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Fungicide Applications on Corn and Soybeans

Farmers will be urged to make fungicide applications on their crops this month. Todd Gleason discussed the issues related to both corn and soybean diseases with ILLINOIS Extension Plant Pathologist Nathan Kleczewski.

ISAP | Conservation Practices, the Supply Chain, & Consumers

Margaret Henry, Director of Sustainable Agriculture - Pepsico
Ryan Sirolli, Global Row Crop Sustainability Director - Cargill

Companies along the food and fiber supply chain are thinking through how to incentivize clean water and conservation practices while providing for consumers’ wants and demands.
 

Expected Harvest Prices for Corn & Soybeans in 2020

farmdoc Daily Soybean article
farmdoc Daily Corn article

The farmdoc team at the University of Illinois has created a model projecting the average fall price for corn and soybean futures in October. University of Illinois Agricultural Economist Gary Schnitkey says, at USDA’s current projected yields, it puts December corn futures at $3.10 and November Soybean futures at $8.36.

Given current yield estimates, a statistical model suggests that the harvest price for crop insurance in Midwest states will be near $3.10 per bushel. Higher yields, above current estimates, would be expected to result in lower prices and vice versa. Thus, higher prices could happen if 2020 yields are lower than the trend. Conversely, an above trend yield would likely result in lower prices. A harvest price below $3.00 per bushel is a distinct possibility with above trend yields.

Given current yield estimates, a statistical model suggests that the harvest price for crop insurance in Midwest states will be near $8.36 per bushel. Higher yields, above current estimates, would be expected to result in lower prices and vice versa. Thus, higher prices could happen if 2020 yields are lower than the trend. Conversely, an above trend yield would likely result in lower prices. A harvest price below $8.00 per bushel is a distinct possibility with above trend yields.

US Corn, Soybeans, and Wheat in World Perspective: Importance of the US Cropped Acre Constraint

By Carl Zulauf, Agricultural Economist - The Ohio State University & Krista Swanson, University of Illinois ACES
link to farmdoc Daily article

Wide-spread concern exists over the large decline in US share of world corn, soybean, and wheat exports (see Figure 1). Moreover, quantity of corn and wheat exports have never consistently exceeded their early 1980 levels (see Figure 2). Tariff wars have heightened the concern. Long term impact of the tariff wars is a concern, but this article argues that graphs such as Figures 1 and 2 exaggerate the decline in US agriculture’s international standing and mask key relationships that frame private and public decisions. Data cited in this article come from PSD (Production, Supply, and Demand website).







Reasons for Exaggeration Growth in domestic US use is ignored. US consumption of meat, livestock products, and especially biofuels has grown, displacing exports, everything else remaining the same. Zulauf estimates US corn exports are 1.4 billion bushels smaller than if US corn market trends of 1984–2004 had continued to hold (farmdoc daily, 11/20/2019).

US policy changes are ignored. In particular, CRP (Conservation Reserve Program, which was authorized in 1985, pays for taking environmentally sensitive cropland out of production. Fewer cropped acres mean prices are higher than they would otherwise be. Higher prices reduce demand for exports more than domestic demand, resulting in fewer exports or slower growth in exports.
Broader markets in which a crop exists are ignored. Corn is a feed grain, soybean is an oilseed, and wheat is a food grain. Corn and soybeans are preferred among these crops around the world. However, their share of harvested feed grain-food grain-oilseed acres has increased more in the US (from 50% in 1972–1976 to 71% in 2015–2019 vs. 15% to 29% for rest of the world). Faster growth in preferred crops imparts an advantage to the US.

Conclusion

A more encompassing and likely more accurate measure of US agriculture’s international role is its share of aggregate world feed grain-food grain-oilseed production.
US share of world feed grain-food grain-oilseed production has declined, but by much less: from 19.3% in 1972–1976 to 16.2% in 2015–2019 (see Figure 3 and Data Note). This conclusion also holds for relative share decline. Relative decline in US share of world corn exports is –52%. It is calculated as percent change in 2015–2019 share from the 1972–1976 share, specifically [1 – (34.9% / 72.8%)] (percent values from Figure 1). Relative decline in US export share is –62% for soybeans and –69% for wheat. In contrast, relative decline in US share of world feed grain-food grain-oilseed production is only –16% (1 – (16.2% / 19.3%).




Closer Look

Because magnitude of a share matters, it is important to examine a share over its range of values (0% to 100%), as Figure 3 does. But, such a graph can mask important smaller, shorter-run changes. Figure 4, a smaller magnitude picture, clearly reveals 2 periods of decline. The first peak-to-trough is from 1982 (20.9%) to 1991 (16.3%). It closely follows the 1973–1980 crop prosperity period. The second peak-to-trough is from 2007 (17.6%) to 2015 (15.9%). It largely overlaps the 2007–2013 crop prosperity period. However, declines in 2018 and 2019 beg a question, “Have the tariff wars undone a possible stabilization in US share following large price declines since 2012?” Between the two declines, US share partially recovered, likely due in part to the large reduction in US prices due to policy changes enacted in the 1985 farm bill.




Role of US Acres Since the early 1980s, all growth in cumulative US production of feed grains, food grains, and oilseeds has come from yield as harvested acres declined by 26 million (see Figure 5). Since 2000, harvested acres have essentially not changed in the US while increasing by 301 million in the rest of the world. The constraint on US acres reflects both bioclimatic factors and public policy. It seems unlikely to change in the near future. The constraint means, if US domestic consumption grows faster than US yield, prices will increase, giving rest of the world an incentive to bring acres into production. This scenario played out as the US expanded its biofuel markets since 2000.




Summary Thoughts

A widely-expressed concern is the decline in US share of world corn, soybean, and wheat exports.
This decline however exaggerates the decline in US agriculture’s international standing. It also masks key relationships that frame private and public decisions.

A more accurate perspective is US share of world feed grain-food grain-oilseed production. This share has declined but by much less than US share of world corn, soybean, or wheat exports.
The decline occurred in two periods: 1982–1991 and 2007–2013. The second decline has, so far, been much less than the first. But, declines in 2018 and 2019 prompt the question, “Is the second decline resuming, especially in light of the tariff wars?”
A key feature of contemporary US agriculture is a constraint on cropped acres. Given this constraint, growing US demand faster than yield means most of the benefits accrue to the rest of the world as they bring more acres into production. Such has occurred since 2000 as the US expanded its biofuels markets.

