DTN Ag Headlines

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- In a hearing before a U.S. House of Representatives committee on Tuesday, biofuel interests stood their ground and told lawmakers a proposal to replace the Renewable Fuel Standard with a high-octane standard essentially would leave biofuels in the dust

The environment subcommittee of the House Energy and Commerce Committee considered testimony from biofuel interests and others regarding a proposal put forward by Rep. John Shimkus, R-Ill., and Rep. Bill Flores, R-Texas.

On the day before Thanksgiving, Shimkus and Flores released what they are calling a "discussion draft" of a bill that essentially would phase out the RFS in 2023 and eliminate a mandate requiring the blending of biofuels altogether.

In addition, the EPA administrator would be required to set volumes on advanced biofuels to be blended at the prior year's production volumes of cellulosic ethanol, biomass-based diesel and other advanced biofuels.

The current law mandates the increased blending of a variety of biofuels through 2022. The actual production volumes of cellulosic ethanol and other biofuels, however, have not come close to reaching the mandate. The current RFS law was designed to set a course for 36 billion gallons of biofuels to be blended by 2022. The discussion draft bill would not mandate the use of biofuels at all.

The proposal is a non-starter for biofuel interest groups.

FARM ECONOMY

Emily Skor, CEO of Growth Energy, told the committee that it shouldn't touch the RFS at a time when the agriculture economy is struggling.

"The absolute repeal of the RFS is unnecessary and will further destabilize the farm economy and the ethanol sector, both of which are already suffering from the EPA's excessive use of small-refinery exemptions, roadblocks erected by the oil industry to ethanol-blended fuel, and export barriers," she said in written testimony.

"We cannot support legislation that would ultimately turn back the clock on our nation's commitment to renewable biofuels, completely undermining the benefits that consumers have come to expect from ethanol at the pump."

Biofuel interests generally support the move to 95 RON (research octane number) requirement at the pump. However, industry representatives told the committee the move wasn't bold enough. Some suggest a move to 98 RON would provide a better incentive for high-octane fuels such as ethanol.

The current proposal, Skor said, would not be much of an incentive for petroleum interests.

"In fact, 98% of all gasoline sold in the U.S. today contains 10% ethanol," she said. "Moving to a 95 RON baseline fuel would require almost no changes from refiners across the country."

NO INCENTIVE

Brooke Coleman executive director of the Advanced Biofuels Business Council, said moving to a 95 RON would do little to incentivize the oil industry to buy more ethanol.

"In theory, renewable fuels like ethanol are in the best position to succeed under an octane standard because ethanol is by far the cheapest source of octane available today," he said. "In practice, and unfortunately, it is in the oil industry's long-term financial interest to marginalize competition and buy petroleum-based octane enhancers from themselves, even if it means lower downstream profits in the immediate term."

Coleman said the proposal provides some predictability for advanced biofuels in setting volume standards and feedstock.

"Unfortunately, the volumetric predictability comes in the form of a provision long advocated by the oil industry, namely, the setting of cellulosic biofuel standards based on prior year actual production," he said. "We strongly oppose the adoption of this provision under current and any future renewable fuel regimes. The problem with setting the cellulosic biofuel standard based on prior year production is it puts the growth trajectory of cellulosic biofuels largely in the hands of the oil industry."

Kurt Kovarik, vice president of federal affairs at the National Biodiesel Board, said the NBB also is concerned that the proposal lacks incentive to use biofuels such as biodiesel.

"The proposal would direct EPA to set backward-looking volume requirements," he said. "It may protect existing assets but not drive investment and further growth. And it would not address several of the causes of instability in the program, such as retroactive small refinery exemptions."

ETHANOL HARM

Geoff Cooper, CEO and president of the Renewable Fuels Association, said the studies show that setting a 95 RON would harm the ethanol industry.

"We simply cannot support eliminating the RFS program, as the draft envisions, without a much stronger signal to the market that ethanol's role in our fuel supply will continue to grow," he said in his written testimony. "A 95 RON standard does not provide that signal and is not a suitable replacement for the RFS beyond 2022. Indeed, as concluded in a new study commissioned by the Energy Information Administration, oil companies could easily meet a 95 RON standard without using any additional ethanol beyond current levels."

The RFA, he said, "strongly believes" a national standard to establish a minimum 98 to 100 RON would provide "much greater fuel efficiency gains and greater reductions in tailpipe pollution and GHG emissions."

The discussion bill would require automakers to design and warranty vehicles for using E20 blends -- 20% ethanol, 80% gasoline.

Cooper said the EPA should grant a fuel waiver for even higher blends to allow refiners and blenders to have more flexibility in capturing ethanol's octane benefits.

"Just as we believe the proposed provision requiring automakers to warrant their vehicles to operate on E20 should be adjusted to E30, RFA believes this provision should require the EPA to grant a fuel waiver allowing the use of up to E30 in light-duty vehicles, not just E20," he said.

Wesley Spurlock, a corn farmer from the Texas Panhandle representing the National Corn Growers Association, said the discussion draft would "undo successful renewable fuel policy" that has helped rural communities.

"At a time when farm income has declined more than 50% over the past five years and farmers continue to face market challenges from trade disruptions, we can't afford more uncertainty," he said.

