DTN Ag Headlines

OMAHA (DTN) -- JBS has reached a settlement in an ongoing class-action lawsuit that alleges JBS, along with several other large meat companies, conspired to raise the price of pork.

According to the settlement preliminarily approved by the U.S. District Court for the District of Minnesota last week, JBS will pay $24 million in monetary relief and agrees to cooperate with the direct purchaser plaintiffs in the case against other pork companies.

Other defendants in the case include Agri Stats Inc., Clemens Food Group LLC, Hormel Foods Corp., Indiana Packers Corp., JBS USA, Seaboard Foods LLC, Smithfield Foods Inc., Triumph Foods LLC, and Tyson Foods Inc.

In 2018, several plaintiffs alleged in a complaint that the companies entered into a conspiracy from "at least 2009 to the present to fix, raise, maintain and stabilize the price of pork. The principal (but not exclusive) method by which defendants implemented and executed their conspiracy was by coordinating their output and limiting production with the intent and expected result of increasing pork prices in the United States."

The settlement class covers anyone who bought pork directly from JBS or other defendants in the lawsuit, starting on Jan. 1, 2009, and continuing to the date of the settlement.

According to the complaint filed in 2018, the plaintiffs alleged a conspiracy among the defendants.

"To effectuate and ensure the stability of their price-fixing agreement, defendants relied on a unique industry data-sharing service known as Agri Stats," the complaint said.

"Agri Stats provided a means for defendants to obtain and monitor critical and competitively sensitive business information regarding each other's production metrics, thereby serving as a central and critical part of defendants' price-fixing scheme, resulting in a remarkably stable and successful anticompetitive cartel."

The plaintiffs pointed to increased concentration in the pork industry as "an ideal zone for collusion."

"Because the industry was dominated by a relative handful of integrators, it was feasible to manipulate price through an agreement among the relatively few dominant players, whose market power greatly simplified the organizational complexity of the price-fixing agreement," the complaint said.

"Further, because none of the largest producers were capable of independently controlling price through their own production, such an agreement was necessary to inflate price."

The lawsuit alleges the industry began showing in 2009, "abnormal price movements. According to aggregate prices published by the USDA, the hog market year average price was at or below $50 every year between 1998 and 2009, before increasing to $76.30 in 2015."

In addition, the lawsuit said pork prices continued to rise into 2018.

"In 2009, 2010, and again in 2013, the pork industry cut production," the lawsuit said.

"The production dip in 2014 reflected the adverse impacts from the deadly pig disease, porcine epidemic diarrhea virus, which took place in the spring and summer of 2014. The decreases in production largely occurred after decreases in pork wholesale prices."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

OMAHA (DTN) -- President-elect Joe Biden on Monday nominated Virginia Department of Agriculture and Consumer Services Commissioner Jewel Bronaugh as deputy secretary of USDA.

Bronaugh, who holds a doctorate in career and technical education from Virginia Tech University, brings to USDA an extensive career working with Extension programs and has served as a 4-H Extension specialist. If confirmed, Bronaugh would serve as Vilsack's second in command at USDA in the Biden administration. Bronaugh would also be the first Black woman to serve as USDA deputy secretary.

"She is passionate about the advancement of youth leadership in agriculture," the Biden transition team stated.

Bronaugh has served as commissioner for the Virginia Department of Agriculture and Consumer Services since May 2018 but had previously served as Virginia's state executive director for the USDA Farm Service Agency, appointed by then USDA Secretary Tom Vilsack in 2015. Before leading Virginia's FSA offices, Bronaugh was dean of the College of Agriculture at Virginia State University (VSU) and oversaw extension, research and academic programs.

On Twitter, Bronaugh stated, "Thank you everyone for the well wishes. And, thank you @PresElectBiden for the opportunity to promote U.S. agriculture, helping to end hunger in the U.S. and abroad and preserving our Nation's natural resources. @transition46 @KamalaHarris"

Biden's transition team highlighted that Bronaugh launched the Virginia Farmer Stress Task Force with agricultural and health groups and agencies "to raise awareness and coordinate resources to address farmer stress and mental health challenges in Virginia." Last fall, Bronaugh also helped create the Virginia Food Access Investment Fund, a program to address food-access issues within historically marginalized communities, the transition team noted.

Zippy Duvall, president of the American Farm Bureau Federation, congratulated Bronaugh on her nomination.

"Dr. Bronaugh's work as Virginia's Agriculture commissioner and her previous experience as state director of USDA's Farm Service Agency have established her as someone who understands the needs of America's farmers and ranchers," Duvall said. "We also appreciate the work she has done to address mental health issues in rural communities -- a priority we hope she continues to pursue at the federal level."

Sen. Debbie Stabenow, D-Mich., the ranking Democrat on the Senate Agriculture Committee, said, "Dr. Bronaugh's background in farm services, research, and extension will bring a breadth of knowledge and experience to the Department," Stabenow said. "As the first woman of color to serve in this position, she will be an important voice as the Biden Administration works to address the many challenges facing our farmers, families, and rural communities. I look forward to learning more about her plans and priorities during the confirmation process."

