USDA Surprises With Corn, Soybean, Wheat and Cotton Projections
The U.S. Department of Agriculture (USDA) released their monthly crop production report and World Ag Supply and Demand Estimates (WASDE) on Thursday, catching many off guard. Joe Vaclavik with Standard Grain in Chicago, IL said “weekly crop ratings have led the trade to believe that fairly significant yield reductions versus July, would be printed in the report. (Instead) they surprised the trade with a minimal cut to the corn yield estimate and a fairly large increase to the soybean yield estimate – and no body in the world thought that was coming”.
Corn production, according to USDA, is forecast at 14.2 billion bushels, down 7 percent from last year. Based on conditions as of August 1, yields are expected to average 169.5 bushels per acre, down 5.1 bushels from 2016. If realized, this will be the third highest yield and production on record for the United States. Area harvested for grain is forecast at 83.5 million acres, unchanged from the June forecast but down 4 percent from 2016.
The domestic soybean production is forecast at 4.38 billion bushels, up 2 percent from last year. Based on August 1 conditions, yields are expected to average 49.4 bushels per acre, down 2.7 bushels from last year. Area for harvest in the United States is forecast at a record high 88.7 million acres, unchanged from the June forecast but up 7 percent from 2016. Planted area for the Nation is estimated at a record high 89.5 million acres, also unchanged from June.
As for all wheat production, at 1.74 billion bushels, is down 1 percent from the July forecast and down 25 percent from 2016. Based on August 1 conditions, the United States yield is forecast at 45.6 bushels per acre, down 0.6 bushel from last month and down 7 bushels from last year.
Finally, the all cotton production is forecast at 20.5 million 480-pound bales, up 20 percent from last year. Yield is expected to average 892 pounds per harvested acre, up 25 pounds from last year. Upland cotton production is forecast at 19.8 million 480-pound bales, up 19 percent from 2016. Pima cotton production is forecast at 770,000 bales, up 35 percent from last year.
Assessing the Pulse of the Next Farm Bill Debate
Thirteen agricultural economists put together short papers describing issues that will surface during the writing of the next farm bill. For each issue, the author describes the “policy setting” and details “farm bill issues” that likely will arise during negotiations. Each issue then has a “what to watch for” summary. Dr. Carl Zulauf (Ohio State University) writes regarding the Pulse of the Next Farm Bill
Historical Overview: Since 1933 the Farm Bill has been the preeminent federal social contract between U.S. society at large and the U.S. rural sector. Began almost exclusively to provide economic assistance to economically impoverished farm families, it has evolved into a multifaceted social contract touching almost every American, both rural and urban. It includes nutrition, commodity, and crop insurance titles that provide safety nets to low-income households, crop farms, and livestock farms. Goals such as environmental quality, research and extension, rural development, trade expansion, and bioenergy production are also promoted.
Budget Overview: A common presumption is that a tight budgetary environment will make negotiations on the next farm bill difficult. However, a tight budget can also facilitate negotiations by encouraging policy actors to work together, often to protect desired, existing programs. Moreover, budget developments are positive. The 2014 commodity and crop insurance programs are costing less than Congressional Budget Office forecasts, and an improving economy is reducing spending on SNAP (Supplemental Nutrition Assistance Program) and other nutrition programs. Nutrition programs make up over 70% of Farm Bill spending. In addition, the on-going, post-2014 farm bill debate over cotton and dairy policy may be resolved via the appropriations process, offering a potentially larger budget baseline for commodity programs. In short, the budget may end up being less of a constraint than has been largely portrayed in the run up to the farm bill debate.
Issues Overview: The next farm bill is being framed by (1) lower farm prices and revenue than when the 2014 Farm Bill was written, (2) a 2016 election underscored by a disaffected American rural sector, and (3) President Trump’s focus on trade as a front-line issue. Point 1 implies that redistribution of spending from farm safety net programs to other farm bill titles is unlikely. Point 2 implies programs targeted to the non-farm rural sector could be a defining feature of this farm bill, particularly given that the next farm bill likely will be written in an election year. While the President’s perspective on trade has caused concern, American agriculture has come to embrace a refocus on trade expansion given a mature domestic market for food and a bioenergy market that appears to have less potential than when the last three farm bills were written. The refocus on trade is also prompting discussions on the role of research and extension, particularly as it pertains to productivity.
Summary: All farm bills are a portfolio of past and new programs and issues. The blend varies by farm bill. This farm bill looks to tilt toward continuation or limited modification of past programs and issues covered. However, an intriguing set of new issues or new perspectives on past issues also exist.
More information is available here: http://farmdocdaily.illinois.edu/2017/07/assessing-the-pulse.html
Iowa and Nebraska Governors Ask EPA to Pump Up Advanced Biofuels
On Tuesday, Iowa Governor Kim Reynolds and Nebraska Governor Pete Ricketts asked the Environmental Protection Agency to increase the amount of biomass-based biodiesel and cellulosic ethanol in its final biofuels rule. The Renewable Fuel Standard proposed by the EPA in early July would keep conventional ethanol at the statutory maximum of 15 billion gallons next year, drop the level of cellulosic biofuel 73 million gallons to 238 million gallons in 2018 and maintain the biomass-based diesel standard for 2019 at the 2018 levels of 2.1 billion gallons. The two Republican governors were joined in support from Senator Joni Ernst (IA-R).
They told a panel of EPA staff that companies had the capacity to produce far more than the 2.1 billion gallons the agency proposed. The group also asked EPA to increase cellulosic volumes, which EPA proposed to reduce by 23 percent in 2018. All three praised the EPA for getting a proposal out approximately on time, a dig at the Obama administration, which missed deadlines so badly it set requirements for 2014 and 2015 in conjunction with a rule for 2016. They were also pleased that the agency kept conventional biofuels, typically filled by corn-based ethanol, at the maximum level.