DTN Ag Headlines

By DTN Staff

This article was originally posted at 2:04 p.m. CST on Friday, Jan. 24. It was last updated at 2:40 p.m.

**

OMAHA (DTN) -- Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 12.0 million head on Jan. 1, 2020. The inventory was 2% above Jan. 1, 2019, USDA NASS reported on Friday.

The inventory included 7.37 million steers and steer calves, up 1% from the previous year. This group accounted for 62% of the total inventory. Heifers and heifer calves accounted for 4.59 million head, up 4% from 2019.

Placements in feedlots during December totaled 1.83 million head, 3% above 2019. Net placements were 1.76 million head. During December, placements of cattle and calves weighing less than 600 pounds were 465,000 head, 600-699 pounds were 455,000 head, 700-799 pounds were 413,000 head, 800-899 pounds were 295,000 head, 900-999 pounds were 95,000 head, and 1,000 pounds and greater were 105,000 head.

Marketings of fed cattle during December totaled 1.83 million head, 5% above 2018.

Other disappearance totaled 67,000 head during December, 11% below 2018.

DTN ANALYSIS

"Last week taught us all a valuable lesson surrounding the signing of the phase-one trade agreement, and that is the market tends to get ahead of itself, which causes problems later down the road," said DTN Livestock Analyst ShayLe Stewart. "Currently, there are enough bears in the marketplace to outweigh bulls by a landslide, and to some degree, that's fair.

"Placements have been higher on the last four COF reports, which becomes alarming as we look to marketing those feeders later down the road. And the cash cattle market hasn't been over performing the last two weeks. But it would be both negligent and unjust to overlook both the domestic and international demand for beef right now and see the driving demand that's pushing packers to keep the slaughter pace running at an exuberant level.

"Friday's COF report may have a bearish connotation to next week's early trade, and there's no doubt that the key factors to be watching this upcoming spring will be: 1) how feeders are managing their readily available fat cattle supplies; 2) the slaughter pace; 3) and the number of cull bulls and cows that are being bought by packers," Stewart said. "The number of cull bulls and cows that are being bought to process will affect how aggressively packers seek out cash cattle and, ultimately, feeders' ability to market their fat cattle."

**

DTN subscribers can view the full Cattle on Feed reports in the Livestock Archives folder under the Markets menu. The report is also available at https://www.nass.usda.gov/….

USDA Actual Average Estimate Range
On Feed Jan. 1 102% 102.2% 101.6-102.5%
Placed in December 103% 103.2% 100.5-105.3%
Marketed in December 105% 105.2% 103.9-105.8%

(AG)

By Todd Hultman
DTN Senior Analyst

I admit, this is a bit odd for a market analyst who is constantly being asked where prices are headed, but between you and me, I don't like making predictions.

Please understand, I put a lot of effort into making predictions and estimates because I know many are taking my words seriously and I want to do right by our customers.

It's not the embarrassment of possibly being wrong that I don't like as much as the concern that some will only focus on the prediction itself and not try to understand the factors that go into it. The real value of good analysis comes from understanding the key factors so that one knows how to adjust to the surprises that inevitably come along.

For example, I'm pretty sure the Kansas City Chiefs and San Francisco 49ers have a game plan ready for how they expect the Super Bowl will go next Sunday, but I also suspect the coaching staffs are preparing plans B and C just in case they run into a surprise.

In the same way, I'd like to offer an early outlook for soybean prices in 2020, now that the phase-one agreement with China has been signed. This is not a vision to be carved in stone, but an early expectation that could require adjustments along the way.

If you read Todd's Take from Jan. 16 (https://www.dtnpf.com/…), you know China agreed to buy $36.5 billion of U.S. ag products in calendar year 2020 and $43.5 billion more in 2021.

The one catch that makes the agreement tricky is that both parties acknowledged China's purchases will be based on "commercial considerations." Apparently, China does not want to be obligated to making any purchases that are not priced competitively with other countries.

Balancing those two aspects of the agreement is likely to make for an interesting year of U.S. soybean export activity. As of Thursday's close on Jan. 23, FOB soybean prices for March were priced 26 cents per bushel lower in Paranagua, Brazil, than at the U.S. Gulf. The anticipation of a big, 4.52 billion bushel (bb) soybean crop in Brazil has already started pressuring Brazil's prices.

Brazil's soybeans aren't harvested yet and this week's forecast for heavy rain across northern Brazil will introduce some delay. Barring significant crop loss at harvest time, China will likely soon be buying soybeans from Brazil based on "commercial considerations."

For that reason, it is difficult to imagine China buying much more than 100 million bushels (mb) of U.S. soybeans for the rest of 2019-20, going by the terms of phase one. USDA is currently estimating 475 mb of U.S. ending soybean stocks for 2019-20, so even modest purchases would help reduce the U.S. surplus, but sizeable purchases early in 2020 do not seem likely.

In terms of prices, it will be difficult for soybean traders to see much bullish evidence for U.S. soybean prices early in 2020 without some weather surprise. I expect August soybean futures will stay near $9.50 a bushel, the way they have the past four months.

