streamlines the sign up process for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) by directing the Secretary of Agriculture to change the regulatory requirements from an annual sign up to a "˜one and done"™ process for ARC and PLC only." An amendment from Reps. Mark Sanford (R-SC) and Ron Kind (D-WI), "lowers the Profit Margin that Crop Insurance Companies are guaranteed referred to as the "˜Target Rate"™ of return from 14.5% to 12%." An amendment from Rep. Ralph Norman (R-SC) "reduces crop insurance premium subsidies for insurance policies by 15 percentage points, except for catastrophic level of coverage." Two representatives want subsidies to be public record. The amendment from Reps. Kind and Jim Sensenbrenner (R-WI), "allows for public disclosures of crops insurance premium subsidies." Rep. Kind also wants to remove cotton from the Title 1 insurance programs. Another amendment from him "makes cotton ineligible for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs under Title 1 and returns cotton to the Stacked Income Protection Program (Stax)." Rep. Steve Russell (R-OK) wants tobacco farmers to pay for their own insurance. His amendment "amends the federal crop Insurance act to prohibit the Department of Agriculture from subsidizing crop insurance premiums for tobacco. Any saving that occur as a result of this bill must be deposited in the Treasury and used for deficit reduction." An amendment from Rep. Blumenauer "creates a payment limit of $125,000 a year for recipients of crop insurance premium subsidies." Reps. Keith Rothfus (R-PA), Kind and Sensenbrenner hope to "limit crop insurance subsidies to only those producers that have an Adjusted Gross Income (AGI) of $500,000 or less," with their amendment. Similarly, Rothfus and Kind want to "limit commodity and conservation assistance to only those producers that have an Adjusted Gross Income (AGI) of $500,000 or less." It"™s important to note that not all of these proposed changes will be approved. "The Rules panel meets late Tuesday afternoon to set the terms of the farm bill debate, and again on Wednesday afternoon to decide which amendments can be considered on the House floor," Wiesemeyer explains.