USDA Today Releases First Survey-Based Estimates for U.S. Corn, Soybeans

Posted on 08/12/2020 7:22 AM

Harris is Biden's VP pick | Fischbach vs Peterson in Minn. | Omar wins bitter primary battle

 


In Today’s Updates


 

Market Focus:
* USDA to release updated supply and demand estimates/forecasts
* FSA's monthly release of crop acreage data begins today
* Iowa ag secretary indicates 40% of state’s farmland impacted by Derecho winds
* Soft commodities are having a very solid summer
* Gold: largest drop in dollar terms in more than seven years
* Other precious metals also took a beating
* Capacity constraints have driven up rates for international shipments
* U.S. exports of liquefied natural gas decline
* Moody’s: States need $500 billion over next two years to plug budget holes
* U.K. GDP plunged by a record 20.4% in the second quarter

 

Policy Focus:
* More commodities will now be covered by the CFAP
* Producers with approved CFAP will soon receive final 20% payment
* Aid talks still at impasse, but...

 

U.S./China update:
* Senior Beijing diplomat ready to talk to U.S. leaders any time
* Bloomberg: China to raise WeChat, TikTok in Phase 1 trade talks
* Kudlow insists China Phase 1 agreement is ‘fine'
* Customs and Border Protection to block imports of clothing from Chinese firm
* China's big economic pivot
* U.S. business skepticism about Phase 1 deal with China


U.S. food & beverage industry update:
* N.Y. attorney general suing Hillandale Farms
* Mexico’s new warning labels on junk food finding major opposition from U.S., EU


Update on re-opening America... and around the world:
* Chain stores and restaurants are moving out of Manhattan
* Big Ten and Pac-12 Conferences votes to postpone college football


Coronavirus update:
* New Zealand locks down

 

Politics & Elections:
* Biden selects Sen. Kamala Harris, 55, as his running mate
* Peterson to face former Lt. Gov. Michelle Fischbach in November
* Rep. Ilhan Omar wins bitter primary battle
* In Georgia, Marjorie Taylor Greene wins primary runoff
* Trump targets Mormons to win Arizona
* Poll shows Biden ahead in Pennsylvania


Other Items of Note:
* Agriculture producing more sulfur emissions than fossil fuels
* Seeds of discontent from Michigan senators
* USTR today to review European products on which to impose tariffs

 


MARKET FOCUS


 

Equities today: Global stock markets were mostly up in overnight trading and the U.S. stock indexes are also pointed toward higher openings.

 

     U.S. equities yesterday: The Dow fell 104.53 points, 0.38%, at 27,686.91. The Nasdaq declined 185.53 points, 1.69%, at 10,782.82. The S&P 500 lost 26.78 points, 0.80%, at 3,333.69.

 

On tap today:

 

     • USDA Crop Production and WASDE, noon ET.
     • U.S. consumer prices for July, due at 8:30 a.m. ET, are expected to have risen 0.3%.
     • Energy Information Administration weekly petroleum status report is due at 10 a.m.
     • Australia releases employment data for July. (9:30 p.m. ET)

 

U.S. exports of liquefied natural gas fell from a record of 8 billion cubic feet per day in January, to an average of 3.1 Bcf/d in July 2020, a drop of about 60%, the EIA reported Tuesday. During the week of July 12, only four vessels loaded U.S. LNG, carrying about 2 Bcf/d, the same levels as the second week of December 2016, before the U.S. became a major exporter. This summer, EIA forecasts U.S. LNG facilities will have utilization rates of 35%, compared to the normal in recent years of more than 90% during summertime. EIA expects U.S. LNG exports to remain low for a few more months before returning to normal by November as global demand has dried up due to the pandemic and Europe and Asia have a buildup of inventories.

 

Moody’s estimates states will need about $500 billion over the next two years to plug the budget holes. Without it, state and local spending cuts (primarily layoffs) will shave 3 percentage points off GDP over the next two years and cost 4 million jobs, they estimate. State and local governments spent or invested $2.33 trillion in 2019, equivalent to 10.9% of gross domestic product. They employ 13% of U.S. workers. State and local governments received $150 billion in the last major economic relief package, which was limited to coronavirus-related expenses. About 75% of the funds have already been allocated.

 

     State jobs

 

U.K. GDP plunged by a record 20.4% in the second quarter, equivalent to an annualized rate of 59.8%, notching the worst economic hit from coronavirus in Europe as well as reporting the highest death toll. Over the same period, the U.S. and Germany lost around 10% of their output, with Italy losing 12%, France 14% and Spain 19%. U.K. GDP (gross domestic product) expanded by 8.7% in June as government lockdown measures eased, having shown a meek 1.8% recovery in May following April’s 20.4% contraction. The second-quarter plunge is the worst on record and follows a 2.2% contraction in the first quarter. Analysts had expected a fall of 20.5%, according to a Reuters poll. Two consecutive periods of contraction mean the British economy is now in a technical recession.