The final four months of 2020 is the time of year when China normally turns to the U.S. for soybeans and that is when I would expect to see the bulk of China's phase-one soybean purchases this year. In 2017, before the trade dispute began, China bought $24.0 billion of U.S. ag products and soybeans comprised 51% of the total.

As I wrote last week, it is not practical to expect China to spend half of its phase-one commitment on soybeans in 2020 -- an amount that could buy over 1.6 bb of soybeans. Provided the U.S. has a decent soybean crop in 2020, a more modest total of 1 bb would be significantly bullish for U.S. soybean prices and put new-crop prices back near $10 or more.

The real bullishness of the phase-one agreement is likely to become more evident at the beginning of the 2020-21 season and the size of the next U.S. soybean crop will also play a big part by then. Knowing it could be difficult for new-crop soybean prices to rally at harvest time, we may not see new-crop soybean prices sustain trading above $10 until January 2021.

Again, the expectations above are sketched in light pencil and there are a lot of moving parts that could change along the way. After the trials and tribulations of 2019, I have a feeling many will be relieved to just get crops planted this year.

Best wishes for what promises to be an interesting new year.

**

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

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

Follow him on Twitter @ToddHultman

(BE/CZ )

By Tregg Cronin
DTN Contributing Analyst

Few financial assets have gotten off to as good of a start this year as Chicago wheat has, adding over 5.0% in 2020 to pair with its 11.0% gain in 2019. While the performance itself has been impressive, it is also worth noting Chicago wheat is now challenging the highest levels since 2015 after scraping decade lows just a couple years prior. So, it begs the question of where the strength is coming from, and with wheat, the answer is always more nuanced than it appears on the surface.

When discussing wheat, it is always best to start with a look at the by-class balance sheet. The soft red winter (SRW) wheat balance sheet saw planted acres in 2019-20 fall to the lowest since 2010-11, while harvested acres fell to 3.733 million, which were the lowest on record going back to 1986-87. Total supplies for the 2019-20 marketing year fell to 402 million bushels (mb) from 495 mb the year before, and were also the lowest since 1986-87. The low wheat prices from 2015 to 2019 have slowly been doing their job as carryout dropped from a seven-year high in 2016-17 of 215 mb to a projected 106 mb in 2019-20. Winter wheat acres planted in the fall of 2019 totaled 5.64 million acres versus 5.201 million the year before, according to USDA, so there is a possibility we've seen the low-water mark for SRW acreage

While supplies on the balance sheet are important, supplies held in CME Group deliverable warehouses are even more important. The wheat held in these warehouses is known as "the supply of last resort" as CBOT futures are backed by physical product as opposed to cash-settled indices on other exchanges. As of Jan. 17, there were 22.845 mb of soft red wheat in deliverable warehouses. This was down 1.887 mb on the week, and down a little over 30 mb from the year before to the lowest deliverable stocks since 2007-08. The 30 mb drop is down 56% from the previous year, which is drastically more than the 18.7% decline the USDA sees in total wheat stocks. If an end user cannot buy wheat in the cash market, they should always be able to stand in for delivery by being long Chicago wheat futures. If the supply of deliverable stocks and the amount of wheat registered for delivery declines to levels like we are seeing now, it is a good indicator the holder of that wheat and those delivery receipts is not going to part ways with them easily. The struggle between end users wanting to own wheat and commercials not wanting to part with their stocks helps us think about how futures can rise and calendar spreads can tighten.

Supply has been the largest driver of the price rally, but demand has also played a crucial role. The wheat behind the Chicago contract is SRW wheat, which is ideal for low-protein products like crackers and pastries. While no commodity demand is completely inelastic, there are times when a certain class of wheat can bring a value much higher than what one would perceive. Cash basis along the Ohio and Mississippi river systems is trading at 40 to 50 cents above gross delivery equivalence, meaning end users are having a very difficult time sourcing the bushels and the quality they need. Bids at the Gulf of Mexico for No. 2 SRW wheat are currently around 120 to 130 cents above the March futures board. These values would be 30 to 40 cents above a year ago and 60 to 70 cents above the three-year average. Countries like Egypt wouldn't take a second look at U.S. SRW wheat at these prices, but places like Mexico, Columbia and Nigeria remain consistent buyers because of the end use qualities they need.

One cannot talk about wheat and basis without discussing calendar spreads. The March/May calendar spread is trading a 1.25-cent inverse at the time of this writing. This compares with a 5.75-cent carry a year ago, a 12.75-cent carry two years ago and a 13.75-cent carry in 2017. For many years, Chicago wheat was the darling of managed funds because of the huge carries offered from the Variable Storage Rate (VSR) program. The hefty supplies of SRW wheat and the relatively tepid demand created great incentive for commercials to store wheat and funds to remain short futures. When funds are long and roll in a carry market, their "purchase price" is increased by the amount of carry. When funds are short in a carry market, however, their "sale price" is improved by the amount of carry. If futures volatility stayed low, as it did in wheat from 2015-19, funds could simply collect the positive roll yield from being short and deploy risk capital in other markets. As supply dynamics began to change in 2019, so too did calendar spreads.