While some Biden nominees will have confirmation hearings Tuesday, the Senate Agriculture Committee has not scheduled a hearing for Vilsack so far. Both Vilsack and Bronaugh will need to be confirmed by the U.S. Senate.

Bronaugh was one of five women nominated by Biden on Monday to serve as deputies in Cabinet posts. Other deputy nominees were named for the departments of Transportation, Health and Human Services, Interior and Education.

Progressives had criticized Vilsack's nomination to return as USDA secretary and called for Biden to nominate a woman of color as his deputy. Former USDA Deputy Secretary Kathleen Merrigan noted on Twitter of Bronaugh's nomination, "Of the 15 major cabinet departments at start of Obama, I was one of only two female deputy secretaries, by law the COOs of the departments. Today Pres-elect Biden nominates five women for deputy, including @VaAgComm Dr. Jewel Bronaugh for USDA. Oh happy #MLKDay!"

Bronaugh will replace Steve Censky as deputy secretary. Censky left USDA in November to return to his former job as CEO of the American Soybean Association.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

OMAHA (DTN) -- With President Donald Trump's time in office coming to a close, U.S. farmers will remember a president who spoke to them and for them more often than any other president in modern history.

Trump's policies on issues such as trade, energy, the environment and immigration heavily influenced farm prices, leading at times to criticism of the president's decisions. But the vast majority of farmers, who Trump often described as "our great, patriot farmers and ranchers," supported him throughout his tenure.

Trump spoke three straight years at the American Farm Bureau Federation annual meeting and multiple times had events at the White House that included several agricultural leaders. But it was Trump's Twitter feed where a condemnation of China's trade practices or complaints about Canada's dairy policies could send markets up or down. Trump also used Twitter to announce his administration would provide more new aid to farmers and approve year-round E15 sales.

The president leaves office with 2020 net farm income at the highest level since 2013, due heavily to direct government payments that will average just under 40% of overall farm income nationally. Still, commodity prices -- especially for major crops such as corn, soybeans and wheat -- also now are at sustained price levels not seen since 2014.

"Well, nothing like $14 soybeans and $5 corn to make you feel better about life," Ben Riensche, a farmer from Jesup, Iowa, said of the current market conditions.

Riensche said Trump brought to the presidency the perspective of someone who had run a business rather than a career in politics. He also offered an outsider mentality to the presidency. Riensche also noted that, when farmers were polled about their support for President Trump, their support often went beyond agricultural issues.

"We felt we were underrepresented, and that all of these other issues -- tax issues, border security, socialization -- all of these other things are ideals we farmers share," Riensche said. "And it wasn't just the ag issues that impacted us, it was the ideology of this president. You're looking at a group that would like to be very self-sufficient and would like to make their wherewithal by the sweat of their brow and the view that private enterprise makes things great."

Others on Twitter, responding to a question from DTN, pointed out Trump and his administration stopped the Obama-era EPA waters of the U.S. (WOTUS) rule. The president was popular for reducing other regulatory burdens and cutting taxes.

But Trump's policies -- especially on trade -- drew criticism from other farmers who said Trump's tariffs and negotiating tactics did more harm than good. Tariffs were placed on aluminum and steel imports, for starters, even from close allies.

"He definitely did what he said he was going to do," said Tom Miller, a former commodity manager at a northwest Iowa ethanol plant who now does market consulting for farmers. "And it just ended up hurting bad -- all of these tariffs and everything. You could just see the market come down, due to the export business and everything. Then, USDA was handing out money to help, but it didn't solve the problem."

Miller added, "He's partially responsible for the market rally that we've seen here. I think China depleted their reserves, and they needed to come back to the table. So, at the end of the day, maybe it worked, but it just seems like there was a lot of suffering to get there."

Early in his time in office, Trump considered pulling out of the North American Free Trade Agreement (NAFTA) altogether. Agriculture Secretary Sonny Perdue used an electoral map showing "Trump country" to explain to Trump that withdrawing from NAFTA would hurt his farmer base. Eventually, NAFTA became the U.S.-Mexico-Canada Agreement (USMCA) that went into effect last summer. USMCA could increase agricultural exports by about $2 billion to Canada and Mexico, or about a 5% bump from last year's sales of $40 billion in sales between the two countries.

Trump's trade moves sparked groups such as Farmers for Free Trade and Rural America 2020 to crop up, with each group looking to challenge some of Trump's trade moves without alienating other farmers who supported the president.

Harold Shaulis, a former dairy farmer from Somerset, Pennsylvania, has been heavily involved in dairy trade promotion and was a board member for Dairy Management Inc., the dairy checkoff program. Shaulis noted most farmers disagree with him, but Shaulis said he thinks Trump "did a terrible job," especially when it comes to trade policy.