 

     UK recession

 

     GDP compare

 

Market perspectives:

 

     • USDA’s August reports expected to show bigger corn, soybean crop pegs. Today’s focus is on USDA’s 11:00 a.m. CT release of its Crop Production and World Agricultural Supply and Demand Estimates. The report will include USDA’s first survey-based production estimates for corn, soybeans and cotton. But unlike previous years, the estimates will not include field-based assessments of yields. Analysts surveyed by Reuters expect USDA to raise its corn and soybean yield projections, pushing production to 15.174 billion bu. and 4.254 billion bu., respectively. Cotton production is expected to slide to 17.19 MMT. The department is also expected to raise its spring wheat crop estimate to 560 MMT, pushing up its all wheat production forecast. U.S. new-crop carryover will likely climb from July for corn, soybeans, and wheat, according to those surveyed. New-crop cotton ending stocks are expected to come down versus USDA’s July report.

 

     • FSA's monthly release of crop acreage data begins today, with the agency providing its update at 2 pm CT on information farmers have provided to the agency on planted acreage, prevented planting and failed acreage.

 

     • Iowa ag secretary indicates 40% of state’s farmland impacted by Derecho winds. Iowa Ag Secretary Mike Naig said Monday’s Derecho storm with hurricane-force winds may have impacted roughly 10 million acres of Iowa farmland and wiped out million of bushels worth of grain storage. Some say Naig is overstating damage. The ag secretary said some of the damaged corn will “still make a crop,” but its unclear how much of it will be able to be harvested. Assessments are underway to whether flattened crops will be able to stand back up. Iowa is the nation’s top corn producer and a top soybean producer, with the June Acreage Report showing 24.7 million acres planted to major crops in 2020. Iowa Governor Kim Reynolds issued a disaster proclamation in response.

 

     Some industry estimates for corn in the impacted area varies from 200 million to 300 million bushels. One veteran grain industry analyst says in his 40-plus years, he's never seen storm damage have a noticeable impact on the balance sheet, despite major impacts in some locations.

 

     • Gold suffered its biggest daily drop in seven years as risk appetite gained on a combination of U.S. President Donald Trump's comments on possible tax cuts, falling Covid-19 hospitalizations in some American states, and strong Chinese economic data. Gold plunged 4.6% on Tuesday to settle at $1,946.30/oz. for its steepest one-day dollar decline since April 15, 2013, and biggest percentage slide since March 13.

 

     • Other precious metals also took a beating, with silver down 11% - giving up all its gains since the start of August — and losses for platinum and palladium


     • The 10-year Treasury yield jumped the most since June ahead of an expected flood of debt issuance.

 

     • Lumber futures hit a record high amid Covid-driven demand for housing.

 

     • Crude oil prices were higher in Asian action after losses in U.S. trading Tuesday, with U.S. crude up 18 cents at $41.79 per barrel and Brent crude up 24 cents at $44.74 per barrel. Futures have strengthened further ahead of U.S. gov't inventory data due later this morning. U.S. crude is around 1.3% higher around $42.20 per barrel and Brent crude has also moved up around 1.3% to trade around $45.05 per barrel.

 

     • Capacity constraints have driven up rates for international shipments this year whether by sea, air or land. The cost of moving goods by ship has climbed 12% in 2020 to the highest in 5-1/2 years, according to the Drewry World Container Index.

        Shipment rates

 

     • Soft commodities are having a very solid summer. Supply constraints and investor bets on a recovering global economy are pushing a rebound in the market for raw ingredients for goods including chocolate and clothes, the Wall Street Journal reports (link), reversing the sizable drops in many commodities at the onset of coronavirus lockdowns. Consumer demand in much of the world “appears to be recovering, however, and that’s boosting confidence in goods like cocoa, coffee, cotton and sugar. Large supplier countries including Brazil and India have also been hard hit by the coronavirus. Traders believe that could lead to leaner supplies in the months ahead that will run up against pent-up demand from nations further into their recoveries, triggering higher prices. That could provide a jolt to a dry-bulk shipping market that has had a tough year, with weaker factory activity cutting into transport demand for major industrial commodities.”

        Softs

 

A voice from the past silenced by Covid-19. The singer and guitarist Trini Lopez relied on Mexican folk music, emphasizing his heritage at a time when many Latin performers kept theirs hidden. “I’m proud to be a Mexicano,” he said. He died of Covid-19 at 83.

