Grains

Areas of China have been inundated by a monsoon, bringing massive rainstorms and creating extreme flooding. The South China Morning Post reported this week on a natural gas pipeline explosion and several roads collapsing due to heavy rains in parts of Yulin, a city in China’s northwestern Shaanxi province. Authorities are evacuating residents from the area. The Guardian reported some places have recorded more than double the normal amount of rain through June and July as the active monsoon has put water pressure on the Three Gorges dam and the millions of people who live downstream in towns such as Wuhan. “Based on our research, we are thinking 10% to 15% of overall ag production could be impacted by the flooding,” says Brian Splitt, a technical analyst with AgMarket.net. “The one thing I would say with confidence is if something happened with the dam, we’d see market volatility increase substantially at that point,” Splitt says. There could be flooding in metropolitan areas, which could create manufacturing problems, he adds. “This could potentially be another black swan in 2020 where equity markets are going to be riled by that,” Splitt says. “[We] could have implications on currency as well.”

China made a monster buy this week of corn. USDA confirmed the 1.9 million metric tons sale was the third largest on record, and the biggest U.S. corn buy ever by China. Even with the new demand, the corn market still seemed unphased. Analysts say much of that was because traders were focused on the weather Thursday. Drought-stricken areas of the Corn Belt saw some rain, helping revive some of the crop needing rain. That positive weather added more pressure to already low corn prices. What will it take to boost corn prices moving forward? Some analysts think it’s going to take more demand from China.  Darin Newsom of Darin Newsom Analysis saw China may be part of the equation, but not all of it.  

The U.S. Department of Agriculture on Monday warned residents against planting unsolicited packages of seeds arriving from China because they could harm the environment. At least eight states, from Washington to Ohio, have also told residents in recent days not to put the seeds in the ground, after they arrived apparently from China in the mailboxes of people who did not order them. Officials said the seeds could be invasive species that could threaten crops or livestock. "At this point in time we don't have enough information to know if this is a hoax, a prank, an internet scam or an act of agricultural bioterrorism," Ryan Quarles, Kentucky's agriculture commissioner, said in a video posted on the department's website. Photos of packages that state agriculture departments posted on social media show seeds of different sizes, shapes and colours that arrived in white or yellow envelopes. State officials said some packages were labelled as jewellery and may have contained Chinese writing. Chinese foreign ministry spokesman Wang Wenbin said on Tuesday that China's postal service strictly abides by restrictions on sending seeds. Records on the packages appear to have been falsified, according to checks by China's postal service, which has asked for them to be sent to China for investigation, he said, speaking at a daily news briefing. The USDA said it is "aware that people across the country have received unsolicited packages of seed from China in recent days." The agency is working with the Department of Homeland Security and states to protect U.S. agriculture and prevent the unlawful entry of prohibited seeds, according to a statement. State officials have asked recipients to secure the seeds in sealed plastic bags until they are picked up by authorities. Police in Whitehouse, Ohio, said it appears the seeds are tied with a scam in which vendors ship inexpensive products to unwitting receivers and then submit positive reviews on e-commerce websites on the receiver's behalf. "Although not directly dangerous, we would still prefer that people contact us to properly dispose of the seeds," the police said on Facebook. The Washington State Department of Agriculture said on Facebook that the shipments are "agricultural smuggling." It asked recipients to save them for the USDA because "they may be needed as evidence."

