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China Stopping Buys of U.S. Ag Complicates Soy Market

4 years, 7 months ago AFBF

Brazil soybean prices are increasing after China halted purchases of U.S. agricultural products. However, the jump has Chinese buyers shying away from purchases, according to Reuters. Brazilian soybean prices climbed to $400 a ton, including cost and freight, up $20 from a week ago. The increase is the result of China stopping purchases of U.S. agricultural products as part of the tit-for-tat trade war sparked by the United States. China is the world's biggest importer of soybeans, primarily used to feed the world's largest hog herd. However, that too is complicating the market as traders are unsure of the long-term impact African swine fever will have on demand. Before China announced its stoppage of U.S. purchases, soybean sales from the U.S. to China were approaching year-ago levels. Last year, China imported $9 billion worth of U.S. agricultural products, less than half of the near $20 billion imported in 2017. The U.S. Department of Agriculture, before China's announcement, predicted China would import 85 million metric tons of soybeans in 2019, down from 94.1 last year.

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Crop Prices Give Slight Boost to Weak Farm Economy

The Kansas City Federal Reserve Bank says farm income and credit conditions show signs of stabilizing. In its second quarter survey of farm lending conditions, the bank says higher corn prices and trade relief payments could have contributed to a slower pace of decline in expectations for farm income and credit. Although farm income was is expected to decrease in the third quarter of 2019, the pace of decline is expected to be the slowest since 2014. Slightly more than 40 percent of bankers reported that farm income was lower, compared with almost 75 percent and 60 percent at the same time in 2016 and 2017. In addition, district bankers reported that deposits grew at a faster pace in some states while farmland values remained steady. Demand for agricultural lending in the district remained high, but bankers anticipated slower growth in future months. The 10th District includes Parts of Missouri and New Mexico, along with Colorado, Kansas, Oklahoma and Nebraska. It is the second-largest Federal Reserve district.

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Peterson: Farmers Don't Want to Get Their Revenue From the Government

Its clear farmers are frustrated with the many forces beyond their control, following a listening session in Minnesota. Agriculture Secretary Sonny Perdue didn't receive a warm welcome during Minnesota's Farmfest this week. Hosted by House Ag Committee Chair and Minnesota Democrat Collin Peterson, Perdue got an earful from farmers questioning farm bill programs and trade. Peterson says one thing was clear: "farmers don't want to get their revenue from the government." However, he says the federal government has a responsibility "to make sure folks aren't left behind as a result of forces beyond their control." There are many forces farmers are struggling with right now, from low income, trade retaliations, adverse weather and an increase in farm bankruptcies. 2019 will undoubtedly go down as one of the most stressful years to be a farmer. Peterson says there is "still a lot of work to be done," to help farmers, adding he will continue to do everything possible to help, along with Secretary Perdue.

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Drought Emerging in Some Midwestern States

It's hard for many in the Midwest to believe 2019 could turn into a drought year following the wet spring and delayed planting. However, the latest Drought Monitor shows parts of Iowa, Illinois and Indiana on the brink of a drought, following the nations wettest 12-month period on record. It's important to note the Midwest Region of the Drought Monitor is 84 percent drought-free, but that's down from 91 percent last week, and 100 percent three months ago. Any classified drought in the Corn Belt adds additional stress to farmers and their crops, with most fields planted late and slow to mature. A late harvest season is expected this year, with growing fears of frost damage. Meanwhile, there are classified drought areas in Oklahoma and Texas. The data shows 45 percent of Oklahoma is classified as a drought area, mainly central to western Oklahoma. Central and West Texas make up most of the drought area of the state, accounting for 46 percent of land area.

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NCGA, ASA Urge President to Support Renewable Fuel Standard

The National Corn Growers Association and American Soybean Association are jointly urging the Trump administration to support the Renewable Fuel Standard. NCGA President Lynn Chrisp and ASA President Davie Stephens penned an editorial this week, urging Trump to uphold his commitment to America's farmers and the RFS. Since early 2018, the Environmental Protection Agency has granted 53 RFS waivers to big oil companies, "undermining the RFS and reducing corn and soybean demand." EPA has an additional 38 waiver petitions pending. The two leaders say the waivers "have resulted in an estimated $2 billion in economic harm each year to the U.S. biodiesel industry." They allege the waivers run counter to President Trump's much-touted support for America's farmers and renewable fuels. Additionally, Chrisp and Stephens say the disruptions in the renewable fuels market could not come at a worse time for agriculture, noting the complicated growing season and uncertainty in markets stemming from trade disputes. The leaders call on Trump to order the EPA to "not undermine the RFS."

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Grassley, Tester Urge USDA to Defend Small Livestock Producers

A letter from ag-state senators urges the Department of Agriculture to provide protections for livestock and poultry farmers against unfair and deceptive practices by meatpackers. Senators Chuck Grassley of Iowa and John Tester of Montana, calling themselves the only farmers in the Senate, outlined key to help farmers compete with large corporations. The comments come as USDA begins to clarify rules within the Packers and Stockyards Act. Grassley and Tester are requesting USDA protect farmers from retaliation when they express concerns to USDA or Congress, clarify that the law does not require a demonstration of harm across the entire industry, defend small producers against preferential marketing agreements for large livestock producers, and provide security and transparency within the system used to pay poultry growers. The 2018 Farm Bill required USDA to issue regulations clarifying aspects of the Packers and Stockyards Act, providing protections to family farms. This spring, USDA announced that it would be clarifying the rules in the fall, though no other announcements have since been made.

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Official actions and statements have led to dire predictions of an extended trade war with China. But not all forecasts out of official D.C. are dire.

The recent U.S.-China trade war escalation is fueling predictions the fight costing U.S. agriculture billions, won't end 'til after the next U.S. election.

But the other side of the coin is more hopeful. President Trump's trade advisor Peter Navarro told Fox News…

"These things need to happen behind closed doors…whatever you hear out there in the 'hype-land,' discount that. The only thing that matters is what happens with Bob Lighthizer and Steve Mnuchin, in the room with their counterparts, and the president actively involved …that's the way to success."

Navarro was referring to Treasury Secretary Mnuchin and U.S. Trade Ambassador Lighthizer, recently back from meetings in China.

American Farm Bureau trade adviser Dave Salmonsen says the question now is if the new trade friction is a prelude to a deal, or no deal…

"Whether these are pressure points that are being developed…ways for either side to get leverage in negotiations, or whether this settles into a longer contest."

The two-sides are still set to meet again in September. President Trump says the Chinese want a deal "badly." The Chinese say they're not afraid to fight the U.S., and have ordered state-owned firms not to buy U.S. farm goods.

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