farmdocDaily Live | Coronvirus & Ag
farmdocDaily Live | #Coronavirus & Ag register today go.illinois.edu/fddlive
markets and weather for the farming world | Todd Gleason, Farm Broadcaster
by Todd Hubbs, Agricultural Economist - ILLINOIS Extension
Iink to farmdocdaily article
USDA’s soybean ending stocks forecast of 425 million bushels for the marketing year may show little if any change in the upcoming WASDE report. Despite the recent strength in soybean crush, the current focus is squarely on the impacts of the coronavirus and the implications for both crush and exports as the disease continues to evolve.
University of Illinois ag economist Todd Hubbs discusses the impact coronavirus is and may have on the use of soybeans across the planet.
Soybean crush in January saw a record total for the month of 188.78 million bushels. Thus far this marketing year, crush set monthly records in October, December, and January. Even with those monthly records, the crush pace during the first five months of the marketing year, at 897 million bushels, equaled last year’s pace. The USDA’s current projection for crush indicates a 13 million bushel increase over last year. To reach the crush forecast, crush needs to total 1.2075 billion bushels over the remainder of the marketing year. Soybean crush at that level comes in higher than last year’s 1.194 billion bushel total over the same period. The recent strength in crush led many market observers to raise the prospects for soybean crush totals. The implementation of higher export taxes on soybean products in Argentina helped to bolster this narrative. While soybean crush may see an increase in marketing year use, the prospect of coronavirus issues hurting meat demand may limit the upside potential later in 2020.
Soybean meal prices in Decatur rallied from the low $290 per ton range in early February to settle near $305 last week, which coincides with the marketing year average price put forth in the February WASDE report. The forecast for domestic soybean meal use sits at 36.8 million short tons, up 708 million tons over last year. Plentiful livestock on feed supports strong domestic soybean meal use this marketing year. However, the spread of the coronavirus around the world may put a damper on meat consumption. The prospect of lower meat consumption in the U.S. remains a serious concern. At 13.2 million short tons, the forecast for soybean meal exports came in 354 million tons lower than last year. Soybean meal exports weakened significantly in January and put the pace of exports through January seven percent behind last year’s export total at 4.576 billion short tons. Total commitments through February 27 sit a little over six percent behind last year’s pace. If the expansion of export tariffs on soybean meal in Argentina impact exports, the pace of meal exports could increase.
Soybean oil prices in Decatur fell back to levels seen last September in recent weeks at between 28 and 30 cents per pound. Vegetable oil prices remain under pressure from the impacts of coronavirus spreading around the world. As Chinese crushers come back online, an expectation of growth in world soybean oil stocks over the short term seems a forgone conclusion. Weaker biodiesel production led to a decrease of 300 million pounds in the February WASDE report to 8.2 billion pounds. Through December, the EIA biodiesel production report put soybean oil use at 1.625 billion pounds, down 545 million pounds from the first quarter last year. Biodiesel production from soybean oil needs to increase by fifteen percent over last year for the remainder of the marketing year to hit the USDA’s forecast. Soybean oil exports continue to exhibit strength and provide a counterbalance to relatively weak domestic demand. At 1.9 billion pounds, the USDA’s forecast for soybean exports seems well within reach this marketing year. Census Bureau soybean oil exports through January came in at 809 million pounds. To reach the projection, soybean oil exports need to total 1.09 billion pounds over the rest of the marketing year, 110 million pounds less than the total over the same period last year and hints at an increase to the forecast for soybean oil exports this marketing year in the next WASDE report.
The large Brazilian soybean crop and the potential for expanded Chinese buying continue to be the main factors shaping the potential for soybean exports. USDA projections for soybean exports total 1.825 billion bushels. Estimates of soybean exports from the Census Bureau are available through January. Soybean exports came in at 1.02 billion bushels. As of March 5, cumulative export inspections for the current marketing year totaled 1.107 billion bushels. By using the relationship between Census Bureau data and export inspections, soybean exports total 1.153 billion bushels for the marketing year. Soybean exports need to equal 672 million bushels, approximately 26.3 million bushels per week, during the remainder of the marketing year to reach the USDA forecast. Over the last four weeks, export inspections averaged 26.1 million bushels per week.
A Brazilian crop near 4.6 billion bushels looks in the offing this year. A large crop in combination with a Brazilian real that depreciated almost fifteen percent against the dollar since the turn of the year promise competition from Brazilian soybeans in 2020. Chinese buying of U.S. soybeans remains the key to hitting export projections. For now, Chinese total commitments (export sales and accumulated exports) through February 27 sit at 449 million bushels, up from 344 million bushels over the same period last year. Census Bureau data through January showed soybean exports to China at 431 million bushels thus far this marketing year. The small growth in exports since January highlights the low level of buying from China since the onset of the coronavirus. The recent exemptions on U.S. soybean tariffs granted for some crushers in China provide support to the notion of China attempting to meet its commitments to the Phase 1 trade deal.
Uncertainty about the impacts of coronavirus looks to set market expectations over the near term. Soybean prices will reflect this uncertainty. Volatility appears set to remain high and developments in soybean product export markets seem destined to determine ending stocks this year.
This is a lengthy discussion with ILLINOIS ag economist Gary Schnitkey detailing the ARC/PLC and Crop Insurance decisions farmers throughout the nation will need to make by March 16, 2020.