"We worked for decades trying to come up with these trade agreements, and with a stroke of one of his magic Sharpies, he gets rid of everything we've worked for," Shaulis said. "It sends a message to all countries that we are not a reliable source of product. We have the quality and we have the quantity -- the supply, price, everything that you need to compete globally -- but when you determine yourself to be an unreliable sources, based on the whims of one person, you can wreak havoc with trade."

Few areas demanded more attention from Trump and his relationship with farmers than the trade war with China. The trade deficit with China was a big focus of Trump's 2016 campaign -- though China had become the top U.S. market for agricultural products by that time. In 2018, Trump began demanding change in the relationship, banning high-tech Chinese companies and slapping tariffs on Chinese imports. China responded in kind, which included not just putting tariffs on U.S. agricultural products but effectively banning purchases of most major commodities.

Angry when trade talks collapsed in May 2019, Trump tweeted that higher tariffs would generate more wealth and it would be good for farmers. "Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!"

The trade dispute ended a year ago with the signing of the Phase One Trade Agreement, which called for China to buy more than $36 billion in agricultural products over the first year. Trump's deal with China went way beyond agriculture, but he spoke more about the farmer benefits than anything else.

"I said 'I love our farmers. Let them tell me they can't do it.' I said. 'Tell them to go out and buy a larger tractor. Buy a little more land.' But I have no doubt they will be able to do it," Trump said at the signing ceremony last year.

The phase-one deal, though, came just as the coronavirus hit, effectively slowing down trade and the global economy. Through November, U.S. agricultural exports to China topped $21.7 billion, up 77% from a year earlier when agricultural exports to China were $12.25 billion. Over four full years, farm exports to China were higher before Trump took office. From 2013-16, the U.S. sold $91.64 billion in ag products to China, compared to $76.45 billion from 2017-2020, an overall decline of 16.6%. That gap will narrow some once the federal government updates December export totals.

Trump, Perdue and his team were effective at helping offset some of the trade losses with programs such as the Market Facilitation Program to provide aid that responded to retaliatory tariffs and loss of markets.

Riensche said Trump and his cabinet members -- Perdue and Treasury Secretary Steven Mnuchin -- won't get the credit they deserve for helping farmers and other businesses cash flow through the spring and summer through the array of government programs such as the Paycheck Protection Program loans and USDA's Coronavirus Food Assistance Program (CFAP).

"The linkage may not have been perfect on how payments were figured and awarded, but without the cash, food producers would have largely gone cash insolvent," Riensche said. "Non-farmers fail to realize how dangerously close we were to having a domestic and international food supply crisis."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

Editor's Note: This story was updated to clarify AgVend is not a party to lawsuit, even though the lawsuit uses the company as an example.

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MT. JULIET, Tenn. (DTN) -- A new lawsuit alleges crop input manufacturers, wholesalers and retailers coordinated a boycott of online sales platforms such as Farmers Business Network and AgVend to prevent greater price transparency, a move the lawsuit argues amounts to collusion to keep prices artificially high in violation of antitrust laws.

The lawsuit, which seeks class-action status, was filed in the U.S. District Court for southern Illinois by Barbara Piper on behalf of her late husband's estate. Michael Piper, who farmed near Mt. Vernon, Illinois, died in 2017. The lawsuit argues that Piper paid more for Liberty herbicide than what would have been a sustainable price in a genuinely competitive market, just like many other farmers across the country.

Fourteen defendants are named in the legal filing, and among them, crop input manufacturers such as Bayer Crop Science, Corteva, Syngenta and BASF. The lawsuit alleges large wholesalers, particularly Cargill, Winfield Solutions and Univar Solutions, were complicit in anti-competitive practices along with retailers, including CHS, Nutrien Ag Solutions, Growmark, Simplot, Tenkoz and Federated Co-operatives.

DTN contacted all defendants by email, and the responses received by the time this article was posted are included below. In general, the companies say they believe the lawsuit is without merit and they intend to put forth a vigorous defense.

The lawsuit argues the existing crop input distribution process, which uses a network of authorized retailers to reach customers, is designed to conceal pricing information, allowing companies to sell seed, chemicals and other inputs at higher profit margins while depriving farmers of information that would allow them to make better decisions.

"Farmers, through no fault of their own, are unwittingly paying more for crop inputs than they would in a truly competitive market," the lawsuit states, arguing that input costs have risen substantially more than yields over the past 20 years. It argues that disparity is pushing farmers out of business. The lawsuit never mentions commodity markets or other factors that influence farm profitability.

The lawsuit details several companies' reaction to Farmers Business Network's (FBN) entry into the market, and the general concern that was widely discussed at CropLife America's annual meeting in 2017. CropLife America is a trade association that represents major crop input manufacturers, wholesalers and retailers, but because there are no farmers on the board of directors, the lawsuit alleges, the organization's meetings make "an ideal vehicle for collusion."

