Grains

China’s Looming Corn Shortage Fans Food Security Unease

Soaring corn prices are stoking food security jitters in China, where food inflation has climbed to the highest in over a decade and President Xi Jinping made a recent high-profile plea for an end to wastage. The price surge in corn - critical for China's mammoth hog, dairy and poultry sectors - is the latest in a series of ructions that include a devastating pig disease, pandemic-driven upsets for international suppliers and warnings of a growing food supply gap. Prices have risen as the country heads for its first real corn shortfall in years in the upcoming 2020/21 season starting in October and could face a deficit of up to 30 million tonnes, around 10% of its total crop, say analysts and traders. That would be a likely boon for major exporters like the United States and Ukraine, but threatens to push up global prices and have a knock-on impact elsewhere as some corn users switch to other grains. "It is certain that there will be a corn shortage in the future, and we would need to import a lot next year," said an executive with a state-owned trading firm, who declined to be identified as he was not authorized to talk to media. Maintaining food supplies is a major source of political legitimacy for the ruling Chinese Communist Party, but it has struggled to balance central planning with grain market forces. Struggling with bulging stockpiles, China four years ago abandoned a scheme that paid farmers above-market prices for corn and has since produced less of the grain than it consumes. The state stockpiles that supplemented supply are now nearly gone. Corn prices in Jiamusi at the heart of China's grain basket hit a five-year high at 2,050 yuan (224.2 pounds) a tonne on Aug. 26, up 27% since the start of the year, before edging down in recent few days. This has contributed to a broader rise in food prices, also driven by severe flooding in the south, pockets of drought in the northern grain belt, and a continuing pork shortage. President Xi underscored concerns when he urged the nation to stop "shameful" food wastage, prompting many local governments to launch related campaigns. IMPORT BOOM? China expects a bumper 2020/21 corn crop at around 266.5 million tonnes but still not enough to meet demand, according to the agriculture ministry, which forecasts year-end stocks of minus 16.7 million tonnes. That shortfall could be up to 30 million tonnes, according to five analysts and traders surveyed by Reuters, far exceeding China's current import quota of seven million tonnes, a figure it has never filled. "If the government does not loosen regulations regarding the import quota, we will be facing a huge shortage," said a Shanghai-based domestic agriculture products trader. The National Development and Reform Commission, which sets grain quotas, did not respond to a fax seeking comment on its quota plans. Still, the need for imports is likely to be limited by substitution, given China's ample supplies of other staple grains, as well as imports of other substitute grains like sorghum and barley. "Based on the aggressive new crop buying we're seeing for U.S. corn, it seems increasingly likely China will raise the quota or make some changes," said Darin Friedrichs, senior analyst at StoneX in Shanghai. "But I don't anticipate (it) being too big. I think roughly about 10 million tonnes seems reasonable, for next year." Feed manufacturers that use nearly 200 million tonnes of corn a year to fatten hogs and chickens are already turning to more plentiful wheat. Feed wheat use in the 2020/21 crop year could rise as high as 20 million tonnes, up about 5 million tonnes from previous years, and about 15% of output, said a government think-tank researcher who declined to be identified as he is not authorized to talk to media. China, meanwhile, has vowed to make record U.S. agricultural purchases this year as part of its Phase 1 trade deal, and made its biggest purchase of U.S. corn in a month last week as it looks to boost supplies. "Corn on the international market is so cheap, why not?" said the trading firm executive.
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Taiwan Paves Way For U.S. Trade Deal By Easing Pork, Beef Imports