Funds losing their carry market can be illustrated rather clearly when examining their positions from the CFTC. Funds ballooned their net-short position in Chicago wheat to 117,833 contracts on April 30, which was the largest net short since January 2018. Funds began to cover that position into summer, hitting a net short of 13,693 contracts on July 2 after harvest. They built the position back to a net short of 56,685 contracts on Sept. 3 before covering and going net long 6,424 contracts as of last week's data. To give a sense of just how rare it is that funds are net long in Chicago wheat, the average fund position for all weeks going back to Jan. 1, 2007, is a net short of 53,778 contracts. The amount of carry or inverse in Chicago wheat is likely to be a large indicator of fund positioning in 2020.

Chicago wheat has enjoyed an impressive run to finish 2019 and begin 2020. Much of the rally has been driven by the drop in SRW wheat production inside the United States due to weather and years of low prices. Producers responded to the oversupply situation by cutting planted acres to decade lows while Mother Nature cut harvested acres to record lows. Because of the unique characteristics of SRW wheat, the highest prices in nearly five years have not completely shut off demand. Finally, the structural changes to the Chicago wheat market removed the comfortable carries so many have been accustomed to, including managed funds. The speculative community responded in kind by moving to a very rare net-long position. The question now becomes whether they will be comfortable in extending that long position throughout 2020.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

(BE/CZ)

By Russ Quinn
DTN Staff Reporter

OMAHA (DTN) -- Whether you call it making forage supplies last longer or maybe eliminating forage feeding waste, cow-calf producers this winter need their supplies to last longer.

Short supplies of good-quality forages because of higher-than-average rainfall in recent growing seasons have limited the hay supply in most Midwest locations. This caused prices to climb. (See more on that at: https://www.dtnpf.com/…)

There are different practices to make forage supply last longer. These methods could include feeding hay to similar-aged cattle to limit waste, or even supplying alternative feed.

Regardless of what option cattle producers select, becoming more efficient when feeding hay and forage will help cattle producers' bottom line, according to experts.

TEST HAY

Before doing anything, cattle producers should test the energy and protein levels in the hay they have, advised South Dakota State University Extension Cow-Calf Field Specialist Adele Harty, located in Rapid City. Cattle with lower body condition scores (BCS) can indicate lower-quality hay.

In Harty's region of western South Dakota, there is a decent supply of lower-quality hay. The problem, as in many areas, is there is a shortage of higher-quality hay.

"You are testing hay mainly to see where energy levels are with the hay," Harty said. "In cold temperatures, cattle's energy requirements go up, and thus the hay fed needs to be good enough to meet these needs."

In some cases, supplemental energy will need to be fed to cow-calf pairs, and this could be in the form of corn, wheat middlings, distillers dried grains (DDG), soy hulls and beet pulps. Corn and DDG are readily available in many areas, while the other feeds might be more difficult to obtain, she said.

These feeds will help cattle meet their energy requirements, as well as provide higher levels of fiber.

FINDING DIFFERENT FEED SOURCES

Limited availability of quality hay has led some cow-calf producers to find different sources of feed.

Mike Berdo, a Washington, Iowa, farmer and cattle producer, said he has fed more corn silage to his cattle over the last two to three years. This has been partially because of lower hay quality and also because of plenty of corn available.

"We have seen our cows have better body condition scores due to feeding some silage," Berdo said.

Berdo plans to feed silage via a feeder wagon daily. His cattle will get 30 pounds of silage per head per day, he said.

Winter weather over the last few winters has been fairly extreme, and feeding cattle in these condition has been a challenge, he said. Adding silage helps to keep the cattle fuller, he said.

PROCESS HAY

Another way to make hay supplies stretch is to alter hay's form. Harty said processing (or chopping) hay makes all of the hay pieces shorter, so cattle have a more difficult time picking through and only eating part of the hay.

The cattle eat more of the hay, and thus, waste losses are minimized, she explained.

Jay Culver, a farmer and cattleman located in Iroquois, South Dakota, said he feeds his cattle very little free choice of forages anymore. Everything he feeds his cattle is ground up and run through a feed wagon and mixed with silage and DDG.

"We are short corn this year with all the prevent plant acres, so we will be feeding more DDG," Culver said.

Normally, he tries to feed his bred cattle three to four pounds of corn per day. This year, it will be less because of less corn available, he said.

Harty said feeding hay by different production groups (older cows versus heifers) allows the best use of forages. Generally, lower-quality hay can be fed to older cattle, while higher-quality hay can be fed to first-calf heifers.

Culver feeds his first-calf heifers separate from his older cattle, and the younger cattle get the available better-quality hay. He grinds separate piles of forage to control mixing, he said.

"The mixer wagon with distiller and silage makes almost any bale usable," he said.

LIMIT FEED?

Harty said another option is to limit feeding cattle in dry lot situations. In this practice, cattle are fed 75% of ration-balancing programs and still maintain weight.

Harty is limit-feeding cattle in dry lot situations. Every other day, she feeds 80 pounds of a balanced ration with the correct amount of protein and energy, she explained.

"The key to limit-feeding is to know forage quality and meet their nutrient requirements," she said.

Another way to feed forage more efficiently is limit waste by using some kind of barriers. Many cattle producers use feeders or panels to limit hay waste, as cattle do not have full access to the hay.

