Evening Report | Aug. 5, 2021

Click here for weekly export sales charts and here for report highlights.

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Drought worsens ‘significantly’ in Minnesota and northern Iowa… Conditions were mixed for the Midwest the week ended Aug. 3, with heavy precipitation again favoring southern and eastern areas of the region, with little to no rain in the Upper Midwest. “Conditions deteriorated significantly across Minnesota and northern Iowa, most notably in several large patches in Iowa and adjacent Minnesota, where extreme drought (D3) was introduced,” today’s U.S. Drought Monitor update says. Even in the wetter areas, rainfall was too light to produce notable changes, with the exception of western Wisconsin, eastern Michigan and some isolated areas.

As of Aug. 3, 74.9% of Iowa was dealing with abnormal dryness or drought, with 33.5% of the state classified as being in severe (D2) or extreme (D3) drought. Ninety-nine percent of Minnesota is dealing with abnormal dryness or drought, with 35.1% of the state classified as being in extreme (D3) drought — a 13-point jump from the week prior. Missouri and eastern areas of the Corn Belt are largely drought-free.

Rains fell from the Southwest as far as eastern Nevada, southern Idaho, southern and western Wyoming and western Colorado, but totals were not enough to significantly improve dryness and drought from the Plains eastward. “Conditions deteriorated in several areas where there was little or no rainfall, specifically the Northern Plains from eastern Montana through western Minnesota, from central Kansas and adjacent Colorado northward into Nebraska, across northeastern Arkansas, over the central Virginias, and in the climatologically dry areas of the Far West,” today’s summary says. In North Dakota, exceptional drought (D4) expanded “substantially to cover much of the state’s interior,” today’s Drought Monitor noted. Find related maps here.

More firms expect a sub-trendline corn yield… IHS Markit Agribusiness (formerly IEG Vantage) projects the U.S. will produce a 14.911 billion bu. corn crop with an average yield of 176.5 bu. per acre, based on the firm’s survey work. Linn & Associates today estimated the U.S. corn crop at 14.794 billion bu. on a national average yield of 176.16 bu. per acre. Earlier this week, StoneX projected the U.S. would produce a 14.945 billion bu. crop on an average yield of 176.9 bu. per acre. USDA in July projected a 15.165 billion bu. crop on a trendline yield forecast of 179.5 bu. per acre.

The U.S. soybean crop will likely yield an average of 51.5 bu. per acre for a 4.464 billion bu. crop, says IHS Markit. Linn & Associates estimates the soybean crop at 4.284 billion bu. on a yield of 49.5 bu. per acre. Yesterday, StoneX pegged the U.S. soybean crop at 4.332 billion bu. on an average yield of 50.0 bu. per acre. USDA’s trendline yield forecast of 50.8 bu. per acre projects to a 4.405 billion bu. crop.

USDA’s first survey-based corn and soybean production estimates will come Aug. 12.

Argentine strike suspended, for now… Operations are reportedly back to normal at Argentina’s Bahia Blanca port as a five-day trucker protest came to an end. “The strike has been lifted. Trucks with grain are entering. Normality has returned," said Carlos Sosa, a member of the board of the Bahia Blanca Port Management Consortium. But he adds that the strike may resume in 72 hours if truckers’ demand regarding wages and other requests are not met.

U.S. trade deficit surged to record in June as imports shot higher... The U.S. registered a record trade deficit in June of $75.7 billion, more than the expectations for $74.2 billion in trade red ink and up from $71.0 billion in May. The 6.7% rise came as imports rose 2.1% at $283.4 billion, reflecting an improving U.S. economy. Oil imports were also up at higher values, helping to build the deficit. The rise in imports easily overshadowed the 0.6% increase in exports to $207.7 billion, still shy of pre-pandemic export marks.

This puts the U.S. on track to set a new record deficit in 2021. The increased trade deficit is somewhat of a double-edged sword in that exports still are struggling but it signals that the U.S. economy remains on an upward path given the stronger demand for imported goods, a typical development as the U.S. economy improves.

The U.S. registered an ag trade deficit of $1.98 billion for June. Imports of ag goods at $14.97 billion outpaced the $12.99 billion of such products the U.S. exported during June. Exports slowed from May while imports climbed, pulling the trade balance into the red.

Former House Ag Chair Peterson sounds off on permanent disaster funding… Former House Ag Chair Collin Peterson noted the potential downside of creating a permanent disaster assistance program for producers. Speaking on a panel at Minnesota’s Farmfest Wednesday, Peterson said it’s important that the program not undermine crop insurance. “I’m afraid it is going to come back and haunt us,” Peterson said about extending disaster aid programs like WHIP+, saying he is concerned about four years of disaster payments that aren’t paid for by farmers. 

In the next farm bill, Peterson says crop insurance needs to be improved to cover more crops and allow producers to buy the protection they need to get through years such as this one, with drought or other weather events over large portions of the country and flooding in the South. “We’re going to have four years of disaster payments; they’re not paid for, and the farmer is not actually contributing to it.” Peterson says that means the next farm bill will need to cover more crops.

Peterson says the biggest policy item the ag committees is tackling is establishing a carbon program, which will be very complicated. “We’ve got to figure out what the hell we’re doing,” Peterson said, adding more research funding is needed to understand how this improves the climate while also helping producers.

Meanwhile, Minnesota Governor Tim Walz said he's open to the idea of a special session to provide drought disaster assistance to the state's farmers. In the meantime, he's been pressuring the Biden administration to provide farmers with more flexibility on how they can use land that's been set aside in conservation reserve programs. During a teleconference with the president and other governors last week, Walz talked about the drought conditions gripping the state. "The president seemed genuinely surprised to hear about it because you’re not seeing in the other farm states. He’s hearing about wildfires and grazing. He said it seems so strange that the land of 10,000 lakes is in severe drought."

USDA to issue two new reports to improve cattle pricing transparency… USDA announced that beginning Monday, Aug. 9, it will issue two new market news reports based on Livestock Mandatory Reporting (LMR) data. These two new reports will include the following:

• The National Daily Direct Formula Base Cattle Reports will enable stakeholders to see the correlation between the negotiated trade and reported formula base prices, as well as the aggregated values being paid as premiums and discounts. Daily formula base price reports will be national in scope and released in morning, summary and afternoon versions. The weekly and monthly formula base reports will be both national and regional in scope and include forward contract base purchase information.
• The National Weekly Cattle Net Price Distribution Report will show at what levels (price and volume) trade occurred across the weekly weighted average price for each purchase type — negotiated, negotiated grid, formula and forward contract. Currently, the market speculates whether large or small volumes of cattle trade on both sides of the price spread. And in fact, with premiums and discounts applied to the prices, the spreads shown on reports can be wide. Publishing a price distribution for all cattle net prices will offer more transparency to each of the purchase type categories. This report is a window into what producers are paid for cattle (net) and retains confidentiality by segregating volumes purchased in $2.00 increments +/- of the daily weighted average price depending upon premiums and discounts. USDA’s Ag Marketing Service has published a similar net price distribution report for direct hogs since January 2010.