The US cropland constraint prompts the following policy questions / issues. Given this constraint,
  • What is the appropriate role and funding for export promotion programs?
  • What should US biofuels policy be, in particular the size of mandated markets?
  • What should be the size and goal of US conservation land retirement programs?
  • What is the appropriate role and funding for public agricultural research?
These issues span multiple titles in the farm bill, suggesting the US cropped acres constraint could be a foundation theme directing debate over the next farm bill.

The Pace of Soybean Use

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.

Waiting for the Trade Deal


The highly anticipated release of USDA’s crop production and ending stocks reports last Friday created a somewhat negative tone in corn and soybean markets. Despite the slightly bearish tilt, prices for both commodities closed higher on Friday. The pending phase one trade agreement and South American production prospects look to set the tone for prices over the near term. - Todd Hubbs, ILLINOIS Extension



by Todd Hubbs, University of Illinois
link to original farmdocDaily article

Corn production for the U.S. in 2019 came in at 13.69 billion bushels, up 31 million bushels from the previous forecast on higher national average yields. Average corn yield of 168 bushels per acre is one bushel higher than the previous forecast. The harvested acreage estimate of 81.5 million acres is down from the November forecast of 81.8 million acres. Current production estimates for corn show eight percent of the crop still in the field and open the estimate to possible revision in the future.

December 1 corn stocks came in at 11.39 billion bushels. The estimate is 122 million bushels below trade expectations and indicates a total disappearance of 4.53 billion bushels in the first quarter of the marketing year. The USDA’s revision of the September 1 corn stocks higher by 107 million bushels along with greater production indicates a massive feed and residual use component in the first quarter.

At 5.525 billion bushels, the WASDE forecast for corn feed use and residual moved up by 250 million bushels from the previous forecast for the 2019–20 marketing year. Despite the significant boost in consumption from feed and residual, projected ending stocks fell only 18 million bushels from the previous forecast. Consumption projection for categories other than feed and residual fell 95 million bushels. While the corn use for ethanol forecast stayed steady at 5.375 billion bushels, the forecast for other industrial purposes decreased by 20 million bushels to 1.395 billion bushels. The forecast for corn exports dropped 75 million bushels to 1.775 billion bushels due to the continuation of weak export numbers through the first four months of the marketing year. The pending trade deal with China holds the promise for change in some of the consumption totals.

The phase one trade deal due to be signed sometime this week still lacks specificity. While the administration continues to tout agricultural export increases near $16 billion over 2017 totals of $24 billion, very little confirmation from the Chinese side has come forth thus far. The Chinese indicated that they would not exceed their global quota on corn imports for any individual country in 2020. The quota for corn stands at 7.2 million metric tons (near 283 million bushels). Through November of 2019, Census data indicates China imported 12.3 million bushels of corn from the U.S. during the calendar year. There remains plenty of room for increased Chinese imports of U.S. corn and corn-related products in 2020 despite the quota. Details surrounding the trade deal matter and look to help shape price prospects for corn over the next few months.

Foreign production projections for corn in the 2019–20 marketing year moved up slightly due to an increase in the European Union and Russian production. Brazil’s corn production forecast stayed at 3.98 billion bushels. Concerns about production losses for first crop corn in southern Brazil due to dry conditions continue to evolve. Strong domestic corn prices in Brazil point to producers planting the safrinha crop even if planting is later than ideal in many areas. Argentinian production forecasts stayed at 1.97 billion bushels. The forecast for Argentina and Brazil corn exports sit at 2.73 billion bushels, 335 million bushels lower than last marketing year. Given the current forecast for South American exports, the evolution of crop conditions in the region, particularly on the Brazilian safrinha crop, hold important implications for corn exports during the coming year.

Soybean production for the U.S. in 2019 totaled 3.558 billion bushels, up 8 million bushels from the previous forecast on higher national average yields. The national average soybean yield of 47.4 bushels per acre is 0.5 bushels higher than the previous forecast. The harvested acreage estimate of 75 million acres is down from the prior forecast of 75.6 million acres. Current production estimates for soybeans indicate two percent of the crop remains in the field. December 1 soybean stocks came in at 3.252 billion bushels, 66 million bushels above trade expectations.

The WASDE report maintained consumption and ending stock projections at the same levels seen in the last forecast. The crush forecast stayed at 2.105 billion bushels, reflecting the pace of soybean crush in the first quarter of the marketing year. Soybean export forecast levels of 1.775 billion bushels remained steady and mirrored the current pace of exports without the possible trade deal impacts. Unlike corn, soybeans do not face a quota scenario in China. A trade deal with specificity on soybean exports could provide support for prices.

A Brazilian crop at 4.519 billion bushels portends tough competition in world markets for U.S. exports. The Argentinian soybean production forecast stayed steady at 1.95 billion bushels. Forecasts for Brazil and Argentina soybean exports are set at 3.09 billion bushels over the marketing year, up 15 million bushels from last marketing year’s estimate. Increased U.S. soybean exports to China under the trade deal may see strong substitution buying of South American soybeans by other major buyers that may limit U.S. exports upside potential despite a trade agreement.

Additional discussion and graphs associated with this article available here.

MFP Impact on 2019 through 2023 Incomes and Financial Positions

read farmdocDaily post

Market Facilitation Program (MFP) payments in 2019 of $50 per acre will reduce financial erosion on farms. Still, incomes for 2019 are projected to be over $100,000 lower than 2018 incomes.

Managing Prevented-Planting Fields | an interview with Emerson Nafziger

by Emerson Nafziger, Extension Agronomist - University of Illinois
link to The Bulletin post

With a lot of acres of corn and soybeans still unplanted as we move into the second half of June, prevented planting (PP) is unfortunately going to be a major part of the story of the 2019 cropping season in Illinois. Here we’ll look at goals and options for managing acres on which the intended crop—corn or soybean—does not get planted.


Emerson Nafziger, University of Illinois Extension Agronomist, on how to manage Prevented Planting acreage this summer.

The main goals of managing PP acres will be: 1) providing a vegetative cover in order to keep the soil in place and to prevent “fallow syndrome”; 2) to prevent or manage weeds so they don’t reseed the field; and 3) to take up nitrogen, including that from any N-containing fertilizer (including DAP/MAP), and any N that will be released from soil organic matter during the growing season. We also need to find ways to keep costs down, given that the PP insurance payments leave little room for adding expenses to these acres. This may not be the best time to invest in expensive cover crop seeding mixes. With high demand this year, such seed—and seed of some less exotic cover crops as well—will be expensive, and some may not be available.