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

Follow him on Twitter @toddneeleyDTN

(SK/AG)

By Russ Quinn
DTN Staff Reporter

JACKSONVILLE, Fla. (DTN) -- While global potash (K) fertilizer prices have been at their highest levels in the last three years due to cutbacks in supply, the outlook for the market is for more capacity than new demand. Potash producers with smaller, higher-cost production facilities will likely come under heavy cost pressure.

Humphrey Knight, Potash Analyst for CRU International Ltd. in London, told attendees of the 2018 Fertilizer Outlook and Technology Conference recently in Jacksonville, Florida, that things really began to change in the potash market since about mid-2016. This is when potash became more affordable and thus led to record 2017 global demand.

GLOBAL K INCREASING

Global potash imports in 2016 totaled 61.4 million metric tons (mmt), then jumped to 66.6 mmt for 2017 imports. The U.S. even increased its imports, to just under 10 mmt, with a strong second half of 2017, he said.

Knight said, of that nearly 10 mmt in 2017, 7.7 mmt was imported from Canada, which is about a 12% increase year-on-year from there. Another 1.9 mmt was imported from overseas (mainly Russia, Belarus and Israel), which was a 44% year-on-year increase.

U.S. potash demand in 2018 is shaping up similar to 2017 with more demand for potash.

Knight said U.S. potash applications on corn increased by 24%, while soybean application climbed 18% from 2012 to 2017.

"Fall application pushed 2017 demand to a record high, with 2018 demand currently following closely," Knight said.

Potash demand growth is set to steadily increase over the next five years across the world, Knight said. Global demand in 2018 should be around 66.8 mmt, and by 2023, demand could be closer to 76.8 mmt. This would be a compound annual growth rate of 2.8% per year during this time period.

The global growth in demand is mainly thanks to two different regions of the world: Asia and Latin America.

CHINESE POTASH NEEDS

Knight said China produces enough potash to meet about half of its domestic demand, while the other half is imported. While nitrogen and phosphorus fertilizer production in the country faces scrutiny from increasing environmental regulations, these issues do not affect the Chinese potash production because they get it from underground mines.

Despite this, the country's domestic capacity appears to have reached a limit, about 16 mmt in 2017. CRU is no longer aware of any further investment in new or expanded potash capacity in China, he said.

"Because of this, imports are becoming more important in China," Knight said.

Chinese farmers are applying more potash to improve the quality of crops in the country, especially fruit and vegetables. Nitrogen and phosphorus are generally over-applied in the nation while potash is under-applied, he said.

Other than China, southeastern Asia oil palm areas (Malaysia and Indonesia) are expected to expand potash usage.

Latin America is also increasing potash demand as the region expands mainly in soybean production. Lower-yielding soybean areas provide potential upside to the potash market, he said.

SEVERAL SUPPLY ISSUES

On the supply side, Knight said, potash producers have attempted to limit supply since about 2013, when companies in Canada enacted voluntary idling of facilities. However, from that time until 2017, the lower capacity really did not improve potash's global price until 2017.

In 2017, Canadian producers have maintained supply discipline. Canada, as well as the rest of the world, have had operating rates close to their customer demand, which ends up being positive news for prices, he explained.

In addition, new capacity projects across the world have been slow to start. Knight said Russia could see another 7 mmt of production as two facilities increase capacity.

A facility in Saskatchewan, Canada, started production in June 2017, but had some issues with product quality early. This plant is expected to produce 1.4 mmt to 1.5 mmt in 2018, with no exports from it to the U.S. expected until 2019, he said.

The slowness of new production can be traced directly to increasing site costs, which have been rising since 2016.

Knight said site costs have been highest in Russia and Belarus. The recovery of the Russian ruble versus the U.S. dollar, as well as 30% higher energy and labor costs, have increased site costs by 23%.

"Margins are very tight at these locations," he said.

Canada's site costs increased by 12%, thanks to higher energy and labor costs, but at least these facilities have capacity increasingly concentrated in lower-cost mines, he said.

Knight said mines in Europe have site costs rising by 17% because of much higher energy costs. These mines tend to be smaller in size and also have falling grades of product, he said.

Future supply will arrive, but it will be later in the five-year window than once anticipated by the industry, he said. All additions from 2008 to 2017 were additions or expansion projects at existing facilities.

Going forward, however, most of the new potash supply will come from new facilities, Knight said. With these new plants set to come online in the coming years, about 16 mmt of new capacity could be seen, which will be a challenge for the industry.

"This is massive new supply for an industry which would have 16 mmt of new capacity and only about 10 mmt of demand," Knight said.

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

Follow him on Twitter @RussQuinnDTN

(ES/AG)

By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- Pick a state, any state, and chances are the rules for dicamba use there could differ from its neighbors next year.

EPA released federal labels for XtendiMax, Engenia and FeXapan on October 31, and already, a patchwork of additional state restrictions is developing.

Arkansas is weighing a May 20 cut-off date, with large protective buffers for certain sensitive crops. Indiana and Minnesota have both submitted 24(c) special local needs labels to EPA with proposed June 20 cut-off dates. South Dakota has submitted a 24(c) for a June 30 cut-off date, which North Dakota is also considering, and a handful of other states are considering additional steps such as new record-keeping rules and state-specific training requirements.

Whether EPA will approve these state restrictions remains uncertain, however. Recently, the agency has told state regulators that it does not want states to use 24(c) labels to create restrictions beyond federal pesticide labels, because the practice may not be legally sound. (See the DTN story here: https://www.dtnpf.com/…).