Taiwan paved the way for an eventual free trade deal with the United States on Friday by announcing an easing of restrictions on the import of U.S. beef and pork, as the island looks to boost ties with Washington at a time of tensions with China.
Taiwan has long sought a free trade agreement with the United States, its most important supporter on the international stage, but Washington has complained about barriers to access for U.S. pork and beef. Taiwan said that was for health grounds, especially with concerns over mad cow disease and additives. President Tsai Ing-wen said her government planned to allow the import of U.S. pork containing ractopamine, an additive that enhances leanness, and allow in U.S. beef more than 30 months old.
"The decision is in line with the country's overall interests and the goals of the nation's strategic development. It's also a decision that could boost Taiwan-U.S. ties," she said. "If we can take one crucial step forward on the issue of U.S. pork and beef, it will be an important start for Taiwan-U.S. economic cooperation at all fronts." U.S. State Department spokeswoman Morgan Ortagus said the United States welcomed Taiwan's move and removing "these long-standing barriers" opened the door to greater economic and trade cooperation. "We look forward to the timely implementation of these actions, which will provide greater access for U.S. farmers to one of East Asia’s most vibrant markets, and for Taiwan consumers to high-quality U.S. agricultural products," she said. Tsai said  that while it may take a while to reach a bilateral trade agreement with the United States, she had a positive attitude on the issue. The United States is an "extremely important" trade partner for Taiwan, and the decision has nothing to do with the upcoming U.S. presidential election, she added. Council of Agriculture Minister Chen Chi-chung said the eased pork and beef rules were expected to come into effect on Jan. 1. Taiwan-U.S. trade last year was worth $85.5 billion, with the United States running a $23.1 billion deficit. Taiwan was the United States' 14th biggest export market in 2019. The United States, like most countries, has no official relations with Taiwan, which is claimed by Beijing as sovereign Chinese territory. China has been stepping up its military activities near Taiwan. Export-dependent, tech powerhouse Taiwan has also been pushing for an investment agreement with the European Union.
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Pro Farmer: Corn and Soybean Yields Lower than USDA Estimates

While it’s difficult to predict the future, Pro Farmer uses information gathered in its annual Crop Tour as well as other data the team collects to estimate total production each year. This year has presented farmers across the Midwest with a myriad of challenges, which are accounted for in the group’s national corn and soybean yield estimates. Corn: 177.5 bu. per acre, 14.820 billion bu. production. Pro Farmer says production and yield could go plus or minus 1%, which equals 14.968 billion bu. to 14.672 billion bu. and 179.3 bu. to 175.7 bu. per acre yield. Soybeans: 52.5 bu. per acre, 4.362 billion bu. production. Soybean margin of error is plus or minus 2%, which equals 4.449 billion bu. to 4.275 billion bu. of production and 53.6 to 51.5 bu. per acre yield. USDA’s August 12 report pegged corn production at a record 15.3 billion bu. and yield at 181.8 bu. per acre. Soybeans were estimated to hit 4.42 billion bu. with a record high yield at 53.3 bu. per acre. Pro Farmer’s estimate for corn yield is 2.37% lower than USDA, and production is 3.14% lower than USDA production. The Pro Farmer soybean yield is 1.5% lower than USDA, with 1.31% lower total production estimates.

Breakdown by state.

Pro Farmer uses data gathered in the Crop Tour, crop maturity, acreage adjustments they’ve made, historical differences in the tour’s findings versus USDA final yields and areas outside of the sampled areas on the tour to gather their estimates. State number estimates below differ from Crop Tour numbers. The estimates for national corn and soybean yields would be records still—just not as big as USDA estimated. In addition, the group cut 525,000 acres from harvested corn acres (300,000 from Iowa alone), putting total harvested acres at 83.498 million.
  • Iowa: corn 180 bu. per acre, soybeans 55 bu. per acre. Western Iowa yields are diminishing because of drought. In addition, wind did destroy some of the crops across a wide swath of the state. While some will be harvested, further yield loss is likely. Soybeans are in desperate need of a rain; current soil moisture is down 46%.
  • Illinois: corn 205 bu. per acre, soybeans 62 bu. per acre. Pods are consistent on soybeans, but the state needs rain to finish strong. Corn isn’t the bin-buster some expected. Ear counts were below average, but grain length could be a savior if weather helps. Corn has more to lose than to gain at this point.
  • Nebraska: 188 bu. per acre corn, 59 bu. per acre soybeans. Irrigated yields were decent but not shockingly high numbers. Dryland likely won’t drag down the average and another rain would be beneficial for corn. Soybean fields are clean, but need a rain to get across the finish line without aborting pods—risk is to the downside.
  • Minnesota: 199 bu. per acre corn, 51 bu. per acre soybeans. Corn showed big, heavy ears with higher ear counts, grain length and kernel rows around than average. Soybean pod count was there for a record soybean yield. Soybeans need another rain to finish.
  • Indiana: corn 186 bu. per acre, soybeans 61 bu. per acre. Corn was variable, but August rains could help along with mild weather. About one-third of the corn crop still needs time to develop. Soybeans are consistent, well podded but dry. Another rain will help fill flat pods.
  • Ohio: corn 176 bu. per acre, soybeans 57 bu. per acre. Corn is too variable, because of dry areas, to beat the state’s 1028 record of 187 bu. per acre. Late-season rain could be the deciding factor on which way corn yields go. Soybeans also need a rain to ensure the crop beats its 2018 record of 56 bu. per acre.
  • South Dakota: 164 bu. per acre corn, 51 bu. per acre soybean. This year marks the best corn crop Pro Farmer has seen in the state. Another rain would clinch the deal. Soybeans are uniform, and if the state gets another rain the crop could be a monster.
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Illinois Yield Potential Shines Despite Mother Nature’s Challenges