We have not seen “fallow syndrome” very often in Illinois, but there was some in 1994 in fields that were flooded for most of the season in 1993 and did not produce crops or even weeds that year. The symptoms include stunting and purpling that indicate phosphorus deficiency. Plants growing in fields host a type of beneficial fungus (VA mycorrhiza) that assists in the uptake of P; these fungi seem to die off when there aren’t any plants, and they come back slowly the next year. We don’t expect to see this in every field, and it’s more likely to show up where water stood for a long period of time this year. The best prevention is to have plants present sometime during this season to help maintain these fungi. Just about any plant with roots will work, including weeds, but a cover crop species we choose to plant will be preferable to weeds.

Having plants present to take up N is more to keep the N from leaving the field this year than it is to make it available for next year’s crop; it’s not clear how much N captured in crop biomass this season will become available to next year’s crop. But mineralization takes place in every field once soils are aerated, regardless of whether the previous crop was corn or soybean. Grasses with deep roots are the best way extract N from deeper in the soil, and to keep this N out of tile drainage water.

We won’t try to reiterate here the complex rules regarding PP certification, but will only deal with managing these fields to provide cover. It appears that any species will work as cover, as long as the rules regarding what’s done with the cover after the season are followed. That means no harvest of grain (or silage) at all, and harvest by grazing or by making hay only after November 1. Every decision on what to plant should be tested with your crop insurance agent beforehand.

PP corn

Where corn was the intended crop in 2019 and soybean is planned for 2020, using a small grain as a cover crop this summer is an option. Winterhardy cereal rye and wheat won’t form heads until after a period of temperatures in the 30s, so probably not until next spring. They should emerge and provide quick cover, but these are cool-season crops, and when they remain low-growing and don’t send up stems with heads, they likely won’t stay very healthy or grow vigorously through a normal summer season.

Spring oats or spring wheat might do a little better than winterhardy wheat or rye. These tend not to tiller much at high temperature, but they will set seed. It can’t be harvested as grain; check the rules on whether it can simply be left to have the seed shatter out in the fall once it’s ripe. That may reseed the cover crop, but these plants won’t survive the winter. None of these are likely to grow roots as deep as when they grow in cool weather, but they should provide decent cover. With the 2019 oats crop in Illinois planted late and not exactly thriving, it will be difficult to find seed locally. Spring wheat seed will have to come from states north and west of Illinois.

Grain from a bin or an elevator, including from this year’s harvest, might work as seed for small grains, since this is not a “crop” in the usual sense. With wet weather this spring, we anticipate that some harvested grain will have diseased kernels that lower its market price, which may provide an incentive for using it as cover crop seed. Test germination, and if germination is low, increase the seeding rate to plant about at least 15 viable seeds per square foot, using a drill. While drilling will usually produce better stands and require less seed, broadcasting 20–25 live seeds per square foot might work. Shallow tillage with a vertical-tillage implement before or after broadcast seeding will probably improve stands.

Sorghum-sudangrass hybrids and forage sorghum produce a lot of residue and are good at taking up soil N. These species grow well in high temperatures, and they tolerate dry soils. If they won’t be grazed (after November 1), it’s probably better to limit their growth to lower the amount of residue present next spring. Lack of adequate N will limit growth in most fields, and delaying planting until mid-July or so can also help. If there is still a lot of growth, plants can be mowed in September so the residue can start to break down this fall. Some sorghum-sudangrass hybrids are male-sterile, and these species don’t produce much seed in any case. There is no danger of having plants of these species overwinter.

In fields that haven’t had herbicides applied that would prevent their growth, species such as radish, turnip, rapeseed, buckwheat, and forage grasses and legumes could be used on PP corn acres. None of these will be as effective as a well-rooted grass crop at taking up N, and those that grow slowly after emergence will generally not provide good cover early, and they won’t compete with weeds very well. Their seed tends to be expensive, and those with very small seed (such as clovers) can be difficult to establish in mid-summer without specialized equipment.

It may be possible to plant corn on PP corn acres, as long as care is taken not to produce corn grain. Ways to assure this include planting it later than July 15, drilling or planting it in rows no more than 15 inches apart, and planting at least 70,000–80,000 seeds (roughly a bushel) per acre. Lack of N will also help keep seeds from forming or filling, as will very late (September) pollination, which should mean failure of the crop to mature. Some seed companies may offer treated seed that they won’t be keeping over at a price low enough to make this an option. It may also be possible to take seed out of a bin of non-GMO corn grain to use for this. Make sure such seed will germinate, and check to make sure the planter is dropping enough seeds. By the time frost kills them, corn plants should not have formed seed that is mature enough to germinate the next spring. If grain begins to form and seeds begin to fill despite these measures, the corn can be mowed with a stalk chopper to prevent formation of viable seeds.

Soybean PP

Management of PP soybean acres has the same goals as those for PP corn acres, but management changes some if these fields will go back to corn again in 2020. Undisturbed corn stalks have by now broken down to some extent, but they still provide some cover, and keeping some of the stalk material on the soil surface will help preserve moisture and to keep soil in place as a cover crop gets started. The presence of high-C residue from the previous corn crop means that there will be less net mineralization in these acres because some mineralized N will be tied up as microbes break down residues. Even so, good root growth from a cover crop will help to take up N and to keep it from leaving the field.

It is possible to use the growing season that remains in 2019 to produce a leguminous crop that can fix N to supplement the N supply for next year’s corn crop. Such a crop should provide good early growth in order to take up N present as the over crop is getting established. Clovers are small-seeded forage legumes that can work, although seed costs might be high and these species may be incompatible with any herbicides that were applied before planting was prevented. Planting them into corn residue will also be challenging, although no-till drilling may work if seed can be placed well. Broadcasting into corn stalks without tillage is not likely to result in good stands. Red clover is more widely available than more exotic clovers, but supplies of all of these might be limited this year. Sweet clover has larger seed and will grow aggressively once it’s established. It will usually provide more dry matter by spring, and will also be more difficult to control before planting the next crop, compared to other clovers. Hairy vetch also grows vigorously, but its seed is expensive and it may not overwinter very well; this species will work in southern Illinois but is probably not a good choice in central and northern Illinois.

Another legume that can provide fairly rapid cover and that is widely available is soybean. As with corn used as a cover crop, soybean should be planted late, in narrow rows and at a high seeding rate (80 to 90 lb of seed per acre, if germination is at least 80%), to provide fast cover and to keep seed production to a minimum. It is not clear that GMO soybean seed can be used to plant for any purpose except commercial grain production. In cases where treated soybean seed cannot be returned to the dealer, the seed company might be asked if use as cover crop seed this year is allowable. There is no other good use for this seed, and it will probably not remain viable if stored until next year.

