Grains

Phosphate Prices Hit Highest Level Since 2012, As Nitrogen Prices Also Climb

Fertilizer prices continue to climb, as higher demand and strained supplies are creating issues. According to Rabobank's latest RaboResearch North America Agribusiness Review,  phosphate prices are now at the highest levels in North America since 2012. The report also shows urea is likely to see further price movement, as higher corn prices improve appetite for demand are key drivers of the market. The sticker shock is also happening with nitrogen. Ken Ferrie, Farm Journal Field Agronomist and owner of Crop-Tech Consulting, Heyworth, Ill., says nitrogen prices were already moving higher, but the Texas freeze didn't help, putting a strain on production. “The nitrogen market is also climbing and seems to be climbing on a weekly basis,” says Ferrie. “Some of that is probably tied to corn prices as well, but you hear more due to the recent cold snap. They had to reroute some of this natural gas to heating instead of making nitrogen, so some of the facilities have been slowed down or shut down. That’s especially the case in the Texas situation where they had to move to heating. So, it's putting pressure on that market." With issues sourcing fertilizer in some places, industry experts predict the higher fertilizer prices to last through spring. Rabo's February report also stated price and supply concerns. "Looking further ahead, some buying opportunities may emerge as we look into the 2022 season for other inputs, as well. The potential risk for seed price increases headed into the 2022 planting season should be considered.
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USDA Expects Both Corn and Soybean Acres to Top 90 Million in 2021

USDA’s 2021 Ag Outlook Forum kicked off Thursday morning with a peek at the possible acreage mix for 2021. During the Forum, USDA’s new chief economist, Seth Meyer, pointed out that the acreage picture largely hinges on weather, as it normally does. Meyer told Outlook attendees the projection is based on the assumption of normal planting weather. He says if weather cooperates, U.S. farmers could see an increase in total planted acres in 2021, with a record combined corn and soybean planted acres this year. The USDA chief economist’s first look at acreage shows 2021 planted acres as follows: 92 million acres of corn 90 million acres of soybean 12 million acres of cotton While the corn and cotton acreage projection from USDA is in line with what farmers planted last year, the soybean acreage number is a bump from the 83 million acres planted in 2020. American Farm Bureau Federation chief economist, John Newton, said on U.S. Farm Report last weekend that he expected to see an increase in total planted acres this year, mainly due to areas that saw significant prevent plant the past couple years were finally starting to dry out. “I think one area to look at is previous prevent plant,” says Newton. “In 2019, we had nearly 20 million acres classified as prevent plant. Last year, we had 10 million acres that qualified for prevent plant. You could see some of those 10 million acres may come back online in corn and soybeans.” Chip Nellinger, Blue Reef Agri-Marketing, agrees with Meyer about the weather. Nellinger thinks if the weather cooperates, farmers will plant more corn. USDA will release its prospective plantings report at the end of March, which will will reveal farmer survey results. “On the case of corn, it's going to boil down to Mother Nature, as it always does,” he says. “If we get a good early, open planting window, I think it favors corn. It always does historically. But it's going to be interesting, because we've got such tight stocks that we need to increase supply and have good yields and good crops. But how that acreage mix is going to pan out is anyone's guess at this point.” Nellinger pointed out it’s more than just corn and soybeans fighting for acres. He says as cotton prices climb to the 90-cent range, cotton could continue to be an attractive option to some farmers in the South this year. “Three months ago, a lot of people in the Mid-South were saying, ‘Hey, I'm going to plant more beans and less cotton.’ But the cotton market heard those whispers and has woken up here recently, which shot cotton straight through the roof. So, there's a lot of competition here amongst a lot of different crop mixes,” Nellinger says. While USDA's farmer survey based projections won't be released until the end of March in the 2021 Prospective Plantings Report, USDA did give an updated projection on prices during the Ag Outlook Forum this week.
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Senate Ag Committee Approves Vilsack Confirmation for USDA

