Evening Report | June 18, 2021

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Your Pro Farmer newsletter is now available… Risk-off trade amid more favorable weather forecasts pummeled many commodity markets the past week, with the Fed’s pulling forward of its interest rate hike timing pushing the dollar sharply higher. But it’s early in the growing season and long-term weather models signal more weather scares may lie ahead. You’ll find plenty of crop/weather coverage in this week’s newsletter, as well as the results of our June planted acreage survey. Access it here.

 

Reuters: China scoops up U.S. soybeans on price plunge… China’s state-owned importers bought at least eight cargos (480,000 MT) of U.S. soybeans, today, two traders familiar with the deal told Reuters. This marked the country’s biggest U.S. bean buys in 4.5-months and comes at a time when the country is typically sourcing the bulk of its bean needs from South America. Traders have signaled deals for as many as 14 cargoes of U.S. soybeans (840,000 MT) are being considered.

China is stocking up on feed supplies needed to rebuild its hog herd. Plus the combination of tight ending stocks, existing drought in northern and western areas of the Corn Belt and the forecast for heat and varied rainfall could have the country concerned about additional price increases.

Of note, rumors also circulated this morning that Asian buyers were buying some corn on the price break.

 

PF/Doane survey: Corn plantings led increases from March intentions… Results of the Pro Farmer/Doane June acreage survey signaled there were more acres planted to corn and soybeans than USDA estimated in March. But the results weren’t too different than what we found in our March survey. We project total corn and soybean plantings at a record 182.3 million acres, which is the exact total we estimated in March and would be up 8.4 million acres (4.8%) from last year and 2.0 million acres more than the 2017 peak.  

Our analysis of survey responses signals producers planted 93.6 million acres to corn this year, up 200,000 acres from our March survey but nearly 2.5 million acres more than USDA originally said were intended. The bulk of those extra acres beyond March intentions, 2.1 million acres, were planted in the 12 Midwest states, based on our survey work. Producers outside those 12 states indicated they planted only 356,000 more acres to corn than they originally intended, which is virtually a rounding error.

Producers in Iowa, North Dakota, Minnesota, Wisconsin and Michigan — states hit hardest by drought — indicated to us they planted a combined 900,000 acres more to corn than USDA estimated in March. Producers in Illinois, Indiana, Kansas, Missouri and Ohio also told us they increased their corn plantings by 100,000 acres or more versus USDA’s March intentions. 

Producers indicated to us they planted 88.7 million acres to soybeans this year, down 200,000 acres from what our March survey indicated but up 1.1 million acres from USDA’s spring estimate.

Soybean acres didn’t shift much from March intentions, especially in the 12 Midwestern states, where survey responses showed soybean seedings up a combined 350,000 acres. Outside of the Midwest, soybean seedings are expected to have increased 750,000 acres versus USDA’s March intentions, led by notable jumps in Arkansas and Louisiana.

In the Midwest, our survey indicated producers ramped up soybean seedings most compared with March intentions in Illinois, Missouri, Nebraska and South Dakota.

Our survey indicated producers seeded 11.3 million acres to other spring wheat this year, which would be down 440,000 acres from USDA’s March estimate. Producers told us they planted 1.6 million acres to durum, up around 70,000 acres compared with their original intentions. Our survey showed winter wheat acres at nearly 33.1 million, which would mean total wheat seedings of roughly 46.0 million acres. USDA’s March estimate of all wheat seedings was 46.4 million acres.

Our analysis of survey responses signal producers planted 11.9 million acres to cotton this year, down 100,000 acres from USDA’s March intentions. We found some Delta farmers reduced cotton seedings in favor of corn acres versus their original intentions.

Producers told us they planted 7.25 million acres to sorghum this year, up 310,000 acres compared with March intentions. That’s not a surprise given drought in areas of the Southern Plains when spring crops were planted.