A representative from Crop Life America told DTN it doesn't comment on ongoing litigation brought against its member companies.

The lawsuit alleges that retailer and wholesaler defendants pressured the manufacturers to refuse to supply FBN because electronic platforms would cut into their market positions and profit margins and that manufacturers complied by imposing strict conditions in its contracts with authorized retailers to prevent sales to the startup.

FBN attempted to break the boycott by purchasing Yorkton Distributors, a Canada-based retailer with decades-old supply agreements, but most of the manufacturing defendants canceled their contracts with Yorkton within a few months of the transaction. Instead, FBN began developing its own inputs.

AgVend, another online platform, was also referenced but is not part of the lawsuit. A company spokesperson told DTN the company is misrepresented throughout the filing.

"As a result of the Retailer, Wholesaler, and Manufacturer Defendants' coordinated actions, farmers were deprived of the opportunity to purchase crop inputs at transparent, lower prices from electronic platforms. Instead, they were forced to continue paying artificially high prices for crop inputs purchased from local retailers subject to Defendants' confidentiality requirements," the lawsuit stated.

Canada's Competition Bureau is formally investigating collusion, and the lawsuit said the U.S. Department of Justice is also considering opening a case.

DTN attempted to contact all the defendants by email. Not all responded by the time this article was posted.

A representative from Corteva said they're aware of the lawsuit "involving allegations relating to the manner in which several agricultural industry members marketed and sold products. Corteva believes that the allegations are factually and legally unsupported and will vigorously defend the case."

A spokesperson for Syngenta said the company "is dedicated to the support and success of our customers, and we will vigorously defend any allegations that our actions have been improper or illegal."

Bayer said it has not yet been served with the complaint, "and will review it in due course. Based on information in published reports, we believe the markets identified in this action are competitive, and the complaint has no merit."

BASF also said it is aware of the lawsuit "alleging BASF and certain other manufacturers, distributors, and retailers of crop inputs violated antitrust laws. BASF strongly disagrees with the allegations in the lawsuit and intends to defend itself vigorously. Most importantly, BASF is committed to a fair and competitive marketplace that provides access for farmers to the critical products they need."

A CHS representative said they're aware of the filing, but it is company policy not to comment on pending litigation.

Katie Dehlinger can be reached at: katie.dehlinger@dtn.com

Or you can follow her on Twitter at @KatieD_DTN

OMAHA (DTN) -- EPA wants the public to comment on whether the agency should consider a general waiver of Renewable Fuel Standard blend requirements for oil refiners.

The agency on Friday released a set of proposals to consider a number of petitions by states to waive Renewable Fuel Standard requirements for small refiners and to make changes to E15 pump labels.

Both the request for comments on a general waiver and changes to E15 labels will be posted for comment in the Federal Register on Jan. 19.

Citing the economic shutdown due to COVID-19, EPA received requests for general waivers from a few small refiners and a number of states for 2019 and 2020. The governors of Texas, Utah, Oklahoma, Wyoming, Louisiana and Pennsylvania were among those who requested RFS general waivers, along with a handful of refining companies. In those requests, all parties claimed the waivers were needed because small refiners faced economic challenges.

The agency said in the proposal it is not proposing granting the waivers, but rather wants public comment on those petitions.

On the second proposed rule, the EPA is seeking comment on whether to remove E15 pump labels altogether or to amend current labels. Ethanol industry officials have expressed concern the current labels offer warnings to consumers that discourage use of the E15. On the other hand, groups also have suggested the expansion of E15 at fuel stations adds to the risk of using the wrong fuel and labels should be more explicit.

EPA proposes a number of changes to the label, including removing the "attention stripe" on the label, removing "E15" from the label while including "contains up to 15% ethanol" on the label. Also, the agency would change other language on the label to promote E15's safety.

In addition, the EPA is proposing changes to allow proper underground storage of E15 and for future allowances for higher ethanol blends.

Growth Energy CEO Emily Skor said the agency proposals are a mixed bag for ethanol producers.

"With 95% of vehicles approved for E15 and over 18 billion miles driven on the fuel, the best outcome for this rulemaking is to remove the label entirely," she said in a statement.

"Despite this potential progress on E15, important work remains to defeat the offensive attempt by refiners to avoid their biofuel blending obligations through general waivers. Given President-elect (Joe) Biden's commitments on the campaign trail, we're confident his incoming team will uphold the integrity of the RFS and reject these oil-backed waiver requests before rural recovery is derailed."

Geoff Cooper, president and CEO of the Renewable Fuels Association, said the requests for general waivers will miss the mark.

"This is nothing more than one last desperate attempt by the refiners to undermine the RFS and protect their chokehold on the nation's fuel markets," he said in a statement.