Using bin-run non-GMO soybeans as cover crop seed for this should be possible; check with your seed dealer to make sure. Non-GMO soybeans are typically marketed as such, and so are likely to be limited in supply now, unless producers have them in their own bin. Later-maturing varieties would make more vegetative growth and be less likely to set and fill viable seeds than normal-maturing ones, but that would add the expense of finding and transporting such seed. All told, soybeans may not be as obvious a choice as they appear to be at first glance, especially if leftover seed can’t be used for this purpose.

Soybeans used as cover should not be allowed to set and fill viable seed. That’s both to avoid complications from planting a crop following prevented planting of the same crop, and also because the maturing crop may have more residue than desired. Mowing plants off at about stage R5 (beginning seedfill) should work to control growth and prevent seed formation while still allowing capture of some fixed N. A crimper-roller might also work. Soybean plants this size can be difficult to control with herbicides, and mechanical control that leaves the residue on or near the soil surface is probably a better option.

A small grain such as wheat or oats can also be used as a cover for PP soybean acres, although that means foregoing the fixation of nitrogen. These will probably be quite N-deficient when planted into corn stalks, and while this will limit the amount of cover they produce, they should make enough growth to provide fair cover by late fall. If winter wheat or rye is used, they should be terminated in the early spring so they don’t interfere with early growth of the corn crop that follows.

If P and K fertilizers were applied in preparation for this year’s crop that didn’t get planted, their availability for next year’s crop should not be affected as long as the soil stays in place. If MAP or DAP will be applied this fall, a green cover crop present at the time of application should take up some of the N in these P-fertilizer materials, and to preserve it from loss if application is made while soils are still warm. If P and K couldn’t be applied for this year’s crop, PP provides an opportunity to sample soils if needed, and to get these nutrients applied this fall. Late planting will mean late harvest of corn and soybeans this year, which will allow for timely fall work on PP acres.

Crop Insurance Loss Ratios in 2018


Gary Schnitkey from the University of Illinois discusses crop insurance loss ratios for 2018, the current outlook for payments in 2019, and the strategic economic models he’ll be developing for soybeans.

by Gary Schnitkey, University of Illinois
link to farmdocDaily article

Most 2018 payments on Federal crop insurance products have now been entered into the Risk Management Agency’s (RMA’s) record system and losses for 2018 can be stated accurately. Similar to 2016 and 2017, low losses again occurred in 2018. Losses were particularly low in Illinois and, more generally, the eastern Corn Belt.

Background on Loss Ratios

This article presents loss ratios, which equal payments on crop insurance policies divided by total premium paid on crop insurance policies. A loss ratio of 1.0 means that crop insurance payments are equal to total premium. Ratios above 1.0 indicate that payments exceed premium, which occurs with some regularity. On the other hand, loss ratios below 1.0 indicate that payments are less than premium. Given the way RMA sets premiums, loss ratios should average slightly below 1.0 over time. Given the high correlation of losses across policies in a year, variability in aggregate loss ratios will occur from year to year.

Data reported in this article come from the Summary of Business which is available from the RMA website. Data were downloaded in late April of 2019. Some changes to loss ratios will occur over time as more loss data become available. However, 2018 loss performance will not materially vary from loss ratios presented here.

Loss Ratios in 2018

For all insurance products, the 2018 loss ratio was .69, indicating that crop insurance payments were less than total premium. Overall, 2018 was a low loss year, continuing a string of low loss years that have occurred since 2013 (see Figure 1). Loss ratios exceeded 1.0 in the drought year of 2012 when the overall loss ratio was 1.57. Payments also exceeded premium in 2013 when the loss ratio was 1.03. Since 2013, loss ratios have been below 1.0 in each year: .91 in 2014, .65 in 2015, .42 in 2016, .54 in 2017, and .69 in 2018. These low loss years correspond to relatively high yielding years in corn and soybeans (farmdoc daily, April 16, 2019).



The overall loss ratio is highly influenced by the performance of corn and soybeans, as these two crops account for 56% of total premium. In 2018, corn policies had 32% of total premium while soybeans had 23%. In 2018, loss ratios were .43 on corn and .56 on soybeans. Since 2014, both crops have had low loss ratios. Corn loss ratios were .46 in 2015, .27 in 2016, .37 in 2017, and .43 in 2018. Soybean loss ratios were .55 in 2015, .21 in 2016, .30 in 2017, and .56 in 2018.
2018 Loss Ratios by County

Many counties in the Corn Belt had very low loss ratios, as would be expected given that corn and soybeans have very low loss ratios. Figure 2 shows loss ratios by county for all policies in that county. Loss ratios below .4 predominated in a stretch of counties beginning in eastern Iowa, going through Illinois, Indiana, and ending in Ohio. Low loss ratios also were in western Corn Belt counties including Minnesota, North Dakota, South Dakota, and Nebraska. In contrast, there was a concentration of counties along the Iowa-Minnesota border that had higher loss ratios above 1.0.



Other sections of the country had higher loss ratios. Loss ratios above 1.2 predominated in North and South Carolina, Georgia, Florida, northwest Missouri and eastern Kansa, and western Texas.
Summary

Overall, loss ratios were low in 2018, continuing a string of years since 2014 that have had low loss ratios. Low loss ratios occurred primarily because of low losses on corn and soybean policies in the Corn Belt.

Good Yields! Yes but a Warning | an interview with Gary Schnitkey



by Gary Schnitkey, University of Illinois
read farmdocDaily article

On a national basis, corn and soybean yields were near record-breaking levels in 2018, with exceptional yields in central Illinois and the eastern United States contributing heavily to those near-record U.S. yields. Other areas had below-trend yields. The county yields for corn and soybeans presented in this article illustrate these facts. Much higher U.S. yields are possible if all areas have exceptional yields. However, all areas including Illinois should not expect above-trend yields in every year.

Corn Yields

The 2018 corn yield for the United States was 176.4 bushels per acre, just .2 bushels below the record yield of 176.6 bushels per acre set in 2017 (all yields in this article are from QuickStats, a website maintained by the National Agricultural Statistical Service). From a national standpoint, corn yields were excellent in 2018.