Tom Vilsack enjoyed bipartisan support in his Senate Agriculture Committee confirmation hearing Tuesday as he seeks to return to USDA. The committee voted unanimously to recommend his confirmation as USDA Secretary to the full Senate. Vilsack noted the unusual date of his confirmation hearing paired with his return to the agency he helmed for all eight years of Barrack Obama’s administration. “It's not lost on me, ironically, that this is Groundhog's Day, and I realized that I'm back again,” Vilsack observed. “But I also realized that this is a fundamentally different time, and I am a different person, and it is a different department, and I think we have to recognize that going into this process.” Vilsack appeared via video conference following COVID-19 restrictions, and the hearing was jointly chaired by Sen. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.) as the Senate has not yet approved rules for operating under a 50-50 split. Vilsack addressed a broad range of issues during the hearing from coronavirus and climate change to Country of Origin Labeling (COOL) and biofuels. Following are key quotes from Vilsack from the hearing on key agricultural issues: Coronavirus recovery:  “Clearly, COVID is on the minds of everyone, as it should be, and the Department of Agriculture has responsibility to aggressively promote the nutrition assistance that you all have provided, and they have begun to do that in the last week, 10 days. We also have to review the additional relief that's been ordered by Congress and try to get that into the hands of farmers, ranchers, producers and those in rural America as quickly, as efficiently, as effectively as possible. We need to make sure that our workers are essential workers on the line in the farm fields in processing facilities and alike are protected and recognized as the essential workers they are. And we certainly need to work collaboratively with Congress and others to build back the real economy in better shape than it was before the COVID crisis.” Addressing climate change:  Vilsack said a number of climate priorities included in a bill sponsored by Stabenow and Sen. Mike Braun (R-Ind.) could be implemented administratively. “For example, putting together an advisory group of farmers that would give us a better understanding and appreciation of how to structure a carbon sequestration or carbon bank effort, making sure that we can, in fact, accurately measure and quantify the results that can be obtained by farmers. Making sure that the benefits of whatever program we devise and develop accrue to the benefit of farmers and not necessarily to third parties. Making sure that we promote the development of ecosystem markets to create those revenue sources for farmers. Making sure that our conservation programs are structured and designed in a way that encourage and incent the kinds of activities we know make a difference. Our soil is precious, we need to make sure we're investing in soil health, and we also frankly need to up our game on research. There are ways in which root systems of crops can potentially be designed in a way that will sequester more carbon. We ought to be exploring that, we ought to be looking at ways in which we can increase market opportunities for greater storage. I think agriculture is probably the first and best way to begin getting some wins in this climate area. I think, farmers are prepared for it, farmers are anxious to do it, if it's voluntary, if it's market based, if it's incentive based. I think you will see farmers, ranchers and producers cooperate extensively.” On discrimination and equity of access: "We need to fully, deeply and completely address the long standing inequities, unfairness and discrimination that has been the history of USDA programs for far too long to a future where all are treated equitably and fairly, where there is zero tolerance for discrimination, where programs actually open up opportunity for all who need help and lift the burden of persistent poverty for those most in need." On using the Commodity Credit Corporation (CCC) to fund climate initiatives: “The first responsibility of the Commodity Credit Corporation is to make sure that the Farm Bill programs are adequately, fully and kindly funded. Having said that, to the extent that that vehicle is available without compromising the ability to fund the Farm Bill programs, it is a great tool for us to create the kind of structure that will inform future farm bills about what will encourage carbon sequestration, what will encourage precision agriculture, what will encourage soil health and regenerative agricultural practices. And to that extent to the extent that there are resources available, I would hope that you all would provide me the opportunity to utilize that in a way, again, that doesn't compromise the Farm Bill programs, but advances and creates additional markets. Secretary Purdue had great flexibility, appropriately so, under the current COVID situation, I would ask for the opportunity to use that flexibility appropriately, effectively and smartly to create the opportunity for you as you put together the next farm bill to understand what works and what would be helpful in terms of programs.” Biofuels: “We need to have the USDA Secretary work closely with his or her partner at EPA to make sure that folks at EPA fully understand or appreciate the benefits of this industry in terms of jobs, in terms of the environment, in terms of lifecycle analysis. This industry has made great strides in becoming much more environmentally friendly than it was at the beginning, and sometimes I fear that we were still working off of old research. New research would indicate that this is an industry that is providing environmental benefits: cleaner air, for example. And making sure that as they make decisions relative to the Renewable Fuel Standard that they are consistent, that they are consistent with the rule, they're consistent with the law. The waiver system was designed for small refineries that were having trouble and difficulty. It was not designed for large scale refineries that are owned by Exxon and Chevron to receive a waiver. So I would hope, and will certainly strongly urge EPA to go back to a day when those waivers are very, very, very infrequently granted. And then finally I think there's a way in which we can utilize USDA resources, and work with Congress to increase those resources, to build out the infrastructure to make it easier for higher blends to be available to consumers. Why? Because at the end of the day, consumers benefit. They have less expensive fuel, they have a cleaner burning fuel, they have a fuel that's better for the environment.” On Coronavirus Food Assistance Program funds currently being reviewed by the administration: “I hope that you understand and appreciate the fact that any new administration needs to have an opportunity to fully understand or appreciate exactly what is taking place with reference to what commitments have been made, what commitments have already been embraced. We just simply need time to have a better understanding of where that is. It is not designed for anything other than to give me, if I'm confirmed, a better sense of that program. Obviously, we're going to follow the directives of Congress, I mean that’s reasonable and appropriate and that's the way it should operate. I would say that we are going to continue to look for ways in which the tools that USDA has can be utilized in the best possible way to provide the assistance that people need to help build the economy back better, to expand opportunities when and if that presents itself, but if there's directive from Congress will obviously follow it.” Livestock price transparency: “There’s no question we need to strengthen the laws that are designed to create more openness and more transparency and more price discovery. No question about that. But that's not enough. I think we need alternative processing opportunities, not just from the competitive standpoint but also from a resilience standpoint. We found that when one or two processing facilities shut down during COVID, that it just created havoc in the market. We can't have that. We have to have a more resilient food system and that, in my view, requires us to look at ways in which we can incent and encourage more processing facilities.” On Country of Origin Labeling: “We [the Obama Administration] made every concerted effort to try to create better transparency, better information for consumers, because we understand and  appreciate that consumers want to know where their food comes from. They want to know when they're buying U.S.  or when they're buying something from someplace else. We attempted on three occasions to sort of strengthen the Country of Origin Labeling, unsuccessfully because of the WTO challenges by our Canadian friends, which would have resulted obviously in retaliation. I am absolutely willing to listen to anybody and everybody who's got an idea about how we can circumvent, or how we can get to a point where the WTO doesn't necessarily slap it down. That creates retaliatory impacts on American agriculture. I'm frank to say I need help in that respect. We can ignore the WTO, but then we’ve got the retaliation and then, you know, that's just not a good thing.”
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Corn Prices Climb as China Commits to Biggest U.S. Ethanol Purchase Ever