 


POLICY FOCUS


 

More commodities will now be covered by the CFAP... Coronavirus Food Assistance Program... in response to public comments and data. USDA extended the deadline to apply for the program to Sept. 11. Link for details.

 

     Producers with approved applications will soon receive their final 20% payment... FSA will automatically issue that payment. Going forward, those who apply for CFAP will receive 100% of their total payment, not to exceed the payment limit.

 

Update on China:

  • Senior Beijing diplomat says he is ready to talk to U.S. leaders any time. Le Yucheng, China’s foreign vice-minister, says focus is needed to prevent the U.S./China relationship from spiraling out of control or getting derailed.
     
  • China to raise WeChat, TikTok in Phase 1 trade talks. U.S. and Chinese negotiators are set to discuss implementation of the Phase 1 trade deal in the coming days, with Beijing pushing for the recent measures targeting businesses including TikTok and WeChat to be on the agenda. A virtual meeting will likely take place as soon as this week though a date hasn’t been finalized. Along with agricultural purchases and the dollar-yuan exchange rate, which are among topics to be discussed, Chinese officials intend to bring up Trump’s prospective bans on transactions with the two apps on national security grounds, Bloomberg reports.

    The trade deal is “fine” and China is “substantially” increasing purchases of American goods, Trump’s top economic adviser Larry Kudlow said yesterday, dismissing concerns that rising tensions between the two countries might jeopardize the deal. The “one area we are engaging is trade,” Kudlow said at a White House press conference. “It’s fine right now.”

    Kudlow insists China Phase 1 agreement is ‘fine.’ China continues its purchases of U.S. commodities under the Phase 1 agreement signed Jan. 15 between the U.S. and China to start the year, with White House economic adviser Larry Kudlow telling reporters the deal is “fine.” Asked if deteriorating ties between the world's two largest economies on other fronts could result in the trade deal being thrown out the window, Kudlow said, "No, no." Despite the tensions between the two sides, Kudlow said the “one area we are engaging is trade.”

     
  • Customs and Border Protection (CBP) says it will block imports of clothing produced by a Chinese company and its subsidiaries based on suspicions that the products were made with prison labor. CBP will issue a “withhold release order” (WRO) requiring customs officials to detain garments and related merchandise manufactured by the Hero Vast Group. The agency has issued 11 WROs over the past year, including three others against China. One of those also targets clothing from China and two target hair products.
     
  • China's big economic pivot. With the world in recession and U.S./China tensions deepening, President Xi Jinping is laying out a major initiative​ to accelerate China’s shift toward more reliance on its domestic economy, the Wall Street Journal reports (link). In a series of speeches to senior government officials since May, Xi has trotted out the new strategy, translated as “domestic circulation,” prioritizing domestic consumption, markets and companies as China’s main growth drivers. Investments and technologies from overseas would play more of a supporting role.

    China exports

     
  • U.S. business skepticism about Phase 1 deal with China. Only 7% of companies who responded to the U.S.-China Business Council’s annual survey believe the gains from Trump’s Phase 1 deal with China outweigh the pain caused by the tariffs the president imposed. Another 56% said it was too early to say whether the strategy had been a success and 37% said they were already convinced it was not. The survey also found that only 16% of companies expected to take advantage of the Phase 1 deal’s dispute settlement mechanism if a problem arises. Many companies were worried about Chinese retaliation if they exercised that option.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Update on next aid package:

  • Aid talks still at impasse, but... U.S. stocks turned sharply lower before the close yesterday after Senate Majority Leader Mitch McConnell (R-Ky.) said stimulus talks are at a stalemate. However, McConnell encouraged both sides to return to the negotiating table.

Food and beverage industry update:

  • New York Attorney General Tish James is suing Hillandale Farms, one of the largest U.S. egg producers, alleging that the company illegally gouged prices during the pandemic. Link for details via Bloomberg.

    Eggs

     
  • Mexico’s new warning labels on junk food finding major opposition from the U.S. and EU. The Mexican standard, scheduled to take effect in October, will require front-of-pack nutrition labeling that clearly describes the health risks posed when those products are high in sugars, calories, salt, and saturated or trans fat. Link to details via Reuters.

Update on reopening America... and around the world:

  • Chain stores and restaurants are moving out of Manhattan. “There’s no reason to do business in New York,” said the CEO of a restaurant chain, as brands like Victoria’s Secret and Gap keep stores closed, and others move out entirely. This is a similar situation in other cities and parts of the world.
     