Contributing to these high yields were counties having average yields above 220 bushels per acre. Several of these counties were in the Northwest U.S. and Nebraska where irrigation often is used in corn production (see Figure 1). In predominately non-irrigated counties, there were a concentration of counties in eastern Iowa and extending through central Illinois with over 220 bushels per acre average yields (see Figure 1). Three counties in this region, all in Illinois, had average yields over 240 bushels per acre: Douglas County (246.0 bushels per acre), Piatt (241.8), and Warren (241.7). Eleven counties – again, all in Illinois – had average yields between 230 and 240 bushels per acre: Macon (239.9), Sangamon (236.4), Logan (236.2), Tazewell (235.4), Effingham (235.2), Coles (234.2), Stark (234.0), Moultrie (233.9), Hancock (233.9), Christian (232.9), and Mercer (231.3). Eighteen counties had yields between 220 and 230 bushels per acre: 6 counties in Iowa and 12 in Illinois.



High yields are a measure of good growing conditions, but it does not take into consideration the inherent productivity of soil. Yield deviations from trend consider an area’s productivity. For each county, a 2018 trend yield was calculated using linear regression to fit a straight line through actual county yields from 1972 to 2017. The straight line then was extended to give the 2018 trend yield which represents the expected yield given approximately average growing conditions. A yield deviation then equals the actual yield minus the trend yield. A yield deviation of 20 bushels per acre means the actual 2018 yield is 20 bushels higher than the trend yield, an indicator of a very good yield. Conversely, a –20 yield deviation indicates that the county yield is 20 bushels below the trend yield, an indicator of poor growing conditions.

As would be expected, eastern Iowa and central Illinois had yields with positive yield deviations, with many counties having yield trends above 30 bushels per acre (see Figure 2). Note that yield deviations paint a broader area of excellent yields. That area includes southern Illinois, central and southern Indiana, western Ohio, western Kentucky, and parts of central Tennessee.



Other areas did not fare as well. Counties along the Iowa-Minnesota border had below-trend yields (see Figure 2). Other regions of poor yields in include Colorado, eastern Kansas and western Missouri, Texas, Arkansas and Louisiana, North Carolina, and New York.
Soybeans Yields Similar to corn, soybeans almost had a record-breaking yield. The average U.S. soybean yield for 2018 was 51.6 bushels per acre, .3 bushels below the record yield set in 2016 of 51.9 bushels per acre.

There were many areas of exceptional soybean yields (see Figure 3). Twenty-nine counties had average county yields over 70 bushels per acre. Three of these counties were in Nebraska: Gosper (75.2 bushels per acre), Dawson (73.2), and Buffalo (70.6). The remaining 26 counties were in Illinois. Three Illinois counties had average county yields over 80 bushels per acre: Sangamon County (82.3 bushels per acre), Morgan (81.6), and Douglas (80).



Yield deviations suggest that central and southern Illinois had exceptional growing conditions in 2018 (see Figure 4). Excellent growing conditions continued into Indiana, Ohio, Kentucky, and Tennessee. Other areas did not have as productive of a year. Yields were below trend along the Iowa-Minnesota board, North and South Dakota, Nebraska, Wisconsin, Michigan, Pennsylvania, and in North and South Dakota.



Commentary The U.S. had near-record yields for corn and soybeans in 2018. Above-trend yields in central and southern Illinois, central and southern Indiana, western Ohio, Kentucky, and Tennessee where large contributors to the near-record U.S. yields.

The examination of county yields suggests two warnings. Illinois farmers should note that many several areas in the country had below-trend yields in 2018. Therefore, the 2018 experience indicates that below-trend yields are still possible. Illinois farmers should not plan on having above-trend yields in every year. It is entirely possible that the area of below-trend yields centered along the Iowa-Minnesota border in 2018 could occur in central Illinois. At the same time, Iowa and Minnesota could have above-trend yields. If that reversal occurs in 2019, there would be large, negative incomes on many Illinois farms.

Somewhat counter to the first warning, the second warning is for the possibility of much larger national corn and soybean supplies. It is possible that all areas of the U.S. have above-trend yields. That is, the western Corn Belt could have had above-trend yields at the same time the eastern Corn Belt has above-trend yields. If this occurs, national yields would be record-breaking, resulting in falling corn and soybean prices, leading to very low farm incomes.

USDA Reports Provide Little Support for Corn and Soybeans

by Todd Hubbs, University of Illinois

The USDA finally released a set of highly anticipated reports on Friday. The results projected lower ending stocks for corn and soybeans during this marketing year. Despite lower ending stock forecasts, the results disappointed and produced a somewhat bearish outlook. The following discussion recaps developments in corn and soybean crop fundamentals coming out of the reports and price implications moving forward.



Corn ending stock projections for the 2018–19 marketing year came in at 1.735 billion bushels, down 46 million bushels from the December forecast. Reduced corn production in 2018 drove ending stocks lower despite a 165 million bushel reduction in total use during the marketing year. Corn production is down 1.4 percent from the November forecast at 14.4 billion bushels. The harvested acreage estimate of 81.7 million acres is down from the November forecast of 81.8 million acres. Average corn yield of 176.4 bushels per acre is 2.5 bushels lower than the November forecast. December 1 corn stocks came in at 11.952 billion bushels. Total disappearance came in near 4.62 billion bushels during the first quarter of the marketing year, up from last year’s first quarter use by approximately 280 million bushels. Despite the lower domestic supply numbers and stronger first quarter use, lower consumption forecasts in key categories provide little support for corn prices.

The WASDE report forecast for U.S. corn during 2018–19 lowered corn use projections for feed and residual use, ethanol crush, and other food and industrial uses. At 5.375 billion bushels, the projection for corn feed use and residual moved lower by 125 million bushels. The ethanol use forecast decreased by 25 million bushels to 5.575 billion bushels. The lower ethanol use reflected the slowing ethanol production levels over the last month. Food, seed, and industrial use other than ethanol saw the consumption forecast lowered 15 million bushels on reduced corn use for high fructose corn syrup, glucose, and dextrose. Corn export forecasts maintained the 2.45 billion bushels forecast in December. The potential for increased corn usage seems increasingly dependent on continued economic growth and the resolution of the current trade impasse.

World ending stocks for corn increased by almost 40 million bushels from December forecasts. The increase focused on stronger production in key growing areas. In particular, Argentine corn production forecasts totaled 1.81 billion bushels, up from last year’s 1.26 billion bushels. Brazil’s corn production forecast stayed at 3.72 billion bushels this year. In total, Brazil and Argentina production forecasts exceed 2017–18 production estimates by 1.04 billion bushels. Projections of corn exports from Argentina and Brazil sit at an additional 492 million bushels each above last marketing year. Given the increase in South American production, the evolution of crop conditions in the region bears monitoring as we move into 2019.