Corn prices climbed double digits on Tuesday. The market was fueled by news China made its biggest buy of corn in six months. More than corn, China hinted at a historic ethanol purchase, committing to buy the most ethanol it’s ever bought in a year, and China says it will do so in the first six months of 2021. During its investor call Tuesday, ADM’s CFO Ray Young said China bought roughly 200 million gallons of ethanol for the first half of 2021, a move Young said could bring optimism for ethanol’s recovery this year. But just how big of a deal is China’s 200-million-gallon ethanol buy? If China follows through with shipments, it would be the biggest annual buy ever by China, and happen in just six months. “This would be a significant purchase,” says Ed Hubbard, general counsel and vice president of government affairs with the Renewable Fuels Association (RFA). “It would be something that would shake the industry up. The challenge, though, is that we have to wait and see whether or not it actually materializes.” Hubbard says the last time China purchased close to this much ethanol was in 2017, when its annual purchases amounted to 198.1 million gallons. “We were seeing volumes from starting in 2013, rising from about 23 million gallons to about 50 million gallons and then by 2017, they peaked at 198.1 million gallons,” he says. “We just topped it with this commitment, which is huge. I mean, 2017 was a peak, and now China has the potential to be our number one, two or three market. This is key for the industry, it's something to be positive about. “ Demand will be key. Hubbard agrees China’s commitment signals the demand in China is strong, and could also hint at China’s eagerness to live up to its Phase One trade promises. “This is something significant,” says Hubbard. “This is a firm commitment to purchase 200 million gallons within the first half of the year. And it is consistent with the Phase One agreement. This is actually something that that we would have liked to have seen earlier last year, but we do think that one of the big obstacles of these transactions will be to convert the purchase commitments to shipments.” More Buys on the Way? China is committing to these purchases as ethanol still faces early 50% tariff heading into China. Despite the tariffs still in place, could more buys be on the way? The ethanol industry is hopeful. “200 million gallons would be the biggest purchase in any year,” says Hubbard. “And that’s just a commitment for the first half of 2021. So, theoretically, if we see further purchases after you know, this 200 million initial purchase for 2021, then it will soar past obviously, there's a great possibility it'll soar past previous records.” Hubbard thinks it’s no coincidence that this large purchase comes on the heels of the Biden inauguration last week. Suderman also thinks the timing is key.
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USDA Cut Ethanol Demand; USDA Chief Economist Explains Why