Our survey also indicated producers planted 1.325 million acres to sunflowers, up 109,000 acres from USDA’s March estimate. Given drought conditions in the Northern Plains, this also isn’t surprising.

Producers in the South signaled they didn’t plant as much rice as originally intended. Our survey showed rice acres at 2.55 million, down 160,000 acres from March intentions. We project barley acres at 2.55 million acres, down just a fraction from USDA’s March estimate.

 

Major crops area increased 3.2 million acres from March… We project the area planted to the eight major crops — corn, soybeans, wheat, cotton, sorghum, barley, oats and rice — at 255.0 million acres. That would be up 3.2 million acres (1.3%) from USDA’s March intentions. Total acres planted to the big four crops (corn, soybeans, wheat and cotton) are expected to rise 9.9 million acres (4.3%) from last year to 240.2 million acres and would be up a combined 3.05 million acres from USDA’s March intentions.

Given strong price rallies into spring, we were shocked that USDA’s March planting intentions pegged all principal crop acreage at only 316.2 million acres. At that time, we projected total crops acreage at 318.4 million acres and our June survey confirmed where we originally believed total acreage would end up this year.

 

Rabobank also expects Brazil’s corn crop to fall short of 90 MMT… Rabobank now estimates Brazil’s corn crop at 89.5 MMT, a dramatic reversal from its 105 MMT forecast in April. An increasing number of private analysts now expect Brazil’s corn crop to fall short of 90 MMT, given the short safrinha corn crop. The analyst raised its Brazilian soybean crop forecast 1 MMT to 137 MMT.

 

Chinese officials are drawing up plans to further loosen birth restrictions… Chinese officials are drawing up plans to further loosen birth restrictions and transition toward policies that explicitly encourage childbirth. The government last month said it would allow up to three kids as the country's slowing birthrate and aging population becomes a concern
 

Biden between a rock and a hard place on RFS… The American Fuel and Petrochemical Manufacturers said in new projections this morning that Renewable Fuel Standard (RFS) compliance costs for 2021 could reach an all-time high, exceeding $30 billion. Democratic politicians from refining states, including the governors of Pennsylvania and Louisiana and Delaware Democratic Senators Tom Carper and Chris Coons, are asking the Biden EPA for relief. Labor unions, including the influential North American Building Trades Unions that Biden fought to win over during the campaign, are echoing those calls, saying the higher costs could force facilities to close and jeopardize jobs and fuel security.

Corn-state Democrats and biofuels groups, in their own push, say any relief the Biden administration would offer small oil refineries would be a giveaway to the fossil fuel industry. Renewable fuel advocates stress that production of ethanol and biodiesel — and RIN generation — will climb this and next year as the nation recovers from the pandemic. They argue that the response to high credit prices should be more biofuel blending and RIN generation — not government-lowered quotas

Bottom line: “Exempting refiners from their obligations to blend biofuel would mean increased reliance on oil and more carbon emissions — a result this country cannot afford if we are to meet our new commitment under the Paris Agreement to reduce emissions by 50%-52% by 2030,” more than a dozen corn-state Democrats wrote in a letter this week to EPA Administrator Michael Regan and National Economic Council director Brian Deese.

Whatever initial decision the Biden administration makes on the RFS will be closely scrutinized, and it will set the tone for the battle over the program that Biden will undoubtedly remain caught in the middle of, especially as the future of the RFS is less scripted by law after 2022.

 

ObamaCare (Affordable Care Act) survived another Supreme Court challenge… Four conservative justices — including the two newest, Amy Coney Barrett and Brett Kavanaugh — joined the three liberals. Texas and other Republican-leaning states sought to strike down the law on technical arguments after Congress reduced to zero the tax penalty for failing to carry health insurance. The Supreme Court concluded that none of the plaintiffs suffered any injury from zeroing out the penalty and thus lacked legal standing to bring the lawsuit at all. Republicans said their effort to rein in the Affordable Care Act through other cases would be more difficult following the Supreme Court’s ruling.

 

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