So far, only three states have confirmed that they are not pursuing any additional state restrictions on the three dicamba herbicides in question. Missouri announced that its applicators will follow the federal dicamba labels in a press release in early December. Representatives from the Mississippi Department of Agriculture and Commerce and the Nebraska Department of Agriculture told DTN that they will not be pursuing 24(c) label restrictions either.

Here are the latest details on state restrictions in development:

ARKANSAS

On December 6, the Arkansas State Plant Board voted to restrict dicamba use from May 21 through October 31. Applications made before May 21 would require a one-mile buffer around research stations, organic and specialty crops, and crops that are not tolerant to dicamba. The new regulations still have to undergo a 30-day public comment period and a public hearing, before being approved by the state legislature and the governor.

But if passed, this regulation would likely increase dicamba use in the state next year. In 2018, Arkansas banned all in-crop use from April 15 through October 31, but still received about 200 dicamba injury complaints.

The Plant Board heard a presentation from Jason Norsworthy, an Extension weed scientist with the University of Arkansas, who showed university data suggesting that volatility of the new dicamba formulations is the primary culprit in off-target dicamba movement.

"I contend today ... that it's the atmospheric loading of dicamba, especially in areas where we've had heavy use of that herbicide, that has contributed to the landscape damage, and it's a function of volatility that we are ultimately dealing with," he told the board.

The original petition for dicamba use in 2019 was brought to the Plant Board by a group of farmers who requested a June 15 cut-off date. The change to May 21 caught some farmers by surprise, noted Charles Williams, a Crittenden County, Arkansas farmer. "I don't think it's a workable solution," he said.

The May cut-off date may give some farmers "the illusion of choice" now and encourage them to buy Xtend seed, only to find they can't get into the field to spray before that date, he said. "I just wanted a decision up or down on the technology," he said.

Jimmy Williams, who grows berries and produce in northeast Arkansas, said the May cut-off date won't protect a lot of early-season crops. "This year, we started picking strawberries on May 15, and it was already 80 degrees -- and then rose to 90 degrees within a week," he said. "It's too late to be used safely."

INDIANA

Indiana pesticide regulators have submitted a 24(c) label to EPA with a late June cut-off date, based on the recommendations of a work group appointed by the Indiana Pesticide Review Board.

"In order to allow for use without causing unreasonable adverse effects on the surrounding

environment, applicators must not apply dicamba post-emergent to soybeans after June 20, 2019," the Office of the Indiana State Chemist reported on its website.

Frustrated by ambiguous language on the labels, the regulators are also adding their own definitions to the 24(c) label: "The work group recommended that the terms "neighboring" and "adjacent" used on the labels shall mean any non-dicamba-tolerant soybeans within 1/4 mile and any other sensitive crop or sensitive residential-area plants within 1/2 mile downwind of the application site."

See more details on Indiana's dicamba use in 2019 here: https://www.oisc.purdue.edu/….

MINNESOTA

Likewise, the Minnesota Department of Agriculture confirmed on Monday that it is submitting a 24(c) label to EPA with a June 20 cut-off date, which the agency credits with limiting off-target dicamba damage in 2018.

"The decision follows the MDA's ongoing investigations and informal surveys into reports of crop damage from alleged dicamba off-target movement over the past two growing seasons," a department press release stated. "In 2017, the MDA received 253 reports of alleged dicamba drift; 55 of those were formal complaints requesting investigations. Those reports impacted an estimated 265,000 acres. After state restrictions were put in place for the 2018 growing season, the number of complaints dropped dramatically this year to 53 reports, of which 29 were formal complaints. Just over 1,800 acres were impacted in 2018."

Last year, the MDA also banned applications when temperatures rose above 85 degrees, but the agency will not be adding that restriction to the 2019 label.

SOUTH DAKOTA

The South Dakota Department of Agriculture has submitted a 24(c) label to EPA with a June 30 cut-off date, confirmed Tom Gere, agronomy services program manager for the agency.

At a meeting of state regulators in Arlington, Virginia, in early December, Gere said the agency struggled to enforce the R1 growth stage cut-off in 2018 and limit late-season spraying. For 2019, the new dicamba labels ban applications beyond the R1 growth stage or 45 days after planting, whichever comes first.

"Last year in 2018, South Dakota ran with the federal label and we really pushed hard on the R1 stage [restriction], but looking at our stats, the majority of our sales that we've looked at for the last two years resulted in applications that were made after July 1," Gere told EPA.

NORTH DAKOTA

The North Dakota Department of Agriculture is also weighing a 24(c) label with a June 30 cut-off date, although they have not yet submitted it to EPA, said Jerry Sauter, an environmental scientist with the agency. The state had that cut-off date in place last year, and it shouldn't limit growers' options too drastically, Sauter said.

"If you plant soybeans late, the June 30 cut-off will apply, but for most people, that 45-day post-planting window [on the federal label] will be closed by then," he said.

The agency hopes to have its state requirements for dicamba use finalized by the end of the year, added Eric Delzer, director of the agency's pesticide and fertilizer program.

ADDITIONAL STATE REQUIREMENTS

A handful of states are forgoing cut-off dates, but are working to add additional uses or requirements, either via 24(c) labels or new state regulations, said Dave Scott, pesticide program administrator for the Office of Indiana State Chemist.