While recent rainfall helped alleviate some of the drought stress across the Midwest, it came at a cost. High winds and hail mean some farmers are facing ugly fields, and potentially challenging harvests. “The rain was perfect timing for our April planted corn that’s in the middle or just getting started with the pollination process this week,” says Ken Ferrie, Farm Journal Field Agronomist. “The two inches of rain will produce more yield than the wind damage will cost. But there’s no doubt this windstorm was very expensive in both yield and harvest complications. We’ll realize the full effect of this storm in the fall.” Several fields from Minnesota, to Kentucky suffered from wind or hail damage. Yield loss from this kind of damage varies greatly, based on how bad the event was in your area and what growth stage the corn was in.   “The younger your corn plant, the less damage you’ll see,” Ferrie says. “April-planted corn that is tasseling or one or two leaves form tasseling will have the most damage.” When you’re scouting fields with damage, check for viable ear count. If the stalk is snapped below the ear that’s obviously a zero count. If it’s snapped above the ear it could still produce an ear, pending it’s able to get pollinated despite the top being broken off. If the corn is lodged, older corn is more likely to continue to have potential issues. “This older corn will tip the top of the plant back up but most of the stock is going to stay tipped,” Ferrie says. “This will put several ears on the backside of the stock, giving us some pollination issues. Half of the ear-filling leaves will also be on the downside of the stock and not receive sunlight. This will reduce grain filling capabilities and bushels.” Later-planted corn could have some advantages over the earlier planted hybrids. In either case, start planning for a potentially challenging harvest now. If needed, start working with providers for equipment like combine reels. Fungicide considerations While you’re checking for ear count, keep an eye out for fungus and disease. With tasseling occurring or closing in quickly, it’s prime time to make a decision on fungicides. “The biggest issue we must deal with is how un-uniform this April corn is,” Ferrie says. “If you’re spraying fungicide on pre-tassel corn, pull out the surfactant to prevent pinched ears. Most of the field have late emergers and replant corn in the same field, so decisions will have to be made whether to pull out surfactant or wait for the late corn to shoot a tassel before fungicide application.” Check fields to see if the diseases are at threshold to help decide what to do about any uneven emergence issues. When it comes to hail-damaged corn, Ferrie says if fungicide is part of your normal program and standability is a concern, treat hail acres.  

China booked deals to buy 522,000 tonnes of soybeans, the U.S. Agriculture Department said on Thursday, the latest in a string of purchases by the world's top buyer of U.S. agricultural products. Another 351,000 tonnes of soybeans were sold to buyers in unknown destinations, the USDA said. Traders and analysts said those soybeans also were likely headed to China. In a separate report on Thursday, the USDA said that export sales of corn to China totaled 1.37 million tonnes in the week ended July 9, the biggest weekly total on record. China also bought 323,739 tonnes of wheat that week, its biggest weekly total since March. But weekly soybean export sales to China were just 383,216 tonnes, the smallest since the week ended April 16. There has been a flurry of farm commodity sales reported in recent days. Since Friday, the USDA has reported 3.259 million tonnes in U.S. corn purchases by China along with 1.04 million tonnes of soybeans and 320,000 tonnes of hard wheat. China said on Thursday it will stick to the Phase 1 trade deal it reached with the United States earlier this year but warned that it will respond to "bullying" tactics from Washington, as relations continue to deteriorate. But China would need to dramatically ramp up buying of U.S. farm products in the coming months to fulfill its Phase 1 commitment to import $36.5 billion in the first year of the deal, signed in January. U.S. government data shows that China imported just over $6 billion worth of U.S. farm goods from January to May.