Harty said many producers in her home area of western South Dakota do not have the facilities and/or the equipment to feed cattle with such barriers. Many will unroll round hay bales on the range, she said.

North Dakota State University Extension had a press release in December, titled "Stretch Limited Hay Supplies." It can be found at https://www.ag.ndsu.edu/….

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

Follow him on Twitter @RussQuinnDTN

(ES/SK/AG)

By Lin Tan
DTN China Correspondent

BEIJING (DTN) -- While the U.S. celebrated the signing of the first phase of the U.S.-China trade deal at the White House, Chinese commodity buyers are still confused about their role in how to make the deal happen.

"I do not know how the government will manage to import the required agricultural products," said China Agricultural University professor Jun Wang. "Chinese policymakers normally set a goal first, then they will try to figure out the way to solve the problem. But it will not be an easy job this time."

Based on the first phase of the U.S.-China agreement, China is expected to buy $36.5 billion of U.S. ag products this year and $43.5 billion next year. Both numbers were based on increases from a baseline amount set in 2017.

"We do not know how this money will be allocated to different commodities and what commodities China can buy," Wang said.

China imported a total value of $24.0 billion of agricultural products from the U.S. in 2017, of which $12.3 billion was spent on soybeans, $3.2 billion on forest products, $1.2 billion on fish products and $700 million on pork. Soybeans accounted for more than half of total imports.

That means China's agricultural products imported from the U.S. will increase 50% in 2020 and 81% in 2021 from 2017, the highest year in history.

Wang said there's a lot that has to happen for China to prepare for such rapid increase in imports.

"International trade for agri-products does not only mean trading, it also includes other sections in the chain, such as production, logistics, storage, processing and consumption. It will take a long time for the two countries, as well as the world market, to reestablish a balance to facilitate the deal," he said.

Wang said increasing imports of soybeans to 50% above 2017 levels, like the deal calls for, will be difficult. China imported 32.9 million metric tons (mmt), or 1.2 billion bushels, of soybeans that year.

"Given the same price, this means China will need to buy close to 49 mmt (1.8 bb) of soybean," he said. "There may not be a market in China for this amount."

China has already purchased 11.7 mmt of new-crop soybeans from the U.S. this year. About 10 mmt of that shipped before the two countries signed the deal, with only 1.75 mmt waiting to be loaded on ships. Wang said the trade doesn't know whether that will count toward overall purchases.

"We already booked our positions all the way to June 2020 from Brazil," a purchasing manager of a crushing company, who could not disclose his name, told DTN. "There is not a lot of room for U.S. beans in the following months. Buying more old-crop beans from the U.S. will mean importing U.S. beans in the Brazilian market season. This will flood the China market."

He said all of the country's grain buyers, including state-owned companies COFCO and SinoGrain, are waiting for detailed regulations on how to buy soybeans since the 25% import tariff remains in place under the terms of the deal.

Since China won't be lowering the tariff, the government will have to create a mechanism to offset the tariff payment, or else U.S. soybeans won't be competitive.

Tariff rate quotas, which allow a certain amount of a commodity to be imported at a lower tariff rate, will also factor into China's purchasing decisions.

"China can buy other products with no tariff quotas, such as DDGs and sorghum, but the country still has tariff quotas on wheat (9.6 mmt), corn (7.2 mmt), rice (5.3 mmt) and cotton (0.89 mmt)," Wang said. "It may be easier for companies to buy more DDGs and sorghum."

Han Jun, vice minister of agriculture, said earlier this month that China will not increase its annual tariff quotas to accommodate the U.S.-China deal. Han was a member of the Chinese negotiating team.

It will be very difficult for U.S. to export ag products to be price competitive in China without a quota. For example, corn's import tariff is 1% within the quota, but once that quota is reached, it jumps to 65%.

Pork and beef import will be possible, depending on the market demand. China's pork production declined 21.3% last year to 42.5 mmt, Wang said.

"The Chinese government may need some time to figure out how to allocate buying powers to the market, given the different ownerships of the companies in the country and the national holidays this week and next week, as Chinese people are celebrating the traditional Chinese New Year," Wang said.

He added that state-owned companies, such as COFCO and SinoGrain, will buy according to the government orders since the country will pay it. But for foreign companies and private companies, profit is still the first concern.

(KD/AG)

By Russ Quinn
DTN Staff Reporter

This month, for the first time in quite a while, I have a Vintage Iron letter. For long-time readers of my column, I used to have quite a few folks send me stories about their old tractors. For whatever reason, the letters just stopped coming in as often.

But recently I got the following Vintage Iron letter:

**

I had seen something you wrote about International 1026 gold demos, so I thought I would show you my International 1456 tractor.

The tractor was bought by our family around 1990, I am 35 years old now and the 1456 was the first large tractor I ever operated by myself. I was around 7, I ran a disc with it and I remember having to stand up to push the clutch in.

It has had a few owners since 1990 but all were in the family. In late 2018, I traded a restored family tractor for the 1456.

The tractor also is loaded with options. It has the factory quick hitch, hydraulic seat, auxiliary belly fuel tank, fender radio and a Donaldson pre-cleaner.

