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Bulk of US crop off to an excellent start

Marc Schober

Most farmers throughout the Corn Belt have been recipients of excellent weather that has led to faster than normal planting operations. As of June 7, 97% of the U.S. corn crop is planted and 89% emerged, and 86% of soybeans are planted and 67% emerged, according to USDA. Now that farmers are wrapping up planting, the focus has shifted to crop scouting, post emerge spraying, and FSA reporting, including signing up for the USDA COVID-19 relief program.

U.S. row crop

Although most farmers’ crops are ahead in planting and growth stage, some areas received far too much moisture this spring and prevent plant may be the only option for some fields, especially in portions of eastern North Dakota and northwestern Minnesota where fall field work was already delayed into May. In these same areas, emergence issues are also prevalent due to wet conditions during tillage before planting.

The regional dependent final planting date per crop insurance for corn around the Midwest started expiring in late May, leaving farmers who had not yet planted with a decision to take prevent plant or to make a switch to a later planted crop such as soybeans. If you are considering prevent plant, claims must be made within 15 days of the final plant date allowed in the area.

In-season inputs are on the decline. Ammonia prices, often applied to corn depending on growth stage and weather conditions, declined by $35.40 per ton according to ProFarmer. In addition, both farm diesel and LP prices decreased throughout planting season. ProFarmer’s regional prices as of early June are $1.39 per gallon for farm diesel and $1.15 per gallon for LP. Much of the U.S. corn crop was planted in an orderly fashion, which decreases on-farm risk of requiring high amounts of LP for drying come harvest.

FSA is now accepting Coronavirus Food Assistance Program (CFAP) applications as of May 26, 2020 and farmers who applied for a Paycheck Protection Program Loan are still eligible for CFAP. We urge farmers and ranchers to quickly apply through FSA. Payments are capped at $250,000 per person with separate restrictions for entity ownership structures and the payments are reportedly being paid within a few days of application approvals.

We highly recommend using the CFAP Payment Calculator to assist with the CFAP application process. USDA has created multiple tools on that can help with operation specific information.

U.S. livestock and dairy

COVID-19 is still causing issues up and down the ag supply chain, most notably in protein processing plants. Processing plants are periodically shutting down across the country since the outbreak, which has surpassed 10,000 cases linked to processing plants in early May. At its peak, upwards of 40% of meat processing plants were offline due to shutdowns, according to USA Today.

In beef and hogs, both supply chains are recouping from plant shutdowns. Although feeder cattle prices have declined 6% since March 1, farmers and ranchers are reporting much lower prices in sale barns due to localized supply chain issues. Hog producers have had difficulties finding a plant to take delivery of mature hogs amongst all the closures. Once mature, producers lose money feeding animals each day beyond the planned delivery and are eventually faced with the decision to kill-off a portion of their herd to save on unnecessary feeding costs.

Dairy prices have significantly rebounded off late April lows, primarily due to USDA purchasing $317 million in dairy products for the Farmers to Families Food Box Program, part of CFAP. The June contract of Class III milk is up 84% from late April lows to a contract high of $20.17 per cwt. The Class IV milk contract is up 35% to $14.08 per cwt.

Ground-level insights from ag bankers

Mike Vendsel, North Central North Dakota

The only negative feedback on CFAP signup has been due to online issues. Many farmers would like to apply in-person, but COVID-19 restrictions do not allow for this yet. We had an extraordinarily wet fall last year and that moisture caused us to be late with 2020 planting. I would say we are at least seven to ten days behind normal. Most farmers will finish up planting in early June and we will see some prevent plant acres, but it will be limited. Our sub surface moisture is very good. There is concern that the Blue Flint ethanol plant near Underwood, ND may close due to the eventual closing of the Coal Creek power plant, according to the Bismarck Tribune. Blue Flint uses the waste steam from Coal Creek in the refining process. Blue Flint consumes upwards of 23 million bushels of corn from producers in our region on an annual basis.