When it rained, it poured and earlier this season, Illinois farmers just couldn’t get away from wet weather. It resulted in later planting, replant and some not-so-great planting conditions across much of the state. Despite it all, the state’s yields are beating three-year-average estimates. When it comes to corn, yields are expected to be 4.35% higher than the three-year average and soybeans 5.19% higher. Scouts did note that tar spot, a potentially devastating new disease, was in two of the counties sampled (Knox and Stark). While scouts did get into areas with damage, they aren't in the heart of it just yet. "We'll get more intensively into it [derecho area] tomorrow," says Brian Grete, Pro Farmer Editor. "It's hard to scout through. It'll take longer when it's laying down in multiple directions. You have to ID the row, count the ears, it just takes time. You have to start from the ground up and it's just time consuming."   Illinois corn yield is expected to hit 189.40 bu. per acre, and soybeans are anticipated to reach 1247.38 pods per 3X3 square. The three-year average for corn is just 181.51 bu. per acre and soybeans per 3X3 square are 1185.79. There were only three irrigated soybean fields and five irrigated corn fields sampled throughout the state. Doug Warters, scout on the eastern tour who made his way through Illinois and into Iowa today, said corn samples looked good but soybeans were more inconsistent along his route. Damage from the recent derecho started showing up on the western side of Illinois. For some farmers, harvest could be extremely challenging—especially on corn acres. “[For example] we had one field that we called ‘moderate’ lodging and wind damage where the corn was flat,” says Jim Smith, scout along the eastern leg of the Pro Farmer Crop Tour. “The yield estimate came out at 264 bu. per acre—but I’m sure we’re not going to get that 264 because the corn was so flat.” It’ll be a low and slow harvest, and farmers with reels will be in a better position to gather as much of the yield potential as possible. Soybeans, however, were better looking because they were earlier in their lifecycles and had less lodging. “All the fields we’ve sampled of soybeans have been extremely clean, no disease,” Smith says. “We still have a lot of questions on the beans though.” On many of the plants he said they were counting pods, but it was still flowering and had only recently pollinated. With cooperation from Mother Nature, a substantial number of pods could develop between now and harvest, he adds. As you’d expect, there was variation from crop district to crop district in terms of estimates. Check out each sampled district here (note corn is in bu. per acre and soybeans are in pods per 3X3 square):
  • District 1
    • Corn 183.63, 42 samples
    • Soybeans 1321.97, 41 samples
  • District 2
    • Corn 201.19, 12 samples
    • Soybeans 1220.00, 12 samples
  • District 3
    • Corn 195.63, 25 samples
    • Soybean 1330.94, 25 samples
  • District 4
    • Corn 189.61, 55 samples
    • Soybeans 1168.99, 55 samples
  • District 5
    • Corn 181.00, 53 samples
    • Soybeans 1192.27, 52 samples
  • District 6
    • Corn 203.71, 12 samples
    • Soybeans 1282.05, 12 samples
  • District 7
    • Corn 204.13, 14 samples
    • Soybeans 1386.12, 14 samples
Scouts took 213 corn samples and 211 soybean samples this year. This exceeds the total number of samples, 399, scouts gathered in 2019. First glance, Iowa burdened by drought and wind damage: As scouts snaked their way north and east from Nebraska and in from Illinois, the were inundated with clearly challenging conditions in the Hawkeye State. “[I’d walk in and] there’s a good ear population and when I pulled my fifth, eight and eleventh ear there was one-half to two inches of tip back—that’s not a good sign,” says Jeff Wilson, Pro Farmer director for the western leg of the tour. The tip back issues and pollination issues he saw boiled down to drought issues in the southwest part of the state. “The crop is mid-dent, so what you have is what you’re going to get,” he adds. “If you could get a little more rain maybe you could add test weight to make a higher quality crop.” Soybeans stayed consistent along his route. Drier areas, of course, came in a little lower, but where the soybeans had moisture Wilson counted more than 1300 pods per 3X3 square on a nine-stop average. If the rains keep coming the soybeans should meet yield estimate expectations. So far, scouts sampled three districts in the state. Here are the results so far (corn in bu. per acre, soybeans in pods per 3X3 square):
  • District 1
    • Corn 181.26, 81 samples
    • Soybeans 1013.31, 81 samples
  • District 4
    • Corn 172.41, 72 samples
    • Soybeans 1177.41, 71 samples
  • District 7
    • Corn 184.74, 55 samples
    • Soybeans 1164.03, 51 samples
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Iowa Says Derecho Destroyed Grain Storage