In addition, if you look closely you will see it has 5088 wheel castings and dual hubs on the back. The castings were on one model only so they are hard to come by. The castings look the same as the 1566, 1568 and 1586 model tractors but fit the 3.5-inch axles.

My goal was to take a 1456 and make it look as if a 1556 would have been made. This is what it would have looked like.

This tractor still gets used every year and will continue to be used. It also originally came with a cab and right now I am in the process of putting a restored factory cab on the tractor since it had one originally.

James Piotter
Sleepy Eye, Minnesota

**

I thank James for the interesting story and photo of the sharp-looking tractor. I am a green man through-and-through, but those stout International tractors of the late 1960s/early 1970s are pretty darn cool.

We had good friends and neighbors who had International tractors of that vintage when I was growing up so I'm guessing I have seen a 1456 up close. I will admit, however, I don't know much about this model of tractor.

According to TractorData.com, the 1456 was built from 1969 to 1971. There were 5,592 Farmall row crop versions built and 294 IH Wheatland versions sold for a grand total of 5,886 tractors.

The original price of a 1456 tractor in 1971 was $12,400. The 1456 had an International Harvester 6.7 liter, six-cylinder diesel engine. The drawbar tested 114.69 horsepower, while the PTO tested 131.1 horsepower.

James' tractor had several equipment options, including the cab. The website said cabs, with both heat and air conditioning, were options on the 1456.

I have always been kind of fascinated by these tractors of the late 1960s and the early 1970s, as this was a time in which tractors were being built with more cabs. There were also many different versions of add-on cabs on the market.

My dad and uncle have a John Deere 4020 on which they put a Full Vision cab probably in the mid-1970s. We now have another 4020 with a Hinkler cab on it.

And you see these cabs on all brands of tractors. I had another uncle who for years had a John Deere 4230 with an add-on yellow cab (this was obviously a 4230 that didn't have a factory cab) and yet another uncle who had a 1960s Oliver tractor with white add-on cab.

I know a lot of folks were not big fans of these cabs that were not sound-proof, especially after newer series of tractors had much quieter cabs, but as someone with fair skin I was just happy to be out of the sun. The old cab, while loud, was kind of nice to be in out of the cold weather on our loader tractor while we pushed snow and fed cattle hay.

Thanks again to James for the interesting story. Do you have story about your vintage tractor?

Send me your story and maybe even a photo and we will use it in a future column. Everything old is new again and maybe we can revive Vintage Iron letters!

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

Follow him on Twitter @RussQuinnDTN

(SK/ES)

By Chris Clayton
DTN Ag Policy Editor

AUSTIN, Texas (DTN) -- In a speech late Sunday afternoon to the American Farm Bureau Federation, President Donald Trump highlighted his recent trade and regulatory victories for farmers while thanking them for standing by him.

The speech to AFBF's annual meeting marked the third straight year Trump has spoken at the convention. On Sunday, Trump reminded the farmer audience he had protected them from economic harm with trade-aid payments while at the same time thanking them for their support. Trump also vowed to come back next year.

The president's speech was full of praise for farmers while he restructured the last few years of trade disputes and economic challenges for producers as a return to good economic times for farmers that were arriving because of his administration's policy actions.

"You feed our people, you fuel our nation, you sustain our land, you uphold our values, and you preserve our cherished American way of life," Trump said. "We want our products made, grown and raised right here in the USA and that's what's happening."

Trump said he hoped farmers "remember before I took office" that American agriculture "was being crushed by an onslaught of massive taxes, crippling regulations, burdensome federal mandates -- you know about that. I released it. I released it all -- and horrendous trade deals."

PROTECTING FARMERS

When he ran for president, Trump said he promised to use everything in his power to protect farmers and he would "always have your backs." Of previous politicians, Trump said, "they talked a lot. They did nothing for you. I kept my promises."

While neglecting that net farm income peaked in 2013 under the Obama administration, Trump pointed out net farm income "plummeted by more than 20%" under Obama when farm income declined from 2014-16. The president cited farm income has gone up by more than $30 billion under his presidency.

"I don't think the farmers and ranchers have been in this position, maybe ever," the president said.

Much of the increase in farm income is attributed to the $20 billion in direct aid payments that were paid to farmers under the Market Facilitation Program, as well as $9 billion in disaster-aid payments to farmers. Agriculture Secretary Sonny Perdue specifically pointed to those payments when he introduced the president.

"You stood with President Trump and he stood with you," Perdue said. "You had his back and he had yours."

BONANZA DEAL FOR FARMERS

Perdue then reiterated comments he had made that the trade deal with China will be a "bonanza" for farmers.

Trump, early in his comments, said of the trade deals, "I told everybody you got to buy a lot of land and you have got to get great big tractors."

Trump noted China targeted agriculture for retaliation, "they even took ads saying what a person I was." The president defended the formula used for disbursing payments, saying money went to small farmers as well as large. He then said the final installment of Market Facilitation Program payments is coming soon.

"You know, the farmers came to me and said we don't want anything. We just want a level playing field," Trump said. "You have now even more than a level playing field."

