A Stack of Spring Updates

So if April showers truly bring May flowers, imagine the bouquet we'll soon have!

Commonality of coyote hunting and strip clubs - In Oregon, the argument will be that of first amendment rights and free speech, i.e. entertainment. Stay tuned, this promises to be interesting.

Conservation Stewardship Program (CSP) - USDA released details on the enrollment period, deadline for submitting your application is May 10. Contact your local county office for specific details.

Flooding - My heart aches for those impacted by the devastating flooding that has occurred along the Missouri and upper Mississippi Rivers. Thankfully the loss of human life was minimal, but the financial loss for many will take years to recover, some won't be able to withstand. Estimates of 1 million calves lost, plus mother cows, millions of bushels of stored grain that is no longer salable or usable and ineligible for disaster assistance. Estimated damages are in excess of $1B, crowding $2B, in each of the three states. Praying for your soon recovery.

ADM and DowDuPont have trimmed their earnings and net sales forecasts due to the impact caused by the flooding.

Glyphosate - The war on this product continues and has intensified with recent court rulings and calls for this product to be banned around the world.

Markets - The South American harvest continues, reports continue to indicate yields are considerably better than last year's drought ravaged yields. Adding more salt to the wound dressing is TPP: April 1st tariffs began to drop for member countries, thereby putting the US at a price disadvantage to other countries (Australia & Canada), namely the Japanese market.

I hope to someday learn how USDA obtains the data necessary for their reports. The report released March 29th, was again 'shocking' to industry analysts - perhaps USDA's methodology should no longer be shocking, as these 'surprising numbers' continue to be the norm in the reports. 2019 projected acres and inventory of carryover stocks grew beyond expectations. Tuesday's WASDE report should prove to be more of the same - look for continued drop in corn usage via ethanol production and exports. The EPA refinery waivers will roost eventually.

What were livestock and poultry fed this long, cold winter? We've had record placements of beef, hog herd is increasing as is poultry...yet corn stocks are at 8.6 billion bushels, down just 3% from March 1, 2018. Soybean stocks are up significantly, in no small part due to the trade spat with China, yet hogs and poultry have bean meal in their diet. I know that feed usage efficiency is better than it was 30 years ago when I left the farm and learned in the classroom...USDA wants me to believe feed usage is at the same level as then, yet we've increased the number of animals being fed. For you grassy knoll theorists, here's another.

AFS - African Swine Fever continues to impact the Chinese swine herd. Hog feeding in China is down an estimated 30%, perhaps more. For perspective, this is equal to the number of animals fed annually in the US, Brazil, Canada and Mexico combined! Significant is an understatement. There are 99 replacement breeding farms in China, only 20 are reported to not be impacted by this disease. Again, if AFS is found or present, there is zero survival of infected animals, the entire herd is culled.

Expected plantings:

• Corn - 92.8 million acres projected for 2019. I realize the projections were based upon data available March 1, but the lack of fall work completed across the corn belt last fall was known. As stated previously, harvest was much later than normal due the excessive moisture received during harvest. Due to the flooding this spring across much of the region, many producers are thankful that they didn't apply any fall nitrogen, as it would all be unavailable to the 2019 crop. The primary N source across the corn belt is anhydrous ammonia; safely planting corn after applying NH3 is up to 14 days, hmmm...55% of the corn acres are under threat of flooding this spring, yet Friday's Commitment of Traders show an increase of more than 33,000 short contracts. Managed money's current position is in excess of 447,000 short contracts, this with a spring snowstorm predicted for mid-week with the potential of up to 20" of snow in some areas of the upper Midwest. Rain/snow in April delaying spring planting does not make grain, computers and hedge funds may soon learn this lesson.
• Beans - AFS impact could potentially reduce bean demand by more than 20 mmt annually. 60% of soybean acres are under the threat of flooding this spring. Bean returns pencil better than the current pricing for corn and spring wheat, yet the carryover stocks are record high, 2.7 billion bushels which is up 29% year over year....demand indicators remain bearish.
• Wheat - 45.8 million acres projected to be planted for 2019. The argument is pertaining to spring wheat plantings in the US; it's mid-April and the snow cover has just gone away - the start of field work is 10 days away with good weather, forecast is not favorable. DNS plantings are projected to be down just under 400k acres; whereas Durum acres are forecast to have nearly 650k fewer acres in 2019 when compared to 2018 plantings.

Our friends north of the 49th parallel: Things are on the opposite side of intentions, as the precipitous price drop of the MIN wheat market has shown last month. China has shut out Canadian canola imports, due to an alleged sanitary (bugs) issue. Anyone believe extradition of Huawei executive not have an impact?

Livestock - Exact numbers are still not known; however,

• estimates are of 1 million calves lost to the flooding across NE and IA last month. The pictures and stories are heartbreaking. January exports of beef and pork were slightly off last year's blistering pace, 1% each. Japan was the leading importer increasing by 8% over last year. Korea imported 30% more volume, an increase of 43% in value in 2018 when compared with 2017...perhaps both countries were wanting to be in front of TPP tariffs?
• To that end, some market analysts believe the hype created from China is distorting the cattle markets, which have trimmed the futures highs seen in mid-March.

A China/US trade deal seems to change upon any given day or hour. Now a report from Bloomberg that trade agreement will be a slow play allowing fulfillment by 2025...

Crude oil has hit its stride of sorts, rebounding significantly since the start of the year. Current price is a five-month high.

Prevent Plant - Due to the length of this report and what I anticipate prevent plant to be, a separate update will come on that topic alone w/in the next day or so. I appreciate your patience.

South China Sea - This region was previously mentioned as part of the reason for the trade war with China, who's recently sent 200 military ships off Manila's doorstep.

Taxation w/o representation - This article is from the recent WAWG Greensheet - Several state senators are of the opinion that ag producers are not paying 'their fair share', including Senator John McCoy who was quoted saying "...ag producers of this state do not pay any taxes. None whatsoever." There seems to be a significant need of education for our elected officials. 

Washington Farm Bureau: Urban state senators continue their attack on agriculture: "The Ag producers in this state do not pay any taxes. None whatsoever!" We can't make this up...

Voting - I understood from my US history class that only a US citizen had the right to vote...that may change.

Weather - I've attached a two maps from NOAA:

1) the projected areas of flooding this next week and the short-term forecast through mid April. Estimates are of 1 million acres recently flooded in NE, IA and MO and 500,000 of would be corn and soybean acres are still underwater.

2) This is not the temperatures needed to get the soil warmed up let alone dried out. Below normal temperatures for nearly 3/4 of the country, there will not be an early spring across the northern half of the US. 

WOTUS - The comment period closes 4/15, please take a moment to comment on this EPA regulation. The Ag Retailers Association has provided a convenient link to accomplish this task HERE.

Worker Protection Standards - I'm providing a link to source additional information that was requested from some whom attended our training. Thank you for the positive feedback and participation at the two sessions we hosted! A good resource for EPA approved training material is the Pesticide Educational Resources Collaborative or PERC.

• PERC site for resources
• EPA's site for Worker Protection Standards

What's Boris up to now? Russia has dumped nearly all their US Treasury holdings for gold...

I wish all a safe spring planting season.

Until next time...

"If everything seems under control, you're not going fast enough." ~Mario Andretti

Curtis Evanenko
McGregor Risk Management Services, LLC
Cell - 509.540.2632
Office - 509.843.2599
Fax - 509.843.2583

Posted in Risk Management; Posted April 09, 2019 by Curtis Evanenko