"But it cannot succeed because EPA has no authority to waive RFS volumes unless the petitioners show that the RFS itself is the cause of the 'severe economic harm' to a state, region, or the nation. Such a showing would be impossible, especially because the renewable fuel blending requirements have already adjusted lower in tandem with COVID-related changes in gasoline and diesel consumption. In reality, the general waiver requests submitted to EPA come nowhere close to satisfying the well-defined statutory criteria and requirements established for requesting a waiver."

It has been a week of turmoil for the ethanol industry.

Members of Congress and the biofuels industry were scrambling as a result of news that EPA Administrator Andrew Wheeler was potentially reversing course and approving more small-refinery exemptions in the last days of the Trump administration.

EPA reportedly was considering 32 requests by petroleum refiners to exempt them from 2019 RFS blend obligations.

A statement in a new EPA proposed rule sent a signal Thursday that EPA may not act on any new small-refinery exemptions. EPA stated, "Due to the ongoing litigation, we take no position on the availability of SREs for the 2019 compliance year."

Ethanol industry officials said the rule was a good sign EPA was not going to grant more exemptions.

Still, EPA also proposed a rule that would grant oil refiners more flexibility and an extension to comply with the RFS for 2019 and 2020. Under the proposal, refineries producing less than 75,000 barrels of oil per day would have until Nov. 30, 2021, to meet 2019 RFS blend requirements, and until Jan. 31, 2022, to meet the 2020 RFS obligations. EPA cited the economic struggles of refineries due to COVID-19 as the reason for the extensions.

These moves come as ethanol production is down about 14% from the same week a year ago and corn used for ethanol is down 11% over the same period.

Read the E15 proposal here: https://public-inspection.federalregister.gov/….

Read the waivers request proposal here: https://public-inspection.federalregister.gov/….

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

ANKENY, Iowa (DTN) -- Cotton prices and demand are "remarkably" strong despite the ongoing worldwide COVID-19 pandemic and financial crisis, economic and policy experts said during the recent Beltwide Cotton Conferences.

March cotton futures surpassed 82 cents per pound on Jan. 13, up more than 30 cents in the past 10 months. The latest USDA projections indicate U.S. cotton use and exports will eclipse production during the 2020-21 marketing year for the first time in three years, which is a good sign for prices.

But is the upward cotton price trend and demand sustainable?

That depends on several factors, according to Jody Campiche, vice president of economics and policy analysis with the National Cotton Council of America, which hosted the virtual event, and Stephen MacDonald, an economist and fibers analyst with the USDA World Agricultural Outlook Board. Factors include how fast the pandemic subsides as COVID-19 vaccines are administered, when people can get back to their normal routines and spending habits, and future government intervention, among other things.

"Current cotton prices are not generally reflective of the global balance sheet and large stocks outside of China," said Campiche, who provided the U.S. cotton market outlook.

However, she said current prices are supported by the following:

-- Lower production and stocks in the U.S.

-- Low supply chain inventories.

-- Increased purchases from China.

-- Speculative money flow.

-- A weaker U.S dollar.

-- Higher grain and oilseeds prices.

-- Post-COVID demand.

"I think we're seeing a lot of influences on prices that are outside of typical supply and demand fundamentals," Campiche said.

It's possible but unclear if cotton growers will enjoy profitable prices, which they were as of mid-January, for the year. Texas A&M University reports the cash price farmers receive is generally 4 to 8 cents less than the futures market. The university estimates the break-even price for farmers is generally 60 to 70 cents per pound, depending on individual costs and yield.

DECIDING WHAT TO GROW

Lee Gibson and his son, Braden, are contemplating what to plant on their 3,000-acre farm near Dumas, Texas. Cotton, corn, soybeans, milo and wheat are all possibilities -- and all are profitable, Lee Gibson said. Most of the crops grown by Gibson Farms are sold to local dairy farms and feedlots, except cotton.

Two years ago, the Gibsons planted 2,500 acres cotton. This year, their leaning toward 500 acres, the same as 2020, as long as prices remain profitable.

"I think cotton prices could get to 85 cents per pound with China demand and the drought," said Gibson, a self-described cotton fanatic. "But the market is so volatile. If we grow cotton, we would market early to manage risk."

If the Gibsons plant cotton, they will have to water the ground before they plant. The soil moisture profile, as of mid-January, is not adequate to get plants off to a good start. If the drought worsens or prices fall, cotton could be scratched due to high input costs, Gibson said.

"I'm positive about cotton prices, but not sure about growing it," he added.

DEMAND STRONGER THAN EXPECTED

MacDonald, who provided the international outlook, asserted the demand for goods including cotton products was stronger than expected worldwide during the pandemic, especially the latter half of 2020. China's purchases of U.S. cotton increased last year partly due to the phase-one trade deal between the two countries. The U.S.-China trade war reduced U.S. cotton sales to China in 2018 and 2019.

"I think it comes back to the fact savings went up and people have been spending a lot of money on goods, and that contributed to the remarkably higher price," MacDonald said.

But in today's world when COVID-19 and international politics can quickly affect trade and commodity prices, nothing is for certain.