The forecast for soybean ending stocks fell to 910 million bushels. Despite the 45 million bushel reduction to ending stocks, the current projection remains record high. Soybean production came in 56 million bushels lower than the November forecast at 4.54 billion. The harvested acreage estimate of 88.1 million acres is down from the November forecast of 88.3 million acres. Average soybean yield of 51.6 bushels per acre is 0.5 bushels lower than the November forecast. While the expected reduction in soybean production materialized, consumption continues to exhibit strong crush levels and weak exports this marketing year.

The WASDE report increased the soybean crush forecast by 10 million bushels to 2.09 billion bushels. The change in the crush projection reflects strong crush numbers through January. Soybean exports saw the forecast lowered by 25 million bushels to 1.875 billion bushels. Considerable uncertainty remains in export potential in 2019 as the sporadic nature of trade talks with China unfold. Total use fell by 15 million bushels on weaker export projections to 4.092 billion bushels. The consumption for this marketing year holds the potential for deterioration if the trade war escalates and increased competition out of South America materializes.

World production forecasts for the marketing year decreased by 301million bushels to 13.26 billion bushels on the smaller U.S. and Brazilian crops. The Brazilian soybean production forecast decreased by 183.72 million bushels over the December forecast to 4.3 billion bushels. Reports out of Brazil indicate this number may fall further before the final crop estimate is complete. The Argentinian soybean production forecast fell slightly to 2.02 billion bushels on reduced acreage. The Brazilian soybean export forecast dropped by 55 million bushels reflecting the decreased crop production levels. Forecasts for Brazil and Argentina soybean exports sit at 3.15 billion bushels over the marketing year, up from last marketing year’s estimate of 2.88 billion bushels.

While the ending stock projections for both crops fell, the USDA maintained price projections for the marketing year at the December mid-point ranges for corn and soybeans at $3.60 and $8.60 respectively. Barring a resolution to the trade issues with China or a significant deterioration in the South American crop, soybean prices are untenable at current levels. Corn prices appear set to remain flat and range bound until the March Prospective Planting reports provide an initial indication of crop acreage in 2019.

January Crop Report Yield Expectations

The January USDA reports have been delayed until further notice because of the government shutdown. It is expected once these numbers are released the changes in the national yields for corn and soybeans could be positive for price.

The last time USDA updated corn and soybean yields was in the month of November. Both crops saw a drop in predicted yield for the 2018 harvest. This drop has been since complicated by harvest problems. Todd Hubbs from the University of Illinois says history can sometimes be a guide to how the January Crop Production report might change. More often than not when the yields from October to November go down, the U of I commodities specialist says they drop again in January, “And what you see is when you see a yield change from November to October that is negative, we tend to see a similar change from January to November. Now it doesn’t always hold, but if that were to materialize we probably see a corn number around 177.2 bushels to the acre. I think it might be a little bit higher than that, but even if it is if we lose half to one bushel out of the current projection of 178.9, then that is really supportive for corn prices moving forward.”

Hubbs says a similar pattern holds for soybean yields. On average he says that’s been about a quarter of a bushel per acre… a little better than that actually… and if it came to fruition this year it would put the 2018 soybean yield at 51.8 bushels to the acre. That would clearly be supportive to price says Hubbs, even though the trade issues with China are continuing, “We could also see some acreage come out of both corn and soybeans as harvest was really tough in some places. Particularly out in Kansas and the southern plains. This has more implications for winter wheat seedings than it does for anything else. Right now, by my projections, I think winter wheat acreage will be down by one-point-five percent from last year’s 32.5 million acres. This may have implications for both corn and soybean acreage in the southern plains as we move into 2019 and think about what kind of acreage we will have.”

The implication being a potential increase in corn or soybean acreage in that area. USDA says it will announce the date for the release of the January reports once the government shutdown has ended.

January Crop Report Yield Expectations

The January USDA reports have been delayed until further notice because of the government shutdown. It is expected once these numbers are released the changes in the national yields for corn and soybeans could be positive for price.

The last time USDA updated corn and soybean yields was in the month of November. Both crops saw a drop in predicted yield for the 2018 harvest. This drop has been since complicated by harvest problems. Todd Hubbs from the University of Illinois says history can sometimes be a guide to how the January Crop Production report might change. More often than not when the yields from October to November go down, the U of I commodities specialist says they drop again in January, “And what you see is when you see a yield change from November to October that is negative, we tend to see similar change from January to November. Now it doesn’t always hold, but if that were to materialize we probably see a corn number around 177.2 bushels to the acre. I think it might be a little bit higher than that, but even if it is if we lose half to one bushel out of the current projection of 178.9, then that is really supportive for corn prices moving forward.”

Hubbs says a similar pattern holds for soybean yields. On-average he says that’s been about a quarter of a bushel per acre… a little better than that actually… and if it came to fruition this year it would put the 2018 soybean yield at 51.8 bushels to the acre. That would clearly be supportive to price says Hubbs even though the trade issues with China are continuing, “We could also see some acreage come out of both corn and soybeans as harvest was really tough in some places. Particularly out in Kansas and the southern plains. This has more implications for winter wheat seedings than it does for anything else. Right now, by my projections I think winter wheat acreage will be down by one-point-five percent from last year’s 32.5 million acres. This may have implications for both corn and soybean acreage in the southern plains as we move into 2019 and think about what kind of acreage we will have.”

The implication being a potential increase in corn or soybean acreage in that area. USDA says it will announce the date for the release of the January reports once the government shutdown has ended.

Corn and Soybean Acreage Prospects for 2019


As US farmers finish the fall harvest, considerable speculation will occur over the next few months about the acreage decisions they’ll make for 2019. Todd Gleason discusses how current market conditions support an acreage increase next year for corn and a reduction for soybeans with University of Illinois agricultural economist Todd Hubbs.

farmdocDaily article
by Todd Hubbs, University of Illinois

Prospects for 2019 crop acreage levels begin with expectations about planted acreage for principal crops. In 2018, acreage planted in principal field crops expanded to 322 million acres, up 2.9 million acres from the previous year. A large share of increased acreage came from an expansion of spring wheat acreage by 2.18 million acres, cotton acreage by 1.4 million acres, and hay acreage by 1.28 million acres. Corn and soybean acreage decreased by 1.03 and .997 million acres respectively. Illinois increased planted acreage by 188,000 acres like most of the primary Corn Belt states. A significant exception came in South Dakota which lowered acreage by 343,000 acres, driven mostly by lower corn acreage. In conjunction with the increase in principal crop planted acreage, prevent plant acreage is small thus far in 2018. The Farm Service Agency reports 1.88 million acres of prevented plantings as of October 1, down from 2.59 and 3.4 million acres in 2016 and 2017 respectively.