On a conference call with state regulators and the EPA, a representative from the Texas Department of Agriculture said it is considering a 24(c) label that would extend the 60-day post-planting application restriction for cotton to 90 days, Scott said. The agency is also considering a state regulation that would address state dicamba training requirements.

Likewise, Iowa, Georgia and North Carolina regulators mentioned on the call that their agencies would be pursuing 24(c) labels to specify state training requirements. Kentucky regulators added on the call that they are considering state regulations that would require additional record keeping for all dicamba products, not just the three new formulations, as well as a new fine structure for pesticide violations.

Finally, the Alabama Department of Agriculture and Industries is planning to pursue a 24(c), that would likely require mandatory state training through the agency and the Alabama Cooperative Extension Service, said Tony Cofer, a pesticide director with the state agency.

State regulators from Illinois had not responded to DTN's inquiries at the time of publication.

See more about state regulators' reactions to the new federal dicamba labels here: https://www.dtnpf.com/…

Emily Unglesbee can be reached at Emily.unglesbee@dtn.com.

Follow her on Twitter @Emily_Unglesbee.

(PS/SK)

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- The White House is delaying a second round of trade-aid payments to farmers that was initially expected to be announced last week, Reuters reported on Tuesday.

Reuters initially reported, citing three unnamed sources, that White House officials are holding off approving the second round of Market Facilitation Payments "amid optimism China will soon resume buying U.S. soybeans."

So far this year, soybean sales to China equal about 2% of last year's volume. Total U.S. soybean exports are just 42% of last year's volume as well.

Since the G20 summit in Argentina nearly two weeks ago, markets have bounced with expectations that China would return to the U.S. to buy soybeans. So far, though, there have been no actual sales announcements.

USDA first announced the $12 billion aid package last summer and began providing payments this fall to producers of several crops, as well as to pork and dairy farmers.

On Dec. 3, following a speech on trade at the DTN Ag Summit, Agriculture Secretary Sonny Perdue said USDA was still analyzing the impact of trade retaliation and working with the White House Office of Management and Budget (OMB) on an announcement of the second round of payments, which Perdue said would happen "very soon, in a few days."

Tim Murtaugh, a USDA spokesman, responded to an email from DTN about the trade-aid payments and indicated USDA would have an announcement before the end of the year.

"Secretary Perdue was clear last week that we are in final stages of confirming our commitment to American farmers," Murtaugh stated. "We are in discussions with the White House and anticipate that the second payment rates for the Market Facilitation Program will be published before the end of the year."

As of Dec. 10, USDA has paid just over $2 billion under the Market Facilitation Program.

Reuters reported the White House OMB "has not been terribly excited about the trade aid package" but would eventually approve a second round of payments.

U.S. soybeans have faced 25% retaliatory tariffs since last summer that have largely halted exports to China, leaving farmers and grain elevators to store more soybeans that are typically railed or shipped directly to export.

"From my perspective, nothing has changed from the tariff damage that farmers experience," Perdue said at the DTN Ag Summit.

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

Follow him on Twitter @ChrisClaytonDTN

(AG)

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- The U.S. Senate voted overwhelming Tuesday afternoon to finalize the new farm bill, the "Agriculture Improvement Act of 2018," just a day after putting the finishing touches on the conference report.

The decision to bring the farm bill conference report to a quick vote was a surprise announced by Senate Agriculture Committee Chairman Pat Roberts, R-Kan., and the bill was approved on an 87-13 vote.

The House should now advance the bill out its Rules Committee for a final floor vote as well, though a Tuesday afternoon hearing was delayed. At a House Republican leadership press conference on Tuesday, House Speaker Paul Ryan, R-Wis., urged House members to vote for the farm bill.

Although the bill does not contain the stiffer work requirements for food stamp beneficiaries that were in the House bill, Ryan said, "This bill strengthens work requirements and boosts work supports, so that more people are spurred toward opportunities."

With expectations the House will approve the farm bill, it will be sent on to President Donald Trump, who also is expected to sign the legislation.

Among the surprise "no" votes in the Senate was Sen. Charles Grassley, R-Iowa, a strong advocate for farmers who still farms himself. Grassley has pushed for years for tighter farm-payment limits and actively engaged rules. The final conference report largely went with changes made in the House bill that opened up farm payments to cousins, nephews and nieces without addressing tighter active-engagement requirements to receive payments that Grassley had championed.

On the Senate floor, Roberts said the farm bill provides certainty and predictability to farmers in all regions and in all crops. The bill also maintains program integrity for food-assistance programs while addressing other key areas such as research funding, lines of credit and risk management in agriculture.

"It means providing the tools and then getting out of the producer's way," Roberts said. He later closed with, "Let us tell those farmers, ranchers and growers who are going through tough times that they are going to be good for the next five years," Roberts said, noting ag lenders also were watching.

Sen. Stabenow, D-Mich., ranking member of the Senate Agriculture Committee, emphasized that the Senate worked to create a "hard-fought, bipartisan agreement to strengthen the diversity of agriculture and the 16 million jobs it supports." Stabenow stressed the need for the farm bill to invest in diversity of farms, whether they are large or small. She pointed to new investments in areas ranging from trade-promotion programs to farmer-market and local foods programs.

"We need to be able to sell around the world, and we need to be able to sell in our own communities," Stabenow said.