  • Big Ten and Pac-12 Conferences voted Tuesday to postpone college football and other fall sports because of the pandemic. Other college football conferences were expected to quickly fall in line with the Big Ten and Pac-12. But as of Tuesday night, the Atlantic Coast Conference suggests it's business as usual, in addition to the Southeastern Conference, Big 12 and American Athletic Conference.

Coronavirus update:

  • Summary: Source: Johns Hopkins University as of 7:00 a.m. ET.

    — 20,317,087: Confirmed cases world-wide, and 584,556 deaths
    — 46,808: New U.S. cases recorded yesterday
    — 5,141,208: Total confirmed cases in the U.S.
    — 1,074: Deaths in the U.S. recorded yesterday
    — 164,545: Total U.S. deaths
    — 63,252,257: Tests conducted in the U.S.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • New Zealand locks down. New Zealand reported four new cases of Covid-19 on Tuesday, breaking a 102-day streak without a single locally transmitted case, prompting Prime Minister Jacinda Ardern to put the capital of Auckland on lockdown. Residents will be asked to stay home, large gatherings will be banned, non-essential businesses will close, and some social-distancing measures will be reintroduced to the rest of the country. The new measures are due to go into effect today.
     

POLITICS & ELECTIONS


  • Links
    2020 Presidential Election Interactive Map
    The Green Papers

     
  • Biden selects Sen. Kamala Harris, 55, as his running mate. Harris, a former attorney general for California, would be the first Black and Asian American vice president and the first to graduate from a historically black college; she is only the fourth woman in history to be chosen for a presidential ticket. Joe Biden, 77 (78 on Inauguration Day), is the third Democratic nominee in this century to pick a rival from the primary as his running mate. The two are expected to appear together in a virtual fundraiser today and at events in Delaware in the days ahead. Biden described her as “a fearless fighter for the little guy, and one of the country’s finest public servants.” In her presidential primary run, Harris pledged to revive a culture of compromise in Washington and deliver the unfinished goals of the Obama administration. Harris knew Biden’s son Beau when he was attorney general of Delaware and Harris held the same job in California. Biden was also impressed by her work on the Senate Judiciary Committee, the campaign said. Her Jamaican and Indian heritage fits well in a party that is becoming more female and less White. Amy Walter of the Cook Political Report, on Fox News Tuesday, said “its really Donald Trump who needs the race to change... and it's hard to make Joe Biden into Hillary Clinton.” Harris initially endorsed Medicare for All and the Green New Deal as a presidential candidate, but she backtracked some when they began to look too extreme.

    On ag-related issues of note, Harris voted for the 2018 Farm Bill, but opposed the USMCA over environmental concerns. Harris also named labor and environmental concerns as prime reasons she wouldn’t support the Trans-Pacific Partnership (TPP), which Biden wants to alter before seeking U.S. entry. She was one of only 14 senators to vote against Bob Lighthizer’s nomination to be U.S. Trade Representative in 2017. “I am not a protectionist Democrat,” Harris said at the third Democratic presidential debate in September 2019. “Look, we need to sell our stuff. And that means we need to sell it to people overseas. That means we need trade policies that allow that to happen.” Harris' rural plan included cracking down on consolidation in agriculture; ending President Donald Trump’s tariffs; and curbing the use of biofuel blending waivers for oil refiners but proposed to reduce food waste by using more leftover food for biofuels. Harris supports expanding carbon credit farming.

    Harris has also said she would seek to end the Senate's filibuster rules, if necessary, in order to pass a Green New Deal — something Biden has signaled he might support. A fact sheet rom the Biden campaign pointed to Harris' actions to defend the Obama-Biden Clean Power Plan and New Source Standards while she was California attorney general, as well as her suits against big oil corporations like Chevron and BP.

    On the economic front, Harris is for a $15/hour minimum wage, advocated for closer regulatory scrutiny of Big Tech and has proposed taxing Wall Street trades and derivative transactions to pay for her Medicare for All healthcare plan. She has also promoted a tax credit for the middle-class (and rent relief).

    Harris

     
  • Peterson (D-Minn.) will face former Lt. Gov. Michelle Fischbach in November. Former Minnesota state senator and lieutenant governor Michelle Fischbach defeated four other candidates to win the Republican nomination in Minnesota's 7th Congressional District. As of 9:45 p.m. Central Time, Fischbach had received 59% of the vote, followed by Dave Hughes with 22%, and Noel Collis with 15%. Two other candidates each received under 3% of the vote. Rep. Collin Peterson (D-Minn.), chairman of the House Agriculture Committee, will face Fischbach in what is expected to be a close contest. “Who will stand with President Donald Trump to make our economy great again?” she said in a new campaign ad, expanding on President Trump's tweet endorsing her, pitching her as “the ally he needs and wants.”

