8/28/18 — It’s been a wild week in the news, with China negotiators last week in Washington to discuss trade issues (tariffs mostly) between the two countries. China actually started applying tariffs first to U.S. products a few years ago with a 10% tariff on soybeans. Then last December they added a huge tariff (over 80%) on sorghum, which effectively eliminated imports of U.S. sorghum. Trump retaliated this year in his much publicized decision to put 25% tariffs on $36 billion in goods, then added another $14 billion last week, and is in the process of adding 10-25% tariffs on another $200 billion in goods. Up to now, the Chinese retaliated this summer on the first $50 billion (soybeans and others at 25%), but cannot match the $200 billion as China only imports about 25% of the $505 billion we import from China.
The major dispute is still intellectual property, which the U.S. wants China to protect and respect. The only problem is China philosophically doesn’t believe in property rights at all. After all, they are communists! Communists believe in communal property. Doing all you can to help the rest. Sharing your talents with the communal good. Patents, Intellectual property rights, and accumulation of money into the hands of the most creative is not their philosophy, and therefore is not a part of their culture. So to get this issue resolved with China may take awhile, if it happens at all.
The other issues, mainly buying more U.S. product (like soybeans and energy), has already been essentially agreed to, and the negotiators understand this. The second major issue, industrial goods, may take more time to resolve. What would be best and most achievable for farmers is to just adopt the product trade agreement, and agree to disagree on things like intellectual property. Silicon Valley would not like it, but this needs to be done at some point.
Our Mexico-U.S. trade agreement appears to be a done deal, with the contentious issues on automobiles being resolved satisfactorily for both sides. That is really important to U.S. corn producers, but so far has not had any significant impact on prices. Trouble is that 25 million acres of demand go away with Chinese soybean imports, and if 10 million more acres go to corn, 5 million to wheat, and the other 10 million to other crops every year — we have too much of everything. And not just one year, but every year until we deal with the oversupply somehow.
Weather forecasts have changed significantly in this morning’s run, moving from warm/wet now (the next 7 days is still forecast to be warm/wet) to cold/dry in the 8-14 day forecast in this morning’s run. Temps cool considerably and noticeably, putting a potential frost threat into the northern Corn Belt by the middle of September. Of course, since the crop is advanced a week to 10 days ahead of normal, the damage that could be done is less than normal. But a mid-Sept. frost also would be early, and there still could be some yield damage. Otherwise the warm forecast the next 7 days, and the normal to above normal precip over most of the Corn Belt is about a perfect forecast to finish off the crop in 2018.
The Mexico/US trade agreement is near completion, so the NAFTA negotiations are going quite well, and are likely to be concluded soon. The devil is in the details, but President Trump is touting it as a win for the U.S., including U.S. farmers.
Crop progress is moving along, with conditions improving 1% in soybeans to 66% G/E, and steady corn at 68% rated G/E. Pro Ag yield model expanded 1.1 bu/acre to 177.9 bu/acre corn (vs. 178.4 USDA), and 0.45 bu/acre soybeans to 49.13 bu (vs. 51.6 USDA). The Pro Farmer tour found similar corn yields, but jacked the soybean yield to even above USDA’s extremely high number. Why is everyone estimating such high soybean yields? Is it really there, or is there some other motivation?
Corn is advanced ahead of normal progress, with dough 92% (8% ahead of normal), 61% dented (19% ahead), and 10% mature (5% ahead). Soybeans are 95% setting pods (5% ahead), and 7% dropping leaves (4% ahead). Cotton is 91% setting bolls (equal to normal), and 21% opening bolls (3% ahead). Cotton conditions improved 2% to 44% G/E. Sorghum is 93% headed (3% ahead), 55% coloring (3% ahead), and 27% mature (3% behind), and 20% harvested (1% behind), with conditions improving 4% to 53% rated G/E this week. HRS wheat is 77% harvested (16% ahead of normal), oats 89% harvested (3% ahead), and barley 80% harvested (8% ahead). Soil moisture levels nationally expanded 2% to 64% adequate/surplus topsoil, and up 1% subsoil to 61% adequate/surplus.
So the crop is advanced nationally in almost all crops, and conditions are rated quite good — especially for corn and soybeans. It will be an above average crop, but frost date and actual harvest yields will determine just how good as there are a lot of variations out there in yield estimates (especially for soybeans). To yield 49 bushels, or 53 bushels an acre are all above average, but quite a bit different in total production, as 4 bu/acre is about 350 mb of production. Essentially, if the high end of yields are hit, we have 350 mb more carryout or about a 50% increase. So the final yield number is important.