Ethanol demand continues to be a question in the new year. As COVID-19 cases continue to rise in the country, some states are still seeing restrictions, which is impacting the number of people on the road. At the same time, ethanol stocks rose to an 8-month high earlier this month. Just how much of a reduction ethanol demand will see in 2021 is still unknown. In the latest World Agricultural Supply and Demand Estimates (WASDE) report, USDA showed corn used for ethanol would be lower this year. The agency said it was based on data through November from the Grain Crushings report, as well as weekly ethanol production data from the Energy Information Administration (EIA). The new USDA Chief Economist Seth Meyer was a guest on U.S. Farm Report and explained USDA’s decision to cut ethanol demand.   “We're looking at corn grind, and we're looking at an ethanol production from EIA, and feel like that number that we have in there [WASDE] is pretty in line with what we're seeing with regard to both the Energy Outlook and where we've seen with grind,” says Meyer. “Folks bring up an issue of how demand and the balance sheet were changed. Well, you're provided with essentially 400 million bushels less supply, and you know, that will ration demand.” Meyer says based on lower supply and the probability of higher prices eating into demand, USDA made other key adjustments in the balance sheet, including 100 million bushels reduction to exports. “You may have to make some adjustments to exports, you take a little bit of it out of stocks, and then you say, what does ethanol look like in regard to corn grind?It may be somewhat less sensitive in terms of its overall demand and other things given underlying policy,” adds Meyer. “So, you're looking at a position coming out of this, where you've got prices back to rationing demand a little bit. Each one of those lines of demand is carefully thought out, in terms of where we're at with that 400-million-bushel smaller supply from the WASDE.”        
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Traders Mull USDA Estimates