The Natural Resources Conservation Service has posted a new Agricultural Conservation Easement Program rule to the Federal Register. The Assistant State Conservationist for Easement Program from Illinois NRCS explains just how easements work and what the new rules offer. Listen to Todd Gleason’s interview with Paula Hingson.
USDA NRCS Press Release
Champaign, Illinois – USDA’s Natural Resources Conservation Service (NRCS) seeks public comments on its interim rule for the Agricultural Conservation Easement Program (ACEP). ACEP is USDA’s premier conservation easement program, helping landowners protect working agricultural lands and wetlands. The interim rule – now available on the Federal Register – will be in effect until the final rule is published. These activities will make changes to the program prescribed by the 2018 Farm Bill.
“Through easements, agricultural landowners are protecting agricultural lands from development, restoring grazing lands and returning wetlands to their natural conditions,” said Ivan Dozier, NRCS State Conservationist in Illinois. “The new changes to ACEP under the 2018 Farm Bill make it stronger and more effective and will result in even better protection of our nation’s farmlands, grasslands and wetlands.”
NRCS is investing more than $300 million in conservation easements for fiscal 2020. NRCS state offices will announce signup periods for ACEP in the coming weeks. Changes to ACEP for agricultural land easements include:
Changes to ACEP for wetland reserve easements include:
“Conservation easements have a tremendous footprint in the U.S. with nearly 5 million acres already enrolled. That’s 58,000 square miles,” NRCS Chief Matthew Lohr said. “This is a great testament to NRCS’s and landowner’s commitment to conservation.”
Submitting Comments NRCS invites comments on this interim rule through March 6 on the Federal Register. Electronic comments must be submitted through regulations.gov under Docket ID NRCS–2019–0006. All written comments received will be publicly available on regulations.gov, too. NRCS will evaluate public comments to determine whether additional changes are needed. The agency plans on publishing a final rule following public comment review.
Applying for ACEP ACEP aids landowners and eligible entities with conserving, restoring and protecting wetlands, productive agricultural lands and grasslands. NRCS accepts ACEP applications year-round, but applications are ranked and funded by enrollment periods that are set locally.
For more information on how to sign up for ACEP, visit your state website at nrcs.usda.gov or contact your local NRCS field office.
The number of hogs being raised in the U.S. has been going up since mid–2014. However, it isn’t necessarily because profits are great.
The last Hogs and Pigs report released by USDA, back in December, was a record-setter at 77 million 338 thousand. That’s three-percent more than year ago. The expansion comes despite unprofitable margins and uncertainties related to trade issues says Jason Franken of Western Illinois University. The fact is there will be more hogs going to market from January to May. One of the reasons, Franken says, is that the litter size has grown on average and is now over 11 piglets per sow, “The continuation of the upward trend in pigs per litter, combined with reported farrowing intentions suggests more hogs going to market in 2020.”
Winter farrowing intentions are up 1 percent from actual farrowings last year and 5% from two years ago. The spring farrowing intentions are also up slightly from last year and up 3 percent from 2 years back.
All of these numbers point to a somewhat higher supply of hogs and pork in 2020 thinks Franken. And, he says, with higher production, one might expect lower prices, but there are additional items to consider on the demand side. For instance, we’re eating more pork per person. Last year’s mark at 52.7 pounds each is the highest number since 1981. Exports are good, too, even to China, “On the world market, all eyes are on Asia, and China in particular, due to their production losses from African Swine Fever. Although held back by China’s retaliatory duties, U.S. pork exports to China increased throughout 2019. In September and October, China surpassed Japan to become our second largest foreign customer after Mexico.”
USDA, by-the-way, is forecasting U.S. pork exports in the first three quarters of 2020 to be 21%, 7.5%, and 8.8% greater than the corresponding quarters from last year. Taking all of this into account, WIU’s Jason Franken says hog prices should be profitable throughout much of 2020, even though they have been below the cost of production in recent weeks, as they often are seasonally at this time of year.
Farmers generally try to get their taxes in order before the end of the year. This season they may need to consider MFP and Prevented Plantings payments and how to best make charitable contributions.
The tax implications of the MFP payments are that the money is taxable in the year it is received. One-half of the MFP payment has already been or will be delivered shortly. It is expected 25% will be delivered in a second check in November. And if needed the third check, another 25% of the total, is likely to come in January. The first two checks are taxable in 2019, and the final portion would be taxable in 2020.
Another payment farmers may not be used to dealing with involves the Prevented Planting portion of crop insurance says Bob Rhea, “Those payments are either taxable when received, or under certain circumstances, could be delayed until 2020 the year after the disaster occurred. So, they should visit with their tax professional as they determine, especially as we near year end, whether those should be taken as 2019 income or used under the election to be treated as 2020 income.”
Rhea presented during this fall’s ILLINOIS Farm Tax School Seminars. He reminded the tax preparers in attendance that farmers also have a unique way to make charitable contributions, “IRS has prescribed some specific steps to validate a contribution with grain. One of those is that the grain must be delivered to the charity. The charity must be the owner of the grain in inventory, and the producer should notify the charity that he has provide x-number of bushels in their name at a certain location. The charity then, from that point, takes the risk and makes the sale and handles the cash proceeds from there.”
In simple terms the producer delivers grain in the name of the charity to the grain elevator, notifies the charity, and the charity then makes the sale.