As we move into 2019, the prospects of large adjustments to crop acreage increasingly focuses on soybean acreage. Acreage adjustments in many major growing areas may be in the form of crop adjustments instead of acreage losses. The current price environment across principal crops points to constant or modest changes in total planted acreage in 2019 and holds the potential for less overall soybean and corn acres.

Since the inception of the Renewable Fuels Standard and growth in Chinese soybean imports, a noticeable shift in principal crop acreage created increases in corn and soybean acreage at the expense of wheat and small grains. Corn and soybean acreage increased from 158.3 million acres in 2006 to 178.3 in 2018 with a peak acreage of 180.3 million in 2017. Over the same period, wheat acreage declined from 57.3 million acres to 47.8 million projected in 2018. The low for wheat acres came in 2017 at 46.02 million acres. Similarly, small grain acres fell from 18 million acres to 14.88 million with a low of 14.5 in 2017. These acreage adjustments stand out when analyzing the data from the three western Corn Belt states of North Dakota, South Dakota, and Kansas.

In 2006, the states mentioned above planted 20.54 million acres of corn and soybeans. Since that year, corn and soybean acreage grew by over eleven million acres with a peak year of 32.52 million acres in 2017. In 2018, 31.15 million acres of corn and soybeans were planted in those states. Conversely, wheat acres contracted dramatically in those states continuing a long run trend. In 2006, the three states planted 21.9 million acres of wheat. Since that year, wheat acreage fell by over four million acres with a low year of 16.2 million acres in 2017. In 2018, 17.3 million wheat acres were planted in those states.

Narrowing profitability margins appear to be shifting away from the expansion of corn and soybean acreage and back to wheat, small grains, and cotton in many areas. Current projections by industry analysts place 2019 corn acreage in a range from 90 to 93.7 million acres. Soybean acreage projections come in between 82.3 and 87.5 million acres. In essence, if the current margins continue, we may be at the beginning stages of unwinding the acreage shifts seen over the last decade. In 2018, corn and soybean acreage in total reversed a three-year trend of increased planted acres. While soybean and corn acreage decreased in 2018, many crops saw planted acreage increases. In particular, spring wheat, cotton, barley, rye, oats, and hay recorded increases. In the main corn producing states during 2018, Missouri, Michigan, Nebraska, and Ohio increased corn acreage over 2017 planting decisions. None of those states increased corn acreage by more than 100,000 acres. Decreases in soybean planted acreage came from North Dakota, Kansas, Arkansas, Minnesota, and Missouri. As we move into 2019, corn and soybean acreage shifts depend on the evolution of corn and soybean prices between now and planting.

Expectations about corn and soybean acreage will continue to evolve. Preliminary surveys of farmer’s planting intentions indicate an intention to decrease soybean acreage and increase corn acreage. Using current market prices, projections for corn and soybean acreage place 2019 corn acreage at 91.1 million acres and soybean acreage at 85.7 million acres. Data availability on acreage begins with the USDA’s Winter Wheat Seedings report in January to be followed by the March Prospective Plantings report.

Reviewing Prices and Market Facilitation Payments

read farmdocDaily article



As the trade conflict with China continues, prices for many agricultural commodities remain relatively low. Illinois corn and soybean prices dipped to new lows in September, coinciding with the latest rounds of tariffs.



The difference between selling an entire crop at spring forward bid prices compared to the September average cash prices makes a substantial difference in income on an average central Illinois grain farm.



University of Illinois Agricultural Economist Gary Schnitkey reviews how this plays out on a 1700 acre corn and soybean farm in Illinois this year, and what the prospects look like for next year.

Trump Admin Still Has Some Biofuels Work to Do

Last Tuesday President Donald Trump made a campaign trip to Council Bluffs, Iowa. There he told a very excited crowd his administration would be backing corn farmers and ethanol.

The President leaned into the mic and gave corn farmers a little insider news they’ve been clamoring to hear since U.S. EPA pronounced gasoline blended with 15 percent ethanol would be ok to use in all cars made since 2001, “We are a little bit early. I shouldn’t say it now, but we are going with E15 year-round.”

Mr. Trump is a little early. Today E15 can be used about 9 months out of the year in much of the nation. During those other three months, the summer months, it has been prohibited. U.S. EPA will need to write some rules about how to make the year-round use happen. Those will need to be approved, and clearly the oil industry will mount court challenges.

If all goes well more corn will be used to make ethanol for E15, but it won’t make a difference in the balance sheets for corn says University of Illinois Agricultural Economist Scott Irwin, “Not for this year and I am confident not for next year.”

So the E15 announcement, while a long run win for corn ethanol, rings a little hollow. The Administration’s other big farm country biofuels problem is EPA’s use of the Small Refinery Exemptions or SRE. The good news here, says Illinois’ Irwin, is that ethanol usage has been holding strong despite EPA letting some refineries out of the mandate to produce gasoline blended with a home grown fuel like ethanol made from corn.

However, there is a problem with oil pressed from soybeans to make biodiesel says Irwin, “And the total amount of biodiesel, because of the Small Refinery Exemptions, has probably gone down at least 10 percent. So, there has been real demand destruction from the Small Refinery Exemptions, but it is in biodiesel and not ethanol.”

US EPA has through November to announce its final decisions related to the volume of biofuels it will require in the nation’s gasoline supply in 2019. It may or may not include some guidance on how it expects to use the Small Refinery Exemptions going forward. So far, it has said it will make no comment on that point.

2019 Illinois Crop Budgets are Dismal

The numbers look bad for Illinois grain farmers next year.

That’s the only conclusion Gary Schnitkey can draw when he puts the costs up against the incomes for corn and soybeans in 2019. Schnitkey, an ag economist at the Univesity of Illinois, says fuel and fertilizer costs are expected to go up. Prices aren’t and that’s the dismal part says Schnitkey, “Probably the one thing that has changed relative to recent years is that corn is expected to be more profitable than soybeans. Again, that is largely due to our use of $3.60 for a 2019 corn price and $8.50 for soybeans. This switches the profitability around. That’s driven by trade concerns, particularly with China and what that has done to commodity prices.”