Some of the major provisions in the farm bill include:

-- Price Loss Coverage reference prices are changed to use a five-year Olympic average of prices that would allow reference prices to increase as much as 15% for commodity crops. The higher reference prices would be used for both the PLC and Agricultural Risk Coverage programs. After 2021, farmers would also be allowed to switch crops annually between ARC and PLC as well. In 2020, farmers will also have the option of updating yield data for each commodity up to 90% of the average yield for the farm from the 2013-17 crop years.

-- Increases the marketing loan rates by about 15% for corn to $2.20 a bushel, $2.50 for barley, about a 5% increase for sugar beets to 23 cents a pound and 24% for soybeans to $6.20 a bushel.

-- In crop insurance, the bill improves products for forage and grazing insurance.

-- Boosts the Conservation Reserve Program from 24 million to 27 million acres while lowering the rental payment to 85% of the average county rate for general sign up and 90% for continuous signup.

-- Direct loans from the Farm Service Agency will increase, with operating loan limits rising to $400,000. Loan guarantees would be increased to $1.75 million, and direct loans for farm ownership would be increased to $600,000.

-- Raises margin protection for dairy producers to $9.50 coverage for feed costs and offers more coverage options for producers with the first 5 million pounds of milk. Dairy farmers can also get 25% lower premiums by locking in coverage over a five-year period. Premiums also are reduced for large Tier II dairy operations.

-- Allows nieces, nephews and cousins to qualify for commodity programs while keeping the individual payment limit at $125,000. The bill also keeps the adjusted gross income (AGI) cap at $900,000, the same as current law.

-- Creates mandatory funding for a national animal lab network and a vaccine bank to defend against invasive livestock diseases.

-- Legalizes hemp as a crop and also creates insurance products for hemp producers.

-- With rural broadband, the bill gives USDA more authority to make grants for rural-broadband access, as well as more loan authority for such projects in communities.

-- In rural health, the bill puts emphasis on mental health with more tools to address opioid addiction, as well as reestablishes the Farm and Ranch Stress Assistance Network to deal with farmers facing mental stresses. The bill also provides authority for USDA to help address other rural emergency needs.

**

DTN Political Correspondent Jerry Hagstrom contributed to this report.

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

Follow him on Twitter @ChrisClaytonDTN

(ES/SK)

By DTN Staff

This article was originally posted at 11:04 a.m. CST. It was updated at 11:26 a.m. CST

**

OMAHA (DTN) -- Despite a challenging harvest season, USDA on Tuesday largely left corn and soybean production unchanged at 14.626 billion bushels of corn and soybeans at 4.6 billion bushels.

USDA released its monthly Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports for December on Tuesday.

Yield projections for corn remain forecast at 178.9 bushels per acre, and soybean yield was pegged at 52.1 bushels per acre, also the same as last month.

Among the few market number changes in the report, USDA raised production estimates for Brazil's soybean crop to 122 million metric tons (4.48 billion bushels) and raised Argentina's soybean crop to 55.5 mmt (2.039 bb).

Tuesday's new U.S. ending stocks estimates were neutral for corn, soybeans and wheat, said DTN Lead Analyst Todd Hultman. World ending stocks estimates from USDA were neutral for corn and wheat, but bearish for soybeans, he said.

Check this page throughout the morning for important highlights from the reports and commentary from our analysts on what the numbers mean.

For DTN's exclusive audio comments on today's reports, visit: http://listen.aghost.net/…

You can also access the full reports here:

-- Crop Production: https://www.nass.usda.gov/…

-- World Agricultural Supply and Demand Estimates (WASDE): http://www.usda.gov/…

CORN

USDA estimated 2018-19 corn ending stocks at 1.78 billion bushels, 45 million bushels higher than last month's estimate.

Production was left unchanged, as is typical in December reports. USDA reduced its expectations for imports by 5 million bushels (mb) and cut corn use for ethanol by 50 mb.

USDA tightened its range of average farm-gate prices by a nickel at each end of the range to $3.25 to $3.95.

USDA left Brazil and Argentina corn production forecasts unchanged at 94.5 mmt and 42.5 mmt, respectively.

Global ending stocks, estimated at 308.8 million metric tons, were 1.29 mmt higher than last month's 307.5 mmt estimate, due to higher production estimates in Ukraine and the European Union.

SOYBEANS

USDA held pat on soybean production, pegging it at 4.6 billion bushels even though farmers nationally faced harvest problems.

Harvested acres remained at 88.3 million with yield per acre projected at 52.1 bushels.

Ending stocks also remained unchanged at 955 million bushels based on a projected 1.9 billion-bushel export market for soybeans. The pre-report average had expected USDA to lower ending stocks to 938 million bushels based on export changed.

The average farm-gate price for soybeans was pegged at $8.60 a bushel, the same as last month, but USDA shifted the projected price range downward at the high end.

USDA did raise Brazil's soybean production 1.5 million metric tons to 122 million metric tons (4.482 billion bushels), reflecting higher yields in the Central-West region of the country where crops had benefited from favorable weather conditions.

USDA also raised Argentina's soybean production to 55.5 mmt (2.039 billion bushels).

Brazil's food and agricultural supply agency, CONAB, earlier Tuesday projected a soybean crop of 120.1 mmt (4.413 billion bushels).