    Peterson has represented the district since 1990. The 7th District is one of 30 districts currently represented by a Democrat which President Trump carried in 2016 and is the district where Trump had his widest margin of victory. Trump's margin over Hillary Clinton (D) — 30.8 percentage points — was nearly double the 15.5-point margin he received in New York's 22nd District, his next-best performance. Two election forecasters say the general election is a toss-up, and a third says it tilts in Peterson's direction.

     
  • Rep. Ilhan Omar (D-Minn.) won a bitter primary battle against Antone Melton-Meaux for Minnesota’s 5th Congressional District, an attorney with no previous political profile who has argued that the congressman's “divisive” approach to politics has been a setback for Minneapolis. The race decided whether the progressive lawmaker will serve a second term in office. Rep. Oma won Minnesota's 5th District handily in 2018. As of 9:25 p.m. Central Time, she had received 57% of the vote. Antone Melton-Meaux was second with 39%.
     
  • In Georgia, Marjorie Taylor Greene, a GOP candidate with ties to the QAnon conspiracy theory and a track record of incendiary rhetoric, won a primary runoff. That outcome leaves Greene well positioned to win a congressional seat in the fall. The race was called with 42% of precincts reporting, with Greene receiving 59.4% of the vote and Cowan following with 40.6%. Incumbent Tom Graves (R), who assumed office in 2010, did not seek re-election. Three election forecasters have rated the general election Safe or Solid Republican.
     
  • Trump targets Mormons to win Arizona. Vice President Mike Pence on Tuesday launched a campaign coalition aimed at winning over Mormons in Arizona for President Trump. Pence at an event in Mesa touted the Trump administration's record on abortion, judicial appointments, and the coronavirus pandemic.
     
  • Poll shows Biden ahead in Pennsylvania. New Emerson College polls of three battleground states show Biden ahead by a wide margin in Pennsylvania and close races in Arizona and North Carolina. In the Pennsylvania poll, 52% of likely voters supported Biden and 43% backed Trump, with 5% undecided. In the Arizona poll, 49% of likely voters supported Biden and 45% backed Trump, with 5% undecided. And in the North Carolina poll, 48% of likely voters supported Trump and 46% backed Biden, with 6% undecided -- a lead that was within the survey’s 3.8 percentage-point margin of error. The polls were conducted August 8-10, before Biden’s announcement that he’d chosen Harris as his running mate.
     

OTHER ITEMS OF NOTE


 

  • Agriculture producing more sulfur emissions than fossil fuels. Agricultural applications. of sulfur... as a fertilizer for crops and as a pesticide.. are producing up to 10 times the sulfur load seen during the peak days of acid rain pollution in the 1960s and 1970s, according to new research from scientists at University of Colorado Boulder and Syracuse University. The high levels of sulfur from agricultural uses raises concerns about whether it will have similar harmful effects as acid rain, said Eve-Lyn Hinckley, assistant professor of environmental studies at CU Boulder and lead author of the study. Studies of ag areas in California and Florida have found downstream effects from sulfur applications, including higher concentrations of toxic methylmercury (sulfur can convert mercury into its organic form) in fish, said Charles Driscoll, a civil and environmental engineering professor at Syracuse and co-author of the research. Higher concentrations of sulfur can also negatively affect wetlands, as is the case in the Everglades, and soil nutrients. What’s next: Hinckley and Driscoll said the next steps for research are to better characterize the effects of agricultural use of sulfur. They aren’t advocating for stopping the use of sulfur in farming but are hoping to determine in what quantities it should be used and how to curb the negative effects.
     
  • Seeds of discontent. Senate Agriculture Ranking Member Debbie Stabenow (D-Mich.) is pressing USDA, Customs and Border Protection and Postal Service leaders for more information about mysterious seed packets from China that have been delivered to recipients all over the country. In a letter with Sen. Gary Peters, the Michigan Democrats said it was “alarming that the seeds were able to enter the country in the first place.”
     
  • Today the USTR is expected to review the European products on which to impose tariffs, as part of a long-running dispute over aircraft subsidies. In late June the USTR proposed hitting imports including olives, vodka and chocolate and worth $3.1 billion in 2018. The tariffs are authorized by the WTO. The European Union claims to have withdrawn subsidies for Airbus, the bloc’s champion plane maker, and is eager to retaliate against American subsidies for Boeing, its arch-rival. WTO permission for those will come in September. But the Americans also claim that their subsidies have been withdrawn, and warn that if the EU applies tariffs, they will strike back once again.

 

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