WHEAT:  The outlook for 2020/21 U.S. wheat this month is for larger supplies, lower domestic use, unchanged exports, and increased stocks.  Supplies are raised as larger beginning stocks more than offset lower production.  Beginning stocks are increased on the NASS Grain Stocks report, issued June 30, which indicated higher 2019/20 ending stocks than previously estimated.  This also resulted in lowering 2019/20 feed and residual use by 61 million bushels to 74 million.  Wheat production for 2020/21 is reduced 53 million bushels to 1,824 million.  Winter wheat production is lowered 48 million bushels to 1,218 million with reductions in Hard Red Winter and Soft Red Winter.  The initial 2020/21 survey-based production forecasts for other spring and Durum were issued this month by NASS.  Other spring wheat is less than last year at 550 million bushels on lower forecast yields while Durum is higher at 56 million on increased harvested area.  Domestic use is 10 million bushels lower this month, all on reduced feed and residual use as 2020/21 U.S. corn supplies are still projected significantly larger than last year.  Projected 2020/21 exports are unchanged at 950 million bushels but there were several offsetting by-class changes this month.  Ending stocks for 2020/21 are projected 17 million bushels higher than last month at 942 million.  The projected season-average farm price (SAFP) is unchanged at $4.60 per bushel, compared to the revised 2019/20 SAFP of $4.58. The 2020/21 global wheat outlook is for smaller supplies, reduced consumption, lower exports, and decreased stocks.  Supplies are reduced 2.9 million tons to 1,066 million as larger beginning stocks are more than offset by reduced production, primarily in the EU, United States, Morocco, and Russia.  EU production is lowered 1.5 million tons to 139.5 million, mainly on reductions for France and Spain.  If realized, this would be the smallest EU wheat production since 2012/13.  Morocco is lowered 800,000 tons to 2.7 million, the smallest output since 2007/08, primarily on updated government estimates.  Russia is reduced 500,000 tons to 76.5 million as lower winter wheat production is partially offset by increased spring wheat output.  Projected 2020/21 global trade is reduced 0.8 million tons to 188.0 million as lower EU exports are only partially offset by higher Australian exports.  World consumption is lowered 1.6 million tons to 751.6 million, primarily on reduced feed and residual use in the EU, the United States, and Morocco.  Projected 2020/21 world ending stocks are lowered 1.3 million tons to 314.8 million but remain record-large with China and India accounting for 51 and 10 percent of the total, respectively. COARSE GRAINS:  This month’s 2020/21 U.S. corn outlook is for sharply lower supplies, reduced feed and residual use, increased food, seed, and industrial use, and lower ending stocks.  Corn beginning stocks are raised 145 million bushels, based on lower use forecasts for 2019/20.  Feed and residual use for 2019/20 is lower based on indicated disappearance during the first three quarters of the marketing year as reported in the June 30 Grain Stocks.  Food, seed, and industrial use is lowered 45 million bushels.  Corn used for ethanol is lowered 50 million bushels based on reported use to date and weekly ethanol production data reported by the Energy Information Administration during the month of June and into early July.  Projected corn used for glucose and dextrose and starch are both raised, while that used for high fructose corn syrup is lowered.   OILSEEDS:  U.S. oilseed production for 2020/21 is projected at 122.8 million tons, down 0.4 million from last month, with increases for soybeans and peanuts offset with reductions for canola, sunflowerseed, and cottonseed.  Soybean production is projected at 4.14 billion bushels, up 10 million on increased harvested area.  Harvested area, forecast at 83.0 million acres in the June 30 Acreage report, is up 0.2 million from last month.  The soybean yield forecast is unchanged at 49.8 bushels per acre.  With higher beginning stocks, 2020/21 soybean supplies are raised 45 million bushels.  Soybean crush is raised 15 million bushels reflecting an increase in domestic soybean meal disappearance which is raised in line with an increase for 2019/20.  With projections for exports unchanged, 2020/21 soybean ending stocks are increased 30 million bushels to 425 million. Soybean changes for 2019/20 include higher crush, lower residual use, and higher ending stocks.  Soybean residual use is reduced 50 million bushels, reflecting June 1 soybean stocks reported in the recent Grain Stocks report, and reported soybean use through May.  Soybean ending stocks for 2019/20 are projected at 620 million bushels, up 35 million from last month. The U.S. season-average soybean price for 2020/21 is forecast at $8.50 per bushel, up $0.30 partly reflecting higher price expectations following the June Acreage report.  The soybean meal price is projected at $300.00 per short ton, up $10.00 from last month.  The soybean oil price forecast is unchanged at 29.0 cents per pound. The 2020/21 global oilseed supply and demand forecasts include lower production, lower exports, higher crush, and lower ending stocks compared to last month.  Global oilseed production is reduced 2.0 million tons to 604.2 million on lower rapeseed, cottonseed, and soybean production.  Canola production is lowered for Canada based on updated government data.  Soybean production is lowered for Canada and Uruguay, resulting in lower 2020/21 exports for both countries. The 2020/21 global soybean ending stocks are reduced 1.3 million tons to 95.1 million as lower stocks for Brazil and China are partly offset by higher U.S. stocks.  Lower foreign stocks reflect notable balance sheet revisions for Brazil in 2019/20 and China in 2019/20 and 2020/21.  For Brazil, the 2019/20 crop is increased 2 million tons to 126 million, reflecting higher yields.  Exports are increased 4 million tons to 89 million, leading to a 2-million-ton reduction to ending stocks.  The local year exports (February 2020-January 2021) are also increased 2.5 million tons to 79.5 million. China’s 2019/20 balance sheet changes include a 2-million-ton increase in imports to 96 million and a 1-million-ton increase to crush, resulting in higher ending stocks.  For 2020/21, China’s higher beginning stocks are offset by higher crush, leading to lower ending stocks.  With these changes, China’s year-over-year soybean meal domestic disappearance growth remains at 7 percent.