WHEAT

U.S. wheat ending stocks for 2018-19 came in at 974 million bushels, 25 mb higher than last month. Without any changes to wheat production, USDA's ending stocks adjustments are due to a 25 mb reduction in exports.

The range of average farm-gate prices, from $5.05 to $5.25, was 15 cents higher on the low end and a nickel lower on the high end.

Globally, 2018-19 ending stocks were estimate at 268.10 million metric tons, up 1.39 mmt from last month. USDA sees a 0.8 mmt increase in Russian carry-in stocks and a larger Canadian crop more than offsetting a reduction in Australian production. Australia's crop forecast was trimmed by 50 mt to 17 mmt.

The WASDE report noted that Russia and other Black Sea suppliers are continuing to displace EU and U.S. exports, but expect those countries to be less competitive in the second half of the year.

COTTON

USDA raised U.S. cotton production 1% to 18.59 million bales and boosted yield per acre from 852 pounds to 860 pounds an acre. USDA attributed higher production mainly due to a 300,000-bale increase in Texas production. Cotton ending stocks were raised 100,000 bales to 4.4 million bales and USDA pegs the mid-price for cotton at 74 cents a pound, the same as November.

**

Stay tuned to DTN on Tuesday for a complete report of the most important numbers as they become available after 11 a.m. CST. At noon CST, join DTN's post-report webinar where DTN Lead Analyst Todd Hultman will be explaining what the day's numbers mean for grain prices. Sign up for Tuesday's webinar at: https://dtn.webex.com/…

U.S. ENDING STOCKS (Million Bushels) 2018-2019
Dec Avg High Low Nov
Corn 1,781 1,744 2,058 1,585 1,736
Soybeans 955 938 1,033 802 955
Wheat 974 969 1,025 924 949
WORLD ENDING STOCKS (Million metric tons) 2018-2019
Dec Avg High Low Nov
Corn 308.8 308.4 312.0 304.2 307.5
Soybeans 115.3 113.2 114.4 112.0 112.1
Wheat 268.1 267.3 270.0 265.0 266.7

(AG)

By Mary Kennedy
DTN Cash Grains Analyst

The Upper Mississippi River (UMR) shipping season is officially over as tows pushing barges, like flocks of geese, headed south for the winter. It's always bittersweet for those of us living near the Mississippi River in downtown St. Paul, Minnesota, when the last barge heads south for the winter. When I walk along the river this time of year, it's so quiet and calm, as if it has gone to sleep for the next five months.

However, during the winter season, the U.S. Army Corps of Engineers (USACE) (Corps) doesn't slow down. They keep busy with repairs to various locks that are closed until spring. Corps officials had asked to have all navigation vessels move south of Lock and Dam 6, near Trempealeau, Wisconsin, no later than midnight on Dec. 1, which required vessels near St. Paul, Minnesota, to depart from there no later than Nov. 30. The last tow to depart from St. Paul, Minnesota, was Motor Vessel Thomas E. Erickson, on Nov. 25, according to the USACE, St. Paul District.

Corps engineers began preparations for several winter repairs at numerous locks within the St. Paul District. According to the district website, engineers were scheduled to begin repairs at Lock and Dam 6 on Dec. 2. The locks include Lock and Dam 4, near Alma, Wisconsin; Lock and Dam 5, near Minnesota City, Minnesota; Lock and Dam 5A, near Fountain City, Wisconsin; and Lock and Dam 9, near Lynxville, Wisconsin, with repairs scheduled to begin Dec. 10.

The St. Paul District is where the "Mighty Mississippi River" starts its long journey through the middle of the United States to the Gulf of Mexico. The district borders follow the edges of four river basins -- the Mississippi River, the Red River of the North, the Souris River and the Rainy River -- and covers an area of approximately 139,000 square miles. This area includes most of Minnesota, the western half of Wisconsin, the northeastern half of North Dakota and small portions of northeastern South Dakota and northeastern Iowa. The district also shares approximately 500 miles of border with three Canadian provinces.

The St. Paul District is responsible for supporting inland navigation by operating 13 locks and dams and by maintaining the nine-foot navigation channel.

For now, the river will hibernate until spring when the first tow makes its way through Lake Pepin to signal the beginning of a new shipping season for the UMR. Lake Pepin is a naturally occurring lake and the widest naturally occurring part of the Mississippi River. It is located approximately 60 miles (97 km) downstream from St. Paul, Minnesota. It is a widening of the river on the border between Minnesota and Wisconsin.

On Wednesday, April 11, 2018, after cutting through ice on Lake Pepin, the first tow of the season, Motor Vessel Michael Poindexter, pushing 12 barges, locked through Lock and Dam 2, near Hastings, Minnesota, on its way to St. Paul. Her journey there signaled the start of the 2018 navigation season in the St. Paul District.

The last tow this year to depart the St. Paul District through Lock and Dam 10, the district's southernmost lock near Guttenberg, Iowa, was Motor Vessel Titletown U.S.A. She locked through Lock 10, heading southbound Dec. 1, officially closing the 2018 navigation season.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(BAS/AG)

By Lance Woodbury
DTN Farm Business Adviser

Everyone knows the importance of accountants, attorneys and wealth managers when planning the transition of the farm or ranch to the next generation. And, for good reason, as getting the legal, tax and financial strategies wrong can lead to unnecessary costs and legal problems.