Steven Otto, West Central Minnesota

Both livestock and crop farmers are actively signing up for CFAP and consider the signup process to be easy. Spring planting went very well, considering the wet fall. Planting dates were ahead of 2019 planting dates and slightly ahead of historical average. Some area farmers have commented that this is one of the best starts to a crop they have ever seen. Corn on corn fields show some inconsistent stands, mainly due to germination issues resulting from less than wet tillage conditions, field residue, and lack of spring moisture to cover up some of those deficiencies. As a result of the dry spring, farmers were able to take care of some tiling projects prior to planting. First cutting of hay started and spraying for weed control. The COVID-19 pandemic has impacted poultry farmers in the area as they have agreed to delays in new flocks in order to let the processors catch up after COVID-19 forced closures at many plants. Potato farmers in the area have also been asked to reduce their 2020 crops due to loss of demand from the restaurant sector.

Jim Vrchota, Southeast MN and Western WI

All of my customers plan to sign up for the CFAP and the feedback has been that the program is relatively simple to apply for. Planting has been significantly better than in 2019 with most of the corn in and about 75% of the soybeans with no prevent plant acres to be heard of. Farmers are itching for the economy to recover and ethanol plants to return to average output levels. Their main concerns are around the prices of the 2020 crop.

Global ag

The Parana River System, the second largest in South America, is drastically low and causing major logistics issues in Argentina. 80% of Argentine ag exports flow down the Parana River, which is now at a 50-year low. Boat load weights are limited due to the shrinking water levels. The Brazilian second crop, often referred to the safrina crop, is starting to be harvested and as of June 5, Brazilian farmers are on an average pace. Brazilian harvest will significantly ramp up in July, but speculation is increasing regarding a lower than anticipated yield due to variable rainfall throughout the country.

The Brazilian Real had been losing value to the U.S. Dollar, but recently rebounded in early June, marking U.S. sourced soybean prices much closer to Brazilian sourced. U.S. sourced corn is currently cheaper than Ukrainian, but slightly higher than Argentinian in the world market.

What to watch for

Many factors affect the current commodity prices, but typically U.S. Corn Belt weather will garner the most attention as we enter the summer months. The short-term post planting forecast calls for slightly below average rainfall for most of the Corn Belt and nearly average temperatures. Corn prices have benefited from speculation of early drought conditions, but all can change with a single storm system.

On the demand side, keep a close eye on U.S. exports and especially to China. U.S. pork exports exceeded 2.0 million pounds in the first quarter of 2020 for the first time ever, according to USDA, with nearly 600,000 pounds to the Chinese. China pork producers are still recovering from the African Swine Fever outbreak. Additionally, Phase 1 of the U.S. and China trade agreement mandates $36.5 billion in purchases of U.S. ag products in the first year.

We will be watching the renewable fuel market throughout summer when U.S. gasoline consumption typically rises. U.S. ethanol production has been steadily increasing since a complete collapse in April. As of June 3, U.S. ethanol stocks significantly declined from 49 days’ worth of production to 29 days’ worth after the ramp up in April due to lost demand. We are optimistic of the rebound in ethanol fundamentals and hope production further increases to support U.S. corn farmers.

Marc Schober

About Marc Schober

Signaling deepened investment in its agriculture and agribusiness customers, Bremer Bank named T. Marc Schober to a newly created Director of Specialized Agriculture Solutions position in 2019. In this strategic role, Marc is responsible for identifying opportunities, services and solutions to serve Bremer’s agriculture customers in new and better ways. Marc’s expertise in agriculture and agribusiness from numerous perspectives is unique and offers an incredibly valuable insight for our customers. Marc's agriculture connections reach all the way back to southeastern Wisconsin, where he grew up on a small family farm. In addition to working as an editor for Farmland Forecast and co-authoring two books on investing in farmland, Marc spent a decade as a director at Colvin & Co. LLP, an asset management firm focused on agriculture.)

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