Average estimates for next Tuesday's important USDA reports have U.S. corn ending stocks at 1.599 billion bushels, soybeans 0.139 bb, and wheat 0.859 bb. All three would represent a decrease from last month's data. Quarterly Grain Stocks is expected to show corn stocks of 11.951 billion bushels as of December 1, soybeans 2.920 bb, and wheat 1.695 bb. All Winter wheat is expected to be reported at 31.528 million acres, consisting of 22.140 Hard Red, 5.884 Soft Red, and 3.514 million acres of white wheat. All three of the above mentioned reports will be released on Tuesday at 11:00 AM CST. Weekly export sales had corn sales of 748,910 metric tonnes reported, within the 500,000 – 1,000,000 trade expectation. Soybean sales were reported at 116,764 tonnes (36,964 for 2020/21 and 79,800 for 2021/22), below the 200,000 – 700,000 expectation. Wheat export sales of 281,313 tonnes were noted, 275,313 for current crop. That was within the 200,000 – 600,000 trade expectation. Argentina's government said on Thursday it would review a decision to temporarily suspend corn exports after a meeting between the farming minister and the leaders of the country's main agricultural associations. (Reuters) The Buenos Aires Grains Exchange raised their estimate of Argentina's wheat harvest from 16.8 million tonnes to now 17.0. USDA's most recent estimate was 18.0. Through the most recent week of reportable trade (through January 5th), managed money funds were estimated to be buyers of 50,000 corn contracts, 55,000 soybean contracts, and 33,500 wheat contracts. The actual data will be released today at 2:30 in the weekly CFTC Commitments of Traders report. Steer weights fell 8 lbs. in this specific week to 913 lbs. Heifers were down by 8 also in just this one week. That dropped weights from +1.9% year/year to +0.9% for steers. Heifers fell from +1.6% to +0.2%. Weekly beef export sales ran -1,228 for the expired old crop, normal for the last week of the year, and only 9,003 tonnes for new. Pork export sales showed -8,593 for the expired 2020 and 23,268 for 2021. Hog weights from two weeks ago fell 1 lb. to 215 lbs. This dropped weights from +1.9% to +0.9%. Dressed beef values were higher with choice up 0.54 and select up 0.51. The Feeder cattle index is 135.35. Pork cut-out values were up 2.17.  
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Tyson Reports “Misappropriation” Of Funds By Beef Supplier

Tyson Foods filed corrected financial results on Monday with the Securities and Exchange Commission for its beef segment for fiscal years 2017 through 2020. The report to the SEC – in Form 8-K – specifies that Tyson is reporting “misappropriation of company funds” by one of its beef suppliers. An internal review of the supplier’s accounts is underway, Tyson said, with assistance of outside advisors. That review determined the supplier made “misrepresentations regarding the number of cattle the supplier purchased on behalf of the company’s beef segment.” Tyson said in the Form 8-K that its live cattle inventory for the year-end fiscal 2020, for instance, was overstated by $285 million, and that the cumulative four-year inventory was overstated by $645 million. However, Tyson’s investigations indicate the resulting losses on their books is isolated to one cattle supplier who represented about 2% of the cattle supplied to Tyson each year from 2017 to 2020. Further, Tyson stated in the Form 8-K the losses do not have a material impact on Tyson’s financial results for the years examined. The internal review is ongoing. Tyson also said in the filing its investigation found “no evidence that the company benefitted from the supplier’s unlawful conduct or that anyone at the company took steps to alter financial statements to hide the transactions resulting from the supplier’s unlawful acts.” Tyson also expects to pursue restitution for losses to date. "The Company anticipates that, despite the corrections to previously issued financial statements, general trends in growth and operating profit metrics will remain unaltered, operating cash flow will be largely unaffected, liquidity will not change and the Company will remain in compliance with all debt covenants," it said. Tyson’s independent registered public accounting firm is PricewaterhouseCoopers LLP. As a publicly traded company, Tyson is required to make quarterly earnings reports to the Securities and Exchange Commission.
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Wheat Acres To Expand For First Time In 8 Years