Less frequently emphasized but equally important to the process of transitioning is self-awareness, or the ability to see your strengths and weaknesses, and understand your preferences and biases. Being knowledgeable of your problem-solving style, your family's transition history, your future goals and your financial needs are the keys to being able to effectively "let go" of the business. Consider the following reasons each area is important.

PROBLEM-SOLVING STYLE

Each of us has a unique way we approach our daily work. Kathy Kolbe, creator of the Kolbe Index, outlines four action modes. Some people are more detailed, some are process oriented, some are more improvisational and some tend to be very hands-on. Each action mode is valuable and can get the job done, but each will do the work in a different way. If you aren't aware of the strengths of different styles, your bias for "your way" limits your view of the next generation's true capabilities.

TRANSITION HISTORY

When you look back at the transition of the business from the prior generation, how did it go? Was it an immediate transition because of an unexpected death or disability, or was it a gradual transition over time? Did your parents retire and move to town or stay close to the farm? Most importantly, how did you feel during that transition? Were you frustrated? Appreciative? Disappointed? Families in multigenerational businesses often repeat their transition history; after all, it's the only way they've seen it done. If prior transitions were difficult, recalling those difficulties and the pain they caused can help you change your transition process for the better.

FUTURE GOALS

For a transition to go smoothly, it helps to feel a pull toward your next chapter in life. That could be as simple as traveling or spending time with grandkids spread around the country, or as challenging as doing church mission work in another country. (My grandparents became missionaries in Japan at age 65.) Your goals might involve improving your health, writing your memoirs, seeing new places, teaching, serving on boards or even starting a new business. Without a reason to look toward the horizon, you will focus on the current business, finding it hard to let go.

FINANCIAL NEEDS

One of the primary reasons for conflict in transitions is the senior generation looking over the shoulder of the younger generation. That may be appropriate when the younger generation is in its 20s or early 30s, but not so much when in its 40s or 50s. It leads to a general feeling that the incoming generation isn't trustworthy with business decisions.

Trust, however, isn't always the problem. Sometimes, the senior generation feels like it can't financially let go. It doesn't have a good understanding of its true financial needs -- in part because the farm has been paying many living expenses -- thus feeling tied to the farm's income stream. Improve the transition process by studying your income needs and articulating the sources of retirement funds. You'll help everyone in the process.

Family business handoffs are notoriously difficult. Gathering information from your advisers is important, but it's just as vital to gather information about yourself. If you identify your problem-solving style, your family's history, your future goals and your financial needs, plus get some help from your key advisers, you can improve your odds of a successful business transition.

**

Editor's Note: Write Lance Woodbury at Family Business Matters, 2204 Lakeshore Dr., Suite 415, Birmingham, AL 35209, or email lance@agprogress.com.

(AG)

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Ohio corn farmer Fred Yoder returned late Friday from a frustrating week in Poland listening to foreign ministers and others talk about what they think farmers globally must do to address climate change.

As chairman of the North America Climate Smart Agriculture Alliance, Yoder took part in a workshop as part of the 24th United Nations Conference of the Parties, described in climate talks as "COP24."

Yoder had expected a discussion about the pillars of climate-smart agriculture, which highlight increasing production sustainably, adaptation and resilience, and reducing greenhouse-gas emissions. But the talks took off in a different direction, and Yoder was taken aback by views that modern agriculture is broken and needs to be radically altered.

"During the workshop, they had a huge room with all of these different countries miked up, and I couldn't believe how many people came with positions not to our liking," Yoder said. "It's very anti-animal protein, and they want to go to a plant-based diet. They had an agenda, and that's the problem. It's not so much just about reducing greenhouse gases but being anti-animal agriculture."

Yoder finally got his chance to talk after hearing from people who want everyone to stop raising meat, champion only grass-fed production or overhaul production of commodity crops. Talk arose about reducing meat consumption 40% or putting a tax on meat globally.

First, Yoder noted how few actual farmers were involved in the 24th Conference of the Parties on climate change.

"I was kind of off-the-cuff, but whatever program they come up with, if they don't have farmers, whatever they come up with is dead in the water," Yoder said. "So I'm thinking to myself if we hadn't been there, silence is considered approval. The people supportive of mainstream agriculture were silent except for us."

Yoder questioned whether the COP24 in Poland was the best way for him to spend his time, especially when he still had some corn in the field because Ohio had been extraordinarily wet during the late fall. But Yoder believes U.S. farmers need a seat at the table in the global debate over agriculture and climate change. He's just not sure the talks are that practical.

"It just galled me they had the view that industrial agriculture is the root of all of our problems," he said. "It's simply not fair. I don't farm anything like I did 20 years ago. I'm more efficient and sustainable than I've ever been."

Yoder said farmers might one day get a price for the value of carbon and a scientific measure for what can be sequestered or reduced. "I'm still looking for the pony in the pile," he said.

CARBON COUNTING IN SOUTH DAKOTA

While Yoder might be frustrated over the international politics of food and climate change, more attention is being paid right now to the role of farm practices in reducing the carbon footprint of biofuels.

Members of the South Dakota Corn Growers Association have been researching just how much carbon farmers in the Northern Plains can store while growing corn. The effort began roughly a decade ago as SDCGA's leadership began to build the case that ethanol can show a lower carbon footprint because of practices on the farm. Because California's Low Carbon Fuel Standard scores greater value to fuels with lower carbon values, there are potentially hundreds of millions of dollars at stake for ethanol plants that can demonstrate lower carbon footprints.