"I personally expect (cotton) consumption in 2021 to grow," MacDonald said. However, there are a lot of questions about what the economy will look like this year or when people will be willing or able to consume services like they used to.

Bart Fischer, economist and co-director of the Agricultural and Food Policy Center at Texas A&M University, said the outlook for 2021 is "vastly improved" over earlier estimates.

"I want to be very clear that there's still a lot of risk ahead," he said.

COTTON FUNDAMENTALS

The USDA January World Agriculture Supply and Demand Report estimated U.S. 2020-21 cotton production at 14.95 million 480-pound bales, 1 million bales less than the December report. More than 12 million acres of cotton were planted in 2020, according to the report, but only 8.7 million were harvested due to drought, hurricane damage and other reasons.

Domestic cotton use and exports for the 2020-21 marketing year are estimated at 2.4 million bales and 15.25 million bales, respectively, the report said. China is the top buyer of U.S. cotton during the current marketing year at 4.4 million bales, with 2.6 million bales shipped as of early January. Based on China's imports of U.S. cotton over the last 10 years, the country is expected to import between 4 million to 6 million bales from the U.S. in 2020 and 2021 under the phase-one trade agreement, Campiche said.

"Export (numbers) are definitely good news for U.S. cotton because there were significant issues with COVID shutdowns," she continued.

MacDonald added China's robust purchases are good, but it "adds uncertainty" to future demand and prices. Namely, the tenuous trade and political relationship between the two countries. Investors' interest also contributed to the price surge, which could change, experts said.

USDA estimates U.S. cotton ending stocks for the current marketing year at 4.6 million bales, the lowest number in three years, according to the report. World cotton ending stock are projected at 96.3 million bales for the 2020-21 marketing year, a slight reduction from the December estimate as total use is expected to exceed production by about 3 million bales.

COVID-19 disruptions dropped world cotton consumption to 102.6 million bales during the 2019-20 marketing year, the report said. World mill use is expected to rebound to nearly 116 million bales during the current marketing year, which is still 4 million bales less than 2018-19.

"What we're seeing is a faster recovery than initially expected, but we're not back to where we were," Campiche said. "There's been a significant reduction in U.S. ending stocks for the 2020-21 marketing year compared to earlier expectations. Strong export sales could result in an even larger reduction in the U.S. stock level."

DTN COTTON OUTLOOK

DTN Lead Analyst Todd Hultman said cotton prices have come a long way from the spring of 2020 when coronavirus concerns ignited a selling panic throughout commodity markets and sent spot cotton prices below 50 cents a pound for the first time since 2009.

Drought cut 2020 U.S. cotton production to its lowest in five years, and exports stayed firm, largely thanks to the resilience of Asia's economies. Hultman said that helped push prices above 80 cents per pound.

"Growers have reason to be a little more optimistic planting cotton this spring, but don't expect cotton to take acres away from corn, soybeans or wheat as grain and oilseed prices are enticing growers with their best prices in several years," he said. "I don't expect cotton acres to expand more than 1 million acres in 2021, and extreme to exceptional drought remains well entrenched in West Texas."

USDA estimates the average farm price at 68 cents per pound in 2020-21. Hultman said 70 cents seems more likely by the time the season ends on July 31 as higher prices are likely to remain well supported the next six months.

"Demand for cotton exports held up remarkably well in 2020 and for now, I expect that firm demand to continue," Hultman continued. "But with coronavirus still a serious threat, it is difficult to estimate the economic climate in 2021."

He said a sideways trading range between 70 to 80 cents per pound seems likely for spot cotton prices in 2021 with weather offering the most potential to disrupt that scenario.

Matthew Wilde can be reached at matt.wilde@dtn.com

Follow him on Twitter @progressivwilde

OMAHA (DTN) -- Producers need to keep a close eye on stored grain as damage from insect feeding will cut into profit when it is marketed. Identifying these insects and managing them accordingly is essential for those with grain in the bin.

These were the observations of South Dakota State University (SDSU) Extension field crop entomologist Adam Varenhorst in a recent SDSU Crop Hour preview webinar. The weekly webinars are put on by SDSU through the last week of March on various ag-related subjects (https://extension.sdstate.edu/…).

PREVENT INSECT FEEDING

Varenhorst said the best way to avoid insects feeding on grain is to prevent conditions in which insects like to feed. Producers can limit the number of insects in stored grain by following basic rules of grain storage, Varenhorst said, such as never storing new grain on old grain, keeping the grain cool, and applying pre-binning insecticide or a protectant insecticide at binning.

Other practices that can help limit pests in stored grain include cleaning the bin before filling it, sealing areas around bin doors, cleaning grain spills around bins and keeping the bin perimeters clear, he said.

Storing grain at a proper moisture is the most important preventative practice, Varenhorst said.

Corn, for instance, can be stored at 15.5% moisture if the grain is going to be stored short term, which would be three to six months. If corn is going to be stored longer term (a year or more), it must be dried down to 13.5% moisture for it to remain in good condition, he said.