Here’s an example of the bottom line for next year’s budget. A northern Illinois farmer might expect to have $174 to split between the farmer and the landowner for corn and $143 for soybeans. This return is considerably below the cost of cash rent and roughly, says Schnitkey, near the 2005 returns.

2019 Crop Budgets Suggest Dismal Corn and Soybean Returns

Even with cost-cutting and savings measures, University of Illinois Agricultural Economist Gary Schnitkey says, for the moment, it seems unlikely farmers will have positive returns on rented farmland in 2019. Todd Gleason has more…

Trump Trade Policy Crashes Soybean Basis



China, the number one destination for all U.S. soybeans, has stopped buying because of the President’s trade policies. Normally those bushels would be exported via the PNW (the Pacific Northwest) grain export terminals. That gate has closed says NDSU’s Frayne Olson and now all those bushels are expected to try and move through the other export gate at the Port of New Orleans.

Olson says “The challenge we have in the soybean market is that the basis levels are trying to choke off the inflow of grain. Local basis is all about what’s the inflow rate versus the outflow rate. The problem is our out-flow rate is very slow. So, the local basis level is going to continue to fall until it chokes off that inflow and where that magic number depends upon where you are.”

Fall 2019 Soybean Basis
If you look at a fall 2018 map of soybean prices across the United State you can see how grain flow is backing up into the St. Louis export terminals. The PNW can handle about 25 train loads of soybeans a day. St. Louis can manage 5. Because of this, cash prices from the Dakotas all the way to Illinois River - it feeds the export market & St. Louis - are miserably low. Those farmers east of the Illinois River are impacted, too. If the map includes Canadian export terminals you can see that farmers in far western North Dakota are getting a $1.90 a bushel less for their soybeans than their counterparts near London, Ontario. Farmers in parts of Illinois, Indiana, and Ohio are getting about 60 cents less.

Soybean Exports since the Onset of Tariffs

by Todd Hubbs, University of Illinois

The evolving developments with tariffs between the U.S. and China continue to influence the outlook for soybean prices. The relationship between U.S. and competitor export prices along with the changing nature of trade flows merit monitoring during the 2018–19 marketing year.



The implementation of tariffs on Chinese goods and the subsequent retaliation led to an adjustment of trade flows in world soybean markets over the last few months. As the tariffs, went into effect, a price gap opened between Brazilian and U.S. export prices. The gap continuously widened when comparing an index of soybean prices at the port of Paranagua and New Orleans prices since early June.


This chart illustrates how the price of U.S. soybeans for export at the port of New Orleans has dropped below the price of Brazil sourced soybeans from the port of Paranagua since June of 2018.

The gap reached its broadest level late last week at approximately $1.90 per bushel difference. New Orleans prices came in near $8.50 per bushel. It is difficult to predict future changes in the spread between the two prices, but it directly relates to the tariff level in China on U.S. soybeans. The development of this price gap indicates the impact of tariffs on soybean markets and highlights switches in Chinese soybean buying this year. Brazilian soybean exports attained record levels in May with exports coming in at 453.7 million bushels. Soybean exports from Brazil continued to show strength through August with the Brazilian export pace exceeding the previous five-year average by 47.5 percent according to Brazilian export data. Meanwhile, the large drop in U.S. soybean prices led to a jump in soybean exports over the last quarter of this marketing year from the U.S.


Both U.S. and Brazilian soybean exports exceeded the five-year-averages in the month of August. However, ILLINOIS’ Todd Hubbs cautions the U.S. increase, derived from countries other than China, is likely not to make up for the expected losses in soybean trade to that nation if the Trump Administration trade row persists.

The USDA soybean export estimate for the 2017–18 marketing year currently sits at 2.11 billion bushels, an increase of 45 million bushels since the June estimate. An expectation of additional bushels added to soybean exports for the 2017–18 marketing year looks probable based on recent export reports. Census Bureau export estimates through July placed soybean exports at 2.051 billion bushels. Census Bureau export totals came in 56 million bushels larger than cumulative marketing year export inspections over the same period. As of August 30, cumulative export inspections for the current marketing year totaled 2.068 billion bushels. If the same difference in export pace continued through the remainder of the marketing year, soybean exports would total 2.124 billion bushels for the 2017–18 marketing year, 14 million bushels above the current estimate. During the last four weeks, export inspections of soybeans averaged 30.6 million bushels per week. Low soybean prices encouraged exports to destinations other than China in the previous two months.


These pie charts illustrate how the final destination of U.S. soybean exports for the month of July changed this year from the previous four years.

A detailed look at July export totals by country, the first full month under the new tariffs, provide a glimpse of how trade flows appear to be adjusting. While Chinese imports fell by 10.7 million bushels from last July, numerous countries increased soybean purchases at the lower prices. Egypt, the European Union, and Taiwan saw the highest increases over last year at 10.9, 5.7, and 8.7 million bushels higher respectively. U.S. soybean exports to China typically reach the lowest levels of the marketing year in the summer and build strength as U.S. harvest progresses. A large pullback in Chinese demand for U.S. soybeans appears set to continue indefinitely. The growth in soybean exports around the world relies on the lower prices in place since June.

A large amount of uncertainty surrounds soybean exports in the 2018–19 marketing. Currently, the USDA forecasts 2.06 billion bushels of soybean exports. Export sales for the next marketing year sit at 510.4 million bushels as of August 30, down 54.8 million bushels from last year. Sales to China came in at 46.5 million bushels, down 80 percent from the same time last year. Stronger sales figures to Mexico, Canada, and Pakistan mitigated weaker sales totals. The ability for the rest of the world to make up for typical Chinese exports in the first half of the 2018–19 marketing year, when U.S. exports to China are at the highest levels, seems unlikely. The USDA reduced the Chinese soybean import forecast to 3.491 billion bushels in the last WASDE report. Recently, the spread of African swine fever saw China indicate an even further reduction in soybean imports over the next year to 3.2 billion bushels, down 9.5 percent from last year. While decreased Chinese import projections may be optimistic, the prospect of substantial increases in U.S. and South American soybean production next marketing year under a lower export demand scenario would keep U.S. prices under pressure.

The growth of the U.S. trade deficit to China in August and the high likelihood of another round of tariffs between the two nations makes a resolution of trade issues a low probability event for the near future. U.S. exports of soybeans jumped over the last quarter of the marketing year as lower prices spurred demand around the world. A large U.S. crop with lower export demand over the next marketing year set up a bearish picture for soybean prices.