"If you look at carbon, the supply chain and the end users, everyone is looking at this," said Lisa Richardson, executive director of the South Dakota Corn Growers Association. "From our perspective, we're trying to figure out the numbers and what the carbon footprint in South Dakota looks like."

Currently, California's LCFS does not take into account farm practices to reduce the carbon footprint of ethanol, but that door could swing open for farmers in the future. So the South Dakota Corn Growers got a peer-reviewed study, later reviewed by the Union of Concerned Scientists, looking at corn production practices and carbon storage.

"We have to figure out how to measure carbon lifecycles on the farms," Richardson said. "There is significant work going on in this space. I know, for us, this is one of our biggest research efforts, because we believe there is an opportunity."

The American Coalition for Ethanol produced a white paper recently on properly measuring the low-carbon benefits of corn ethanol. The paper analyzed life cycle modeling to ideally build more consensus for expanding corn-based ethanol production and use beyond the obligations of the Renewable Fuel Standard.

The report cites several recent lab studies seeking to encourage the Department of Energy, EPA and the California Air Resources Board to update data on emissions for corn and ethanol production. The studies include data on nitrous-oxide emissions, nitrogen retention, input use and corn transportation.

South Dakota's water balance helps because the state doesn't have excessive runoff that affects the nitrogen balance, Richardson said. Practices such as no-till and ridge-till production in the state grew out of ways to help address water-pressure issues.

"We don't have excess water; we're usually short on water, so we use all of the nitrogen," she said. "It doesn't leave, typically. There are some situations, but typically it doesn't leave. We are storing carbon even in conventional till because of all the organic matter we're putting back on the field."

This is a unique opportunity for the Western Corn Belt, Richardson said. "We want to lead this effort," he said, pointing to ways linking low-carbon farm production to precision agriculture. South Dakota State University recently announced the creation of a precision agricultural center and major at the university.

Originally, a small South Dakota ethanol plant made an application to the California Air Resources Board to look at the production practices of farmers delivering to the ethanol plant. The data was there, but it was just one small ethanol plant involved, and the effort got lost in the protocol and the time it would take by CARB to approve such a low-carbon pathway. The research, though, continues.

"I do believe there is an opportunity for corn-based ethanol, because of the farmers' production practices, that we can get into that market at a much higher blend level," Richardson said.

California has a cap-and-trade program, which has given carbon-credit pathways for rice growers in parts of the country, as well as wheat growers in the northwest Palouse region. More groups are looking at the cap-and-trade pathway, but the value for corn farmers is in the liquid-fuel market, Richardson said.

"A $100 carbon price (per ton) is worth about $80 an acre in South Dakota," Richardson said. "That would mean part of the benefit goes to the ethanol plant, and part of the benefit goes to the farmer."

Such work would further create opportunities for farmers if other states also created their own low-carbon fuel standards.

MEASURING SEQUESTRATION BENEFITS

As part of the South Dakota carbon sequestration study, the group Applied Ecological Services was hired to study the carbon sequestration on the farm of Ron and Keith Alverson near Chester, South Dakota.

Applied Ecological Services found that the Alversons' farm has been storing about 1.5 tons of carbon dioxide per acre going back over the past 32 years. Not only is the farm operation carbon neutral, but it's carbon negative. The Alverson farm sequesters enough carbon dioxide to offset all greenhouse gases tied to the farm, along with the emissions from 370 cars.

The Alversons use a ridge-till system that creates high seed beds, making it more high and dry when spring weather is still cool and moist. The practice makes it effective for growing high-residue continuous corn. The organic matter in the soil has grown from an average of 3.2% to 4.5% to 5% levels.

"When you do the math on that, however many pounds of carbon we've sequestered through the years offsets all of the emissions we've had from tilling, nitrogen fertilizer manufacturing and all of that stuff," Ron Alverson said. "It becomes a full life cycle assessment."

Ron's son, Keith Alverson, added, "We have just seen nice progress from where we started with carbon-depleted soils and just continued to build that up. So we think a lot of that has to do with the amount of corn in the rotation, the reduction of tillage and the growth we've seen in yields. I think others are getting there just because corn yields are getting high enough you can return carbon to the soil."

A high percentage of South Dakota's ethanol goes to California to meet its low-carbon fuel standard. Ron Alverson noted how much ethanol plants focus on counting carbon already because of the economic benefits.

"They're all becoming carbon counters, and it's always been my dream to transfer that to the farm and make all farmers carbon counters," Ron Alverson said. "Every time they go to the field, they should know what that's going to do to their carbon intensity. If we could get to that point, we could really make progress in agriculture, I think. We could incentivize things like reduced tillage and nitrogen management."

Ron Alverson noted California's Low Carbon Fuel Standard is tailored to that state's market and not generally as friendly to Midwest-based ethanol. A Midwest standard could be tailored to allow more specific farmer credits for production practices such as nitrogen management.

"It's all a cycle, and you have to look at the entire cycle when you get into carbon accounting," he said.

Outside of South Dakota, the National Corn Growers Association now has 140 farms in its Soil Health Partnership and will host its first summit in January where the Soil Health Partnership is expected to release more data from its on-farm studies. NCGA also has a USDA Conservation and Innovation Grant also looking at farm practices that sequester carbon and more analysis from that research is expected to come out early this spring as well.

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

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)

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