USDA report, margin protection, Syngenta GMO corn litigation
09/15/15 — USDA’s revision lower in U.S. corn yields by 1.3 bu/acre to 167.5 bu was an ill-advised cut as they will have to reverse themselves in the remaining October, November, and January reports. USDA chose unwisely to capitulate to the “Pro Farmer” mentality out there that corn yields would be lower than the August report, and all the chatter the trade made about the same idea in spite of crop ratings that now suggest a 173.9 bu/acre crop, up another bu/acre last week. Of course, actual harvest yields are all that really matter, and by October we will have enough actual yield data to get a more accurate picture of the real crop numbers.
USDA also chose to cut world-ending stocks of corn by 5.4 mmt due to a cut in the EU of 4.3 mmt production along with the U.S. production cut. That seemed to propel corn higher, forming an upside daily reversal Friday with follow through strength Monday. But we still have very large carryouts projected in corn at 1.59 billion bu, and soybeans at 450 million bu. When USDA goes back to hiking production numbers of both corn and soybeans in the October report (as yields continue to expand in September with no frost forecast – in fact warm temps are forecast the next 2 weeks), the trade will have a more negative reaction to it.
The soybean numbers were quite bearish with a 0.2 bu/acre hike in yields to 47.1 bu rather than the nearly 1 bu/acre cut that was expected, but endings stocks were actually cut due to lower beginning stocks (-30 mb) and higher use (+8 mb), that offset the 19 mb hike in production. World soybean numbers were also cut in Ukraine and Canada, resulting in a 1.9 mmt cut in world ending stocks.
Wheat numbers were all bearish in spite of no revisions to production. But wheat exports were cut 25 mb, and world ending stocks were hiked 5.1 mmt on increased production in EU and the FSU. In other noteworthy news, sorghum production was hiked to a new record large yield at 74.9 bu/acre.
Weather forecasts have warmed back up to above to much above average temps the next two weeks, which will take us frost free through September, meaning an early frost is no longer possible. Pro Ag remains bearish as actual yield potential of corn is much higher than USDA’s last report, and the crop continues to mature with no weather threat which will lead to even higher yield estimates in yield models.
Syngenta GMO corn
Progressive Ag Law, PLLC, a separate business from Progressive Ag Marketing, Inc (a marketing firm) and Progressive Ag Systems, Inc (a crop insurance agency) has agreed to be local counsel for the Syngenta corn GMO case for Martin J. Phipps of Phipps/Anderson/Deacon, LLP in San Antonio, Texas. Note Martin J. Phipps had the highest per acre state court verdict and settlement against Bayer in the Rice GMO case, in which Mr. Phipps and others obtained significant amounts for the rice farmers from Bayer.
Our Fargo law firm will be working to sign up farmers who have been harmed by Syngenta’s premature release of their GMO Agrisure Viptera MIR162 seed into the U.S. corn supply chain and the resulting damages to U.S. farming interests. In 2011, prior to receiving import approval from China, then a large export market for U.S. corn, Syngenta began marketing its MIR162 seed for U.S. cultivation. In November 2013, China detected MIR162 in U.S. corn shipments. China enforced its zero-tolerance policy on imports containing the unapproved MIR162 trait and began rejecting U.S. shipments of distillers dried grains and cancelling U.S. contracts. U.S. corn and DDGS demand plummeted, reducing domestic prices and revenues. By January 2014, U.S. exports of corn and corn products to China had practically ceased. In April 2014, the National Grain and Feed Association (NGFA) estimated the U.S. corn industry had lost up to $2.9 billion from the loss of the Chinese export market. In 2014, Syngenta began marketing its new Agrisure Duracade 5307 (”Duracade”) biotech-enhanced corn seed – again, before China granted import approval. In a second economic analysis, the NGFA estimated U.S. corn growers, grain handlers, and exporters will face another economic blow during the 2014-15 crop year from premature introduction of Duracade, totaling up to $3.4 billion in additional losses.
Plaintiffs in the Syngenta Corn Litigation are corn farmers that raised corn. (You didn’t have to raise MIR162 in order to suffer damages.) It’s important to note that we are not anti-GMO’s, we just want them released responsibly and have their release not adversely affect our markets. Recall how much the market has dropped since November 2013! We note that NGFA estimates of $.11 to over $.50 per bushel damage might be low, based on the 16 expert agricultural economists hired by Mr. Phipps. Some estimates of damages go as high as $1 per bushel, but who knows what a jury will decide?
Margin protection meetings
The new margin protection program allows farmers to buy up to 90% margin protection. (That is the wheat price x county yield – input costs including fuel, fertilizer, and interest which are traded commodities and subject to price changes just like the wheat price in revenue insurance). You can buy your traditional crop insurance (like 75% revenue insurance) and also buy margin protection. With agriculture prices sliding in a tailspin right now, this revenue coverage could provide a $50/acre payment or more in years like this year where prices continually go against the farmer! If agriculture goes into a financial crisis like the 1980s, this product may save many farms! This year decisions to sign up must be made by Sept. 30, so we are trying to get this information out as soon as possible.