Alex Norton / Beeson Inc.
Each year at the start of May, a large group of volunteer crop scouts tour the state of Kansas to sample wheat fields and get a firsthand look at the winter wheat crop. The Wheat Quality Council's Hard Red Winter Wheat Crop Tour allows the market to preview the primary winter wheat growing state ahead of the May U.S. Department of Agriculture estimates for the new crop.
The Northern Plains and parts of the Corn Belt are unseasonably cold. Some major snowstorms were reported through the week which makes any planting difficult. Even in areas not hit by snow, cold soil temperatures prohibit planting. The U.S. Department of Agriculture's weekly reports confirmed these planting delays — spring wheat efforts are basically halted and corn progress was basically unchanged from the previous week at just 3 percent completion.
The winter wheat crop is not off to a great start this spring. The U.S. Department of Agriculture has started reporting weekly conditions for the national crop, and ratings keep dropping. Just 30 percent of the crop is rated good to excellent and 35 percent is rated poor to very poor. All through the winter, the Plains were in need of some precipitation to build soil moisture reserves for the spring. That really did not ever happen in a significant way, so when the crop emerged from winter dormancy there just was not a good stand in place.
China's response to U.S. tariffs was targeted and aimed at key agricultural products. Tariffs were placed on soybeans, some corn products and pork (among other agricultural items as well as automobiles and aircraft). This move was clearly meant to hit back at not just the U.S. as a whole but the farm economy that largely supported President Donald Trump during the 2016 election. Soybean exports from the U.S.
The U.S. Department of Agriculture released two of its biggest reports this week. The first is the Quarterly Grain Stocks report, which tracks physical supplies of major commodities. The second is the Prospective Plantings report, which is a survey-based report. It reveals farmers' intentions for the upcoming planting season.
Next week's U.S. Department of Agriculture reports on expected spring planted area and quarterly grain stocks are being overshadowed by fears of a trade war with China. Usually, the market is focused solely on weather and forecasting farmers' planting intentions, but President Donald Trump's metals tariffs and recent promises for more in the future are creating fears of retaliation from China. And these fears seem to be well-founded, as China responded this week by placing tariffs on what amounts to $3 billion of U.S. exports.
With the U.S. Department of Agriculture reports for quarterly stocks and planting intentions not due out until the end of the month, markets are looking at demand for some direction. This is not to say that current weather and forecasts for the spring are not influencing trade, but to emphasize the usage of many crops still matters as winter comes to a close.
We are not to new crop estimates from the U.S. Department of Agriculture yet and the fall-harvested crops are known. So the monthly World Agricultural Supply and Demand Estimates (WASDE) Reports from the USDA in the winter tend to be more focused on demand and production in South America. The March report was released on March 8 and while some changes made sense given recent market trends, there were a few estimates that made us scratch our heads.
With all of the activity in Washington, it can be hard to keep up with some of the less-covered agriculture policy stories. But this week, the Renewable Fuels Standard (RFS) has been front and center. In relatively short order, a complaint by Texas Senator Ted Cruz gained traction and led to not one, but two meetings of corn/ethanol and oil industry representatives with President Donald Trump.
Sometimes political discussions in the U.S. Capitol are largely ignored by agricultural markets. Other times, we see a very clear connection, requiring a good understanding of the discussion and potential outcomes in order to brace for the eventual price impact.