A severe windstorm last week destroyed or seriously damaged more than 57 million bushels of commercial grain storage capacity in Iowa and a similar amount on farms, the state's agriculture department estimated on Tuesday, raising concerns ahead of the autumn harvest. Fresh estimates of the damage from the Aug. 10 derecho emerged as U.S. President Donald Trump prepared to visit Iowa, the top U.S. corn producing state, the day after approving disaster aid for the state. The storm crumpled steel storage bins, flattened corn fields, caused widespread damage in towns and left thousands of people without power. The destruction compounded troubles for a U.S. agricultural economy already battered by extreme weather, the U.S.-China trade war and disruptions to labor and food consumption from the COVID-19 pandemic. Iowa's agriculture department said it will cost more than $300 million to remove, replace or repair the damaged grain storage bins.
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Unprecedented Damage Could Change National Yield in a ‘Big Way’

Hurricane-force like wind screamed through parts of the Corn Belt earlier this week. With the wind came never-before-seen damage to corn and soybean fields, grain storage facilities and communities. “Never in my career have I seen so many acres damaged in one year by wind and wind alone,” says Farm Journal Field Agronomist Ken Ferrie. “The scale of this issue is unprecedented.” Ferrie anticipates this wide-spread damage, in conjunction with wind damage in mid-July, will change national corn-yield averages dramatically. Farmers with damage will fight not only yield loss during grain fill, but enhanced harvest loss as well. In addition, ear rots will be a greater risk when ears are closer to the ground. Our prayers go out to all of you that were caught up in this monster,” Ferrie says. “It’s time to put together your harvest strategy to deal with the issues coming your way this fall.” Here are a few major considerations to keep in mind because of the storm:
  • Harvest will be slower.
  • Work with grain delivery points to make sure they can handle the crop this fall.
  • Start thinking about seed next year—there could be supply issues in 2021.
“This storm came right through seed corn alley in Iowa and I expect those fields are going to take a hard hit as well,” he says. “We may have to keep an eye on seed supplies next spring.” What to watch in non-wind-damaged areas. While the swath of wind-damaged acres is large, it’s not quite everyone. Keep your boots in the dirt scouting to make sure you don’t let pests such as insects, disease or weeds damage the yields you’ve worked all season to build. “We’re now seeing aphids in late May and June corn,” Ferrie says. “[Also check] to make sure there aren’t second generation corn borer flights as well.” Watch for these pests in non-traited corn fields especially. In addition, he’s seeing some corn rootworm resistance to below-ground, traited hybrids. Dig roots to check for feeding and take good notes to use the next time that field is planted to corn. “Disease pressure continues to build in corn,” he adds. “And I do expect to see some sudden death [syndrome] this week to start showing up in beans.”
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Could China’s Massive Rainstorms Be A “Black Swan” for Markets?

