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Tariffs hang over good news of record soybean production


INDIANAPOLIS, Ind. — Beautiful weather may be a crop’s best friend, but it doesn’t always mesh well with market forces to benefit a farmer’s bank account.

Largely ideal weather conditions across the Midwest this summer and the impact of tariffs on crop exports, particularly soybeans, combined last Friday to drop futures prices on corn, soybeans and wheat following publication of the USDA’s monthly Crop Production and World Agricultural Supply and Demand Estimates reports.

In Indiana particularly, “everything’s going in line with the best things Mother Nature can do to help you out,” said Shaun Casteel, Purdue University soybean and small grains specialist.

Purdue corn management expert Bob Nielsen added, “I wouldn’t be surprised that the vast majority of the (corn) crop could be harvested in September,” if the weather holds out and current growth and fill paces continue. He and Casteel joined fellow Indiana crop experts to talk about the USDA reports at the Indiana State Fair Friday.

USDA is projecting the corn harvest, at just under 14.6 billion bushels, down less than 1 percent from 2017 production, since 1 million fewer acres were planted this year but is on track for a record yield of 178.4 bushels per acre.

But the big news focused on soybeans, which are estimated at a record 4.59 billion bushels, or 200 million more than last year. This would be a production increase of 4 percent, in a year when farmers are facing problems selling it.

“It’s a particularly bad time to have a lot of soybeans and not have a market for it,” said Purdue agricultural economist Chris Hurt.

When farmers planted just a few months ago, he said they anticipated prices close to $10 soybeans and $4 corn at harvest. Even in June, the November 2018 futures for soy was at $10.38 and December corn was at $4.12; when the Chicago Board of Trade closed Friday, those were at $8.61 and $3.71, respectively.

Hurt explained a “substantial part” of the decrease in soy futures is because of 25 percent tariffs China imposed on the crop after the Trump administration levied tariffs on billions of dollars’ worth of Chinese exports. While the administration and USDA recently announced $12 billion in relief to help compensate farmers, he said it probably won’t be enough to offset all their losses.

“It’s going to help the cash flow get them through this fall,” Hurt said, adding there will hopefully be a longer-term resolution between the U.S. and China soon.

Though USDA Secretary Sonny Perdue hasn’t yet released details of how the $12 billion will work, Hurt said the agency has said $7 billion-$8 billion might be distributed through Farm Service Agency direct payments.

He recounted, with some humor, a conversation he recently had with Brazilians touring the Purdue campus, who asked Hurt if he could speculate how long the U.S.-China trade tiff would last. Hurt said Brazil growers are nearing time to make planting decisions, and explained since the tariffs went into effect on U.S. soy, they have been getting an extra $1.50 per bushel in sales to China – might the situation last another year and make it worth their while to plant more beans this fall (spring in Brazil)?

After a few years of falling U.S. farm income, he noted that early in the year, 2018 was seen as a turning point, a time when commodity sales would improve and income would start to tick back up.

“We’ll try again next year,” Hurt said – and his current prediction for what U.S. growers will mostly plant next year is “corn, corn, corn.”

This is at least partly because global corn stocks are falling after seasons of abundant production and stockpiling. USDA is estimating feed use will be up based on lower expected prices and a larger crop, and it also raised exports on U.S. competitiveness and expectations of reduced competition from Brazil.

“That means there’s good prospects for buyers of our corn,” Hurt said.

The 2017/18 marketing year will come to a close at the end of August. He said the USDA is estimating a $3.60 corn marketing year price for 2018/19, 20 cents higher than the current year’s. But he pointed out input costs are higher, too.

For soybeans, he said the current marketing year price has been $9.35 and USDA is expecting it to fall to $8.90 in 2018/19.

Both corn and soy have had a weather-friendly year so far, despite a delayed start. Greg Matli, Indiana state statistician with USDA’s National Agricultural Statistics Service, said 92 percent of the state’s corn was planted by May 27, and 87 percent of soybeans were in the ground by June 3. Both paces were well above the five-year average and remarkable, given there was still snow in April.

In fact, this April was the third-coldest in 92 years, according to Tipton County extension director and Purdue climate change specialist Austin Pearson; only 10 days of the month were suitable for fieldwork. By sharp contrast, this May was the warmest since 1896, seeing a month-average rise in temperature to 70.1 degrees Fahrenheit, from April’s 45.2.

He said weather watchers are keeping an eye on the Pacific for an El Nino pattern this year. There is a 60 percent chance of one moving in this fall, but not likely in August. It could have an effect in September, though, which would mean cooler and drier conditions.

In this region, Illinois, Indiana, Ohio and Tennessee are each forecast to produce more corn than last year. Illinois will harvest 2.2 billion bushels but is still trailing Iowa at 2.6 billion; they are the two top corn-producing states. Indiana will harvest 915 million bushels; Ohio, 596 million; Michigan, 292 million; Kentucky, 212 million; and Tennessee 127 million.

This year, Illinois leads as the nation’s top producer of soybeans, at 694 million bushels, followed by Iowa with 581 million. Indiana will harvest 358 million bushels; Ohio, 277 million; Michigan, 105 million; Kentucky, 111 million; and Tennessee, 84 million. Each of these are up over last year.