The president pointed to the $40 billion to $50 billion in agricultural goods now promised as sales to China in each of the next two years under the phase-one trade deal signed on Jan. 15. Trump rattled off a list of commodities that he said will tear down market barriers and open new markets to China under the deal, including beef, pork, soybeans, poultry, seafood, rice, dairy, animal feed, infant formula and biotech products, the president said.

"This is an incredible success for the entire country and it was your fortitude, your perseverance and your devotion that made it all possible," Trump said.

The president added that the phase-one deal has created a stronger relationship with China as well. "We now have the best relationship we have had with China in many, many years and they respect us now," Trump said, also saying the relationship with Russia and other countries is better now under his administration. "We don't want people taking advantage of us."

Discussing the talks, Trump said he repeatedly walked away from talks with China, but the Chinese wanted a deal and brought his team back to the table. As this was happening, Trump said critics attacked him and media looked for farmers angry about prices and skeptical about the president's strategy.

"Thank you very much to the farmers and ranchers for standing with me and saying 'The president is right. Yes, it's tough right now but the president is doing the right thing.' Thank you," Trump said. "More than anything else, it proved to me that farmers love America and I just want to tell you that America loves our farmers."

USMCA PROVIDES MORE ACCESS

In a matter of days, the president also will sign the United States-Mexico-Canada Agreement into law to replace the North American Free Trade Agreement. Trump noted Canada will provide more access to U.S. dairy farmers with U.S. dairy exports expected to grow $300 million. U.S. poultry exports could grow 50% and egg exports even more. Canada will finally provide fair access to U.S. wheat as well.

Trump noted he is going to Europe this week to speak at the World Economic Forum in Davos, Switzerland. The president said economic leaders from other world powers will hear about the strength of the American economy. Citing the 3.5% unemployment rate and rising incomes, especially for blue-collar workers, the president said the U.S. has the hottest economy on the planet now.

"Everyone wants to come back to America; everyone wants to come back to the United States. We're where the action is," he said.

VENTED ABOUT IMPEACHMENT

Trump then vented about the impeachment against him. "Tell me what I get out of it? I get impeached. By these radical left lunatics. But that's OK. The farmers are sticking with Trump." That drew another loud cheer from the crowd.

He later criticized "far-left" Democrats, saying they want to raise taxes, "load you up with regulations" and raise energy costs. "More importantly, you won't be able to afford the energy to run your farm. We'll never let it happen."

Trump hit on the tax cuts approved early in his administration that virtually eliminated the estate tax for businesses and farmers. "If you love your children, you do not have to pay the estate tax or the death tax," Trump said.

Pointing to his decision last summer to approve 15% ethanol year-round, Trump said his administration is proudly promoting ethanol. "We're providing more support for ethanol than ever before."

CHANGES TO ENVIRONMENTAL LAWS

The president also said changes his administration was making to environmental laws would speed up reviews for infrastructure projects. He also noted the EPA's "waters of the U.S." (WOTUS) rule under the Obama administration has also been rescinded, though EPA's actions remain tied up in court.

"We have liberated American agriculture from an avalanche of environmental regulations," the president said. He later added, "As long as I'm president, the government is never going to micro-manage America's farmers."

Trump also touched on a water supply rule by the Army Corps of Engineers. Trump announced he was ordering the Army Corps of Engineers to withdraw the water rule that the president said allows federal government to restrict access to water.

"That is why I'm directing the Corps of Engineers to withdraw the rule ... and to allow states to manage water resources based on their own needs and what farmers and ranchers want. Water is the lifeblood of agriculture and we will always protect your water supply."

INVESTMENT IN RURAL BROADBAND ACCESS

The president also briefly hit on his administration's investments in rural broadband access, which includes a $20 billion program from the Federal Communications Commission that was announced earlier this month. "We are putting America first."

The president concluded, "We're the greatest country anywhere in the world and we are taking care of you."

Perdue and Trump also each offered their prayers and thoughts to AFBF President Zippy Duvall and his family. Duvall did not attend the convention because his wife of 40 years, Bonnie, passed away on Saturday after battling cancer.

"We want Zippy and his entire family to know we are keeping them in our thoughts and prayers," Trump said.

Scott VanderWal, vice president of AFBF and a South Dakota farmer, addressed the AFBF convention earlier in the day. "All of our members have the Duvall family in their thoughts and prayers," VanderWal said.

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

Follow him on Twitter @ChrisClaytonDTN

(ES/)

By Chris Clayton
DTN Ag Policy Editor

AUSTIN, Texas (DTN) -- Agriculture Secretary Sonny Perdue said Monday the third tranche of Market Facilitation Program payments is "assured" and the payment is "imminent" but he did not have a specific date when that announcement would be made.

Perdue spoke at the American Farm Bureau Federation annual meeting in Austin, following President Donald Trump's speech at the event on Sunday.

Perdue sought to clarify the difference between a "third tranche" of payments from the 2019 MFP and the possibility of a new program payment for 2020.

"I've been telling farmers all fall don't expect a 2020 Market Facilitation Program if we get a deal because you want trade, not aid, and we're going to get our trade."