"The moisture should be monitored on a pretty regular basis," Varenhorst said. "About every time you go to scout the bin, you should also be checking for insects as well as the moisture levels."

DIRECT VS. INDIRECT DAMAGE

Varenhorst said there are two types of insect damage in stored grain, direct and indirect.

An example of indirect damage is the presence of insect bodies in the grain. This could contaminate the grain and lead to dockage, he said.

Direct damage is insects feeding on the grain itself, causing damage to the grain. Reduced-quality grain can lead to heat damage, mold growth and odors.

Direct feeding leads to declines in germination, nutrition, weight and market value of the grain are all effects of insects directly feeding on grain, he said.

Varenhorst said direct feeding damage can be further broken up into two different groups: internal and external feeders.

INTERNAL FEEDERS

Internal feeders get into the grain by boring holes into it. This damage can happen very quickly and can be very destructive, he said.

There are several examples of internal-feeding grain insects. Among the most common are granary weevil, maize weevil, rice weevil and lesser grain borer.

Varenhorst said each pest has distinct features and feeds slightly differently on the stored grain.

The granary weevil (also known as the wheat weevil) has a long snout with a polished red body. Both the larvae and adults feed on the grain, he said.

Maize weevils are slightly larger than other internal-feeding species, with a densely pitted thorax. The larvae feed on the grain.

Rice weevils are smaller pests that feed within the grain. Their lifecycles need high moisture or high humidity in storage bins to allow them to grow, he said.

The lesser grain borer is also common in stored grains, and its presence causes a sweet or musty odor. Often, their thin, brown body shells are found in stored grain.

EXTERNAL FEEDERS

Varenhorst said external feeders feed on grain dust, cracked kernels and other grain debris in the bin. A clean bin with high-quality grain will limit the activity of external feeders, he said.

The red flour beetle and confused flour beetle feed on cracked kernels and dust in bins. They give off an unpleasant odor and grain infested with these pests will have a gray appearance if the infestation is severe enough, Varenhorst said.

The sawtooth grain beetle is another external feeder. This pest feeds on cracked kernels, is red in color and is very small, only about 1/10th of an inch.

Cadelle beetles are larger (about 0.6 inch) and the adults are black. These pests will also bore into wood surfaces, he said.

Mealworms are also classified as an external feeder; they feed on broken, damp and/or moldy grain, Varenhorst said. These pests can survive for months without any food.

Another external feeder is the Indian meal moth. The larvae feed on the surface of broken grain and produce silk webbing. This webbing creates issues by trapping dust and causing the grain temperature to rise, he said.

OPTIONS FOR INFESTED GRAIN

Varenhorst said if a bin is infested with grain pests, there are several options available to producers.

One option is to clean the grain and move it to another bin. Another option is to move the grain and treat it with protectant insecticide, he said.

"If it was a fairly small infestation, you could aerate the grain to lower the grain (temperature) to 55 degrees (Fahrenheit) or less," he said.

Other options include feeding the grain to livestock or selling the grain for a reduced price. A last option would be to fumigate the bin, which can be a dangerous task if not done properly.

To listen to the entire SDSU Crop Hour webinar on stored grain pests, click on the following link: https://www.youtube.com/….

Russ Quinn can be reached at russ.quinn@dtn.com

Follow him on Twitter @RussQuinnDTN

In one sense, I shouldn't be writing another article on corn. DTN staff professionally reported the highlights of Tuesday's USDA reports and were followed by a fuller discussion of the numbers by DTN Senior Analyst Dana Mantini later that afternoon.

Read his recap here: https://www.dtnpf.com/….

DTN Contributing Analyst Alan Brugler dug even more into the details of USDA's corn numbers Wednesday, and as we have come to expect from Alan, no stone was left unturned.

Read that column here: https://www.dtnpf.com/….

So, what more could I possibly have to say about USDA's corn estimates, and, maybe more importantly, do Tuesday's reports deserve this much attention?

You'll have to be the judge, though I do think it's important to have at least one more conversation to have an appreciation for the uncertainties of corn's balance sheet moving forward.

Let me start by saying something so basic -- and I need to warn this is not meant to offend anyone -- but just because USDA estimates something, does not make it true.

One year ago at this time, USDA estimated a 13.69 billion bushel (bb) corn crop, which drew boos from most farmers and this analyst as being too high. At farm meetings, it was easy to show cash prices were much stronger in relation to the futures market than usual. Subsequent grain stocks reports eventually showed that the corn wasn't there.

The January World Agricultural Supply and Demand Estimates (WASDE) report is often referred to as the final crop estimates for corn and soybeans, but it doesn't stop USDA from tweaking the numbers long after the January report. The 13.69 bb crop estimate of January 2019 was adjusted twice but is not much different today at 13.62 bb.