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.”
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Is China the Only Answer to Save Corn Prices This Year?

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.
“Thinking that our great trade war enemy is going to be the one to step in and save the corn market, the ethanol market, soybean market, soybean meal, pork, cattle, whatever else, seems a bit foolhardy,” he says. “Does the US need China? Absolutely. Are they going to step in and save all of our markets? Absolutely not.” Newsom says the biggest advantage the corn market has right now is not only low prices attracting buyers, but also a weaker U.S. dollar “If we just look at this from a business point of view, and put all the politics aside, U.S. crops and U.S. supplies are going to have a good value on the world stage going into 2020-21,” says Newsom.  “The question is, ‘Will it be enough to offset the political side? And what happens in November?’ So, do we need China? Sure. Is it going to happen? I think the jury's still out.”
 
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U.S. Warns Against Planting Unsolicited Seeds from China

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."
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Tyson Fire, Pandemic Market Report Released By USDA

USDA released Wednesday the long-awaited report on its investigation into cattle market disruptions  following last year’s Tyson Foods packing plant fire and this spring’s impact from the coronavirus pandemic. The 20-page report confirmed massive volatility to both the cash and futures markets yet found no wrong-doing on the part of any industry participants. Prepared by USDA’s Agricultural Marketing Service in coordination with the Office of the Chief Economist, summarizes market conditions, fed cattle prices, boxed beef values and the spread before and after the two market-disrupting events. Appearing on Wednesday’s AgriTalk PM shortly after the report’s release, National Cattlemen’s Beef Association CEO Colin Woodall said the industry is glad to have the report in hand, though acknowledged it will not satisfy everyone. The report “very readily acknowledges that there are a lot of issues that we need to address – packing capacity, for example, further transparency.” While AMS did not cite any wrong-doing, the investigations are not over, and Agriculture Secretary Sonny Perdue indicated as much in a statement. “While we’re pleased to provide this update, we assure producers that our work continues in order to determine if there are any violations of the Packers and Stockyards Act,” Perdue said. “If any unfair practices are detected, we will take quick enforcement action.” Issuing his own statement after the report, Iowa Senator Chuck Grassley, who has called on the Justice Department to open an investigation into the cattle markets, said, “As USDA continues to investigate market manipulation and unfair practices, today’s report lays out steps we can take to fix this marketplace. Congress has a responsibility to heed the advice of this report and take action to restore cattle price transparency when we reauthorize Livestock Mandatory Price Reporting requirements.” Woodall said NCBA has focused on “having some minimum cash trade levels in order to have price discovery and some sort of trigger mechanism that could go along with that. I do believe that is going to be a big topic during our summer business meeting next week here in Denver.” The Justice Department’s investigation is ongoing and Woodall said DOJ employees have been in the country “interviewing people throughout the entire beef supply chain. There’s more to come on this in terms of whether or not there’s any sort of criminal action that may have taken place.” But the AMS report also supports the argument that while the two black swan events caused disruption and economic harm to producers, the markets reacted to those events and not to some outside intervention. “There was nothing (in the report) to indicate any sort of market manipulation,” Woodall said. “Once we look back at this, we understand that it has had a significant impact on our industry and a significant impact on prices and is still having an impact.” To producers who may be unhappy with the findings of AMS’ report, Woodall’s message to them is, “It’s not over. This is just one part of it. I think this is an important piece of the overall puzzle and we needed to see what USDA would find. There are a lot of individuals who believe that anything short of Packers going to jail is not going to be acceptable. But I hope that they will take the time to read what is here and understand that USDA spent a lot of time and effort to try to make sure that they get they get as much information that they can analyze, look at it from a true third party viewpoint, in order to provide  the industry some of the best information we could get.” The North American Meat Institute also released a statement about the USDA investigation into beef price margins. “In its analysis of the effects of the fire and the pandemic, USDA found no wrong-doing and confirms the disruption in the beef markets was due to devastating and unprecedented events,” said Meat Institute President and CEO, Julie Anna Potts. “It is difficult to see how the USDA’s recommended legislative proposals would have changed the outcome of the fire or the pandemic.” Related stories:
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