MFP was meant to replace lost trade. As the phase-one deal with China comes into force, along with the finalization of the United States-Mexico-Canada Agreement, Perdue said the administration wants more trade to develop soon enough so another aid payment will not be needed. It may be summer or fall before those trade benefits show up.

"You remember the cry, we want trade not aid," Perdue told reporters after his speech.

Perdue left open a window, though, for a possible 2020 program, especially if President Trump orders new payments. That's what happened last spring after talks between the U.S. and China broke down. "I will tell you, not from my perspective, but the president has demonstrated the ability to do what it takes to preserve the ag sector in this country," Perdue said.

In his speech, the secretary highlighted the importance of the safety net in 2019 as crop insurance payments and disaster aid reached more than $9 billion, to go along with more than $10.8 billion in MFP payments. All of that helped boost farm income by roughly $18 billion, the secretary said.

"I hope the safety net helped. I know it's been painful, but I'm a farmer, and I'm an optimist, and I think 2020 is going to be better," he said.

In a question-and-answer session with Tennessee Farm Bureau President Jeff Aiken, the secretary said now that the administration has gotten some wins in agricultural trade, it is turning more attention to agricultural labor. The administration is working on "a renewed and refreshed ag labor program," he said.

"Now that we have got some daylight in trade that we're going to enforce, let's work on our labor situation, because if we don't have people who can help us grow these things and harvest our products, then it may not matter," Perdue said. "That may be the limiting factor."

Perdue said he has been trying to persuade others in the administration "to separate immigration, which is people wanting to become citizens, with a temporary, legal guest-worker program.

"That's what agriculture needs, and that's what we want," Perdue said. "It doesn't offend people who are anti-immigrant because they don't want more immigrant citizens here. We need people who can help U.S. agriculture meet the production."

Another issue Perdue wants to reform in an agricultural guest-worker program is wage rates. "We're kind of pricing ourselves out of business here," Perdue said. "We've insisted ... that we have to do something with wage rates."

Perdue said the adverse wage rate has set almost a $15 minimum wage for agriculture, "and no other business in the country has that."

Aiken and Perdue said it was a national security issue to have the labor needed to ensure food production is maintained.

"We all know how difficult it is to hire domestic workers," Perdue said. "We've got produce growers and fruit growers who have tried and tried and tried to get domestic workers and they just don't want to work in ag-related jobs any longer, irrespective of what you are paying there."

Perdue noted in his speech he wanted to address some of the issues farmers were concerned about in 2019. He said people had concerns about the crop reporting at the National Agricultural Statistics Service survey.

"We got kind of paranoia in light of all the prevented planting and other kind of things that were falling on us," Perdue said "We got a little conspiratorial thinking NASS was out to get us too."

Perdue said he questioned staff and NASS staff were at the AFBF meeting to answer questions about the methodology on how USDA collects that information. But Perdue expressed confidence about the acreage and production data that came out over the summer.

"I think we'll find out their numbers that sort of surprised the market back in June -- that they may have been more correct than the market was ultimately," Perdue said.

The secretary said USDA will continue to improve on its acreage surveys and Crop Production reports. He said USDA will use better surveys, local satellite information, and more real-time data "to help determine even more accuracy," along with enumerators that go along with surveys. He asked for ideas to improve the methodology.

"If you have got an idea how we can use electronics and maybe an app for better surveys, we would like to hear those. We are open to those kind of ideas of using modern technology to get you the best data you can to make plans for your farms."

The secretary added, "At the end of the day, 2019 was tough, but I do believe we have bright days ahead.

Discussing enforceability on the $40 billion to $50 billion in expected agricultural sales to China, Perdue said USDA will keep track of those sales. USDA will provide details to the U.S. trade representative's office and President Trump about what has been sold to China. Staff at USTR would then take those figures to show whether China is meeting its obligations.

"The enforceability provisions are fairly unique though. It's unilateral and the ability to reinstall punitive tariffs there without retaliatory ability on China's part," Perdue said. "The only ability they would have would be to withdraw from the whole agreement. Then it would be a new ballgame."

Perdue said China "has exempted pork and soybeans already," but was leaving other tariffs on different sectors. That is a different interpretation than commodity groups in pork and soybeans understand. Soybeans, for instance, still see a 30% published tariff rate, on top of a normal 3% rate, but China is issuing various tariff waivers to companies importing soybeans. Pork products have tariffs of 60% to 68% on them.

The U.S. is still imposing 25% tariffs on $250 billion in Chinese goods. "So we didn't have a big case to stand on in insisting they remove all of those tariffs," Perdue said.

Before reaching the deal, Perdue had repeatedly said the U.S. had become too reliant on China as an agricultural buyer. The secretary said other trade deals such as USMCA, Japan and South Korea are going to continue to help diversify exports, and the Trump administration is looking to India as well, where the U.S has not traditionally sold a lot of agricultural products.

"We're prepared to expand the envelope of exporting countries, again as a hedge against China fulfilling those export numbers," Perdue said. "But as I said earlier, we don't want to become dependent on any one."

Perdue said he does not know when the president will sign the USMCA, but the secretary indicated Trump may sign the deal in multiple states to highlight the benefits of the trade deal. "This is a big deal for agriculture as a whole and I think it will be signed maybe in multiple states around the country," Perdue said.