USDA's estimate of feed and residual demand in 2019-20, however, has been on quite the journey, going from 5.275 bb in the December 2019 WASDE report to 5.903 bb as of Tuesday. As an estimate of feed demand, it is not unusual to change through the year, but the residual part makes this account unique in that it often gets tasked for incorporating the findings of the quarterly grain stocks reports.

The good news is that the 628 million-bushel (mb) increase in feed and residual demand lowered corn's ending stocks estimate for 2019-20, just as if the same amount had been deducted from USDA's production estimate. The bad news is that the adjustments mess up any hope we have of understanding what are feed demand changes and what are inventory adjustments, related to overestimating production in the first place.

If we were trying to estimate feed demand, we would look at changes in beef, pork and poultry production, all of which showed small percentage gains in 2019-20 -- or we could use USDA's estimate of grain-consuming animal units, which showed a 2.1% increase for 2019-20.

But those basic feed demand factors would not explain the 8.7% jump in USDA's feed demand and residual estimate for 2019-20 to 5.903 bb in Tuesday's report. The bulk of that increase, I contend, came from overestimating corn production in 2019 and had little to do with feed demand.

Why did USDA make any adjustments at all? Because the quarterly grain stocks reports kept coming in less than expected and forced USDA to reflect the lower supplies somewhere in the balance sheet. Unfortunately, USDA's insistence on combining the residual with feed demand is unnecessarily confusing.

I know I'm not the first analyst to bring up these points, and I encourage others to keep putting slips in USDA's suggestion box. I congratulate Tom Vilsack, Seth Meyers and others in their new roles at USDA and say a prayer for all, as it is not easy to carry the weight of that responsibility.

From my little corner of the world, I want to help farmers understand markets so they can make good decisions about marketing their crops, and there are some areas USDA could help with. Separating out feed demand from the residual account is one of the easier fixes.

It's time for USDA to stop saying that China has 7.55 bb of ending corn stocks, and Russia's wheat ending stocks are probably overinflated as well. One of these days, the value of monthly grain stocks reports will be recognized and will take a lot of the guessing out of the market.

Until help arrives, we at DTN keep trying to explain which USDA estimates make sense and which ones we need to ignore. I don't know if USDA's lower-than-expected corn crop estimate of 14.182 bb is accurate or not ... the grain stocks reports will eventually decide.

Where will USDA's feed and residual demand land in 2020-21? I don't have a clue.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman1

OMAHA (DTN) -- Profit margins continued to fall at DTN's hypothetical ethanol plant as soaring corn prices offset higher ethanol prices at the 50-million-gallon Neeley Biofuels plant.

The DTN National Corn Index has spiked from about $3.75 per bushel in early October to $4.99 on Wednesday. The March futures price on the Chicago Board of Trade -- the price paid by DTN's hypothetical plant -- closed at $5.24 on Wednesday, jumping by about $1 since the middle of December.

As a result, the hypothetical plant reported a 37-cent net loss per gallon of ethanol produced in our January update. In the December update the plant reported a 35-cent loss.

Most ethanol plants are not paying debt. If the hypothetical plant were not paying debt, it would see a 6-cent-per-gallon loss compared to a 4-cent loss in December.

A jump in ethanol and distillers dried grains prices in this update prevented margins from cratering.

For this update, Neeley Biofuels received $1.62 per gallon for its ethanol on the rack price -- a 25-cent spike since our December update. In addition, the plant received $205 per ton for DDG -- a $15 increase from our December update.

DTN Cash Grains Analyst Mary Kennedy said while the U.S. Energy Information Administration on Wednesday showed a slight increase in plant production last week, ethanol production still is running 14% behind the same time last year.

"Some plants continue to struggle with the higher cash corn prices along with the latest EIA report showing as of the week ending Jan. 8," she said.

"Blending activity, a measure of demand, was slightly higher, but down 12.4% from the same week in 2020 and neither of those scenarios is good for overall plant margins. The DTN National Corn Index during just the first 13 days of 2021 has gained 39 cents."

Last spring, during the beginning of the COVID-19 economic shutdown, ethanol margins were at some of their lowest levels in history.

DTN established Neeley Biofuels in DTN's ProphetX Ethanol Edition to track ethanol industry profitability. Using the real-time commodity price data that flows into the "corn crush" in ProphetX, and some industry-average figures for interest costs, labor and overhead, DTN is able to track current profits. It also tracks how much Neeley Biofuels would make or lose under an infinite number of "what-if" scenarios.

DTN uses industry-average figures from Iowa State University. Included in the figures are annual labor and management costs, transportation costs, debt-servicing costs, depreciation and maintenance costs. Although Neeley Biofuels is paying debt-service and depreciation costs on its plant, many real plants are not in debt.

Also, it should be noted the calculations include all other costs, such as chemicals and yeasts, electricity, denaturant and water. While DTN uses natural gas spot prices for these updates, many ethanol plants lock in prices on the futures market, so they are not as vulnerable to natural gas market volatility.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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