Farmers will be planting more total wheat acres for 2021, thanks to stronger demand, higher grain prices and good weather conditions. USDA predicts 46 million total acres of wheat will be planted—a 1.7-million-acre increase over the 44.3 million acres of wheat planted in 2020. The increase marks the first expansion of U.S. wheat acres in the past eight years. Winter wheat is the first cash crop that farmers have planted since the agricultural commodity price rally began in late summer. However, the U.S. government will not release a farmer survey specifically on winter wheat plantings until January, reports a Reuters article posted earlier this month. Reuters reports that private analytics firm IHS Markit Agribusiness forecast U.S. winter wheat plantings at 31.5 million acres, up 3.6% from the 30.4 million acres seeded a year ago.
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Mexico shipments surge in second quarter

Shipments of Mexican produce to the U.S. increased at a double-digit rate in the second quarter this year, a transportation report from the U.S. Department of Agriculture reveals. The USDA’s Mexico Transport Cost Indicator Report showed second quarter total reported shipments of fruits and vegetables from Mexico were 2.96 million tons, an 11% increase compared with the second quarter last year. The sum of the top five commodities shipped from Mexico (figured on an annual basis: tomatoes, peppers, cucumbers, avocados and squash) increased by 31,000 tons, or 6%, according to the report. Seedless watermelons shipped to the U.S. in the second quarter topped all fresh produce commodities for the quarter, the report said, with 297,000 tons shipped. Still, that was down 19% than the same quarter last year, according to the USDA.

Truck rates

The USDA report said truck rates for shipments of 501 miles to 1,500 miles from the Arizona border crossings averaged $2.55 per mile, up 1% quarter to quarter, but down 6% compared with the second quarter a year ago. Rates for shipments of 501 miles to 1,500 miles from the Texas border crossings averaged $2.25 per mile, down by 10% quarter to quarter and down by 1% year to year. Diesel fuel prices for border crossings through Texas averaged $2.21 per gallon for the quarter, compared with $2.60 per gallon for crossings through Arizona.  
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China’s Increased Appetite Drives Wheat to Multi-Year Highs, What’s Behind the Developing Demand?

Wheat futures rallied this week to levels U.S. farmers haven’t seen in six years. According to Pro Farmer, wheat prices jumped Friday on rumors China was shopping for French and U.S. wheat. The added interest from China continues to help major commodity prices, including soybeans and lean hogs, trend higher. The question many want to know is “why is China buying so much from the U.S.?" One University of Nebraska economist says the answer isn't simple. “Clearly, they've been strong buyers in the market,” says Brad Lubben, policy and extension specialist, University of Nebraska “There was hope back in January with a Phase One agreement that purchases were going to go way up. Well, you don't ever fundamentally know from a commitment to buy, whether it translates into actual purchases.” Lubben says COVID-19 slowed China’s appetite, however, as the economy is rebounding, China is returning to the market in a big way. “The rate they're buying now is certainly supportive of the positive market prices, but whether we can determine exactly what their policy is, we'll know after the fact, and we'll assess how much they really bought.” Lubben says China could be buying to help rebuild its domestic reserves, or possibly to feed the growing hog herd in the country as Chinese pork producers try to recover from ASF. He says no matter what the answer is, it won't known until after the fact. “It's always difficult to know what a closed economy system or a state-run economy system is doing,” he says. “It's difficult to know what's happening in the market until we come out after the fact and find out what really happened.” The increased appetite from China is coming at a time when farmers are seeing impressive harvest pace. What seems to be a quick harvest may typically add pressure to commodity prices, however 2020 is proving that’s not always the case. “This is something that shows how marketing works,” says Cory Walters of the University of Nebraska. “It's very random. You can't predict it. And you never know when those things are going to come.” The marketing plans that seemed to pay off this year are the ones who held on to their crop and waited to sell. Walters says that may not be the case next year. “There are always strategies that win,” adds Walters. “But you never know at the beginning of the year what's going to happen; you still have to take that survival point of view.” While Walters thinks these prices should entice more farmers to sell grain, he says leaving some bushels unpriced could help farmers who fear they will miss out on higher prices. Walter says those unpriced bushels will help farmers sell into potential future rallies.
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