The secretary also touched on investments in rural broadband, saying it will change rural Americans' lives, going beyond precision agriculture. E-commerce, tele-medicine and distance learning can all be improved.

"By golly, it's just immoral country kids and rural kids have to drive to town to do their homework today while people in other cities can do it all along," Perdue said, drawing applause from the crowd.

Perdue said internet connectivity is more than a luxury, but a service in the 21st Century. "It absolutely is a business tool that needs to be available to our farms and our rural areas," he said.

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

Follow him on Twitter @ChrisClaytonDTN

(BAS/CZ)

By Greg D. Horstmeier
DTN Editor-in-Chief

OMAHA (DTN) -- A long, drawn-out crop year and ongoing trade battles didn't dampen farmers' moods, as they ended 2019 with new optimism and were solid in their support for the Trump administration.

The DTN/The Progressive Farmer Agriculture Confidence Index has risen to 164.1 in December 2019, significantly higher than the Index of 110.2 in March and the December 2018 level of 109.2.

Farmers were surveyed in mid-to-late December. About 75% of farmers said that if the 2020 presidential election was held at that time, they would vote to reelect the current administration.

About a quarter said they would likely not vote for the current administration. The question was asked without respondents knowing who an alternative candidate would be.

Both farmer confidence and their support of the president is noteworthy, given events going on at that time. Grain farmers had just finished a long, wet harvest, and some farmers in the upper Midwest still had fields to harvest. The Trump administration in December promised to have a trade deal signed with China within a month, although similar previous promises had not come to pass. That phase-one trade deal was signed Jan. 15, and included the promise that China will double its purchases of U.S. agricultural products.

Mid-December also saw Congress being pressured to multitask, to ratify the United States-Mexico-Canada Agreement (USMCA) while it simultaneously prepared to impeach the creator of that trade pact. USMCA, too, now appears ready for approval by President Donald Trump. Trump told an audience at the annual American Farm Bureau Federation convention Jan. 19 that his team was preparing the trade documents. "I will sign it very soon," Trump said.

SURVEY METHODOLOGY

The DTN/The Progressive Farmer Agriculture Confidence Index is conducted three times a year: early spring before planting, late summer just prior to harvest, and just before the end of the year, during tax preparation time. The telephone survey is conducted with at least 500 farmers who identify as being actively engaged in their farm operations.

Farmers responding to the telephone survey answer a series of financial and income questions that compare the present to how they expect conditions to be in the coming year. A score is given to rate their "present situation" and to their "future expectations." Those numbers are combined to create the overall Agriculture Confidence Index.

Numbers above the baseline of 100 indicate optimism -- the higher the number, the higher the optimism. Scores below 100 are considered pessimistic.

SLIGHTLY OPTIMISTIC AT PRESENT

For December 2019, farmers gave their present condition a slightly optimistic rating of 115.5, the first time this piece of the index has been above 100 since December 2017. The present-time rating was a pessimistic 63.0 in March; it was an even lower 56.5 a year ago.

"This level of recovery also has not been seen since the summer of 2018," said Robert Hill, economist and original designer of the Agriculture Confidence Index. "While this is a very positive development, the present situation is still only about half the level achieved in the go-go days of 2012."

The steep rise in the overall index is also driven by farmers' record optimism for the future. The rating for "future expectations" is 191.0, above the 136.1 of March 2019 and the 138.0 of December 2018. The previous record for future expectations was 163.6 in March 2017.

"The expectations for the future have never been greater over the entire decade the ACI has been in existence," Hill said. "This is true for every subgroup investigated, including regions, type of farm, or income class."

Midwestern farmers were the least positive about current conditions, dipping into pessimistic territory at 97.5, but still above previous 2019 levels. Midwest future expectations rating was a record 196.1, creating an overall ACI of 155.5.

Southeastern farmers were most pleased with current conditions, with a 162.9 rating and a slightly lower 153.1 for expectations of the future. Overall, the ACI for that region was 155.9.

"Bottom line is the farmers are feeling pretty good about their current situation and have very high hopes for the future. Their views on income prospects have improved, both for farm income and overall household income. On the input side, their attitudes also improved on current levels of input prices and on future input prices."

AGRIBUSINESS RESPONSES

In conversations with ag input companies, Hill noted that purchases for the 2020 season were behind normal levels at year's end. "A 'delay hangover' from the 2019, added onto by a 'prevent hangover,'" had farmers cautious about placing orders. "In many areas, fall fieldwork was not completed and has dragged over to hopes for open weather in late-winter or early spring in order to get caught up. And there are still some unharvested crops out there," he said. With the farmers' improved optimism, both on income and costs, "we should see these input orders placed quickly now."

In addition to the survey of farmers, DTN/The Progressive Farmer also conducts a similar query of at least 100 ag retailers for the DTN/The Progressive Farmer Agribusiness Index. Scores around that index are flat to slightly lower. The DTN/The Progressive Farmer Agribusiness Index is at 100.5. It was 103.4 in March, 95.6 a year ago.

"Agribusinesses serving the farmers don't seem to share the optimism felt by their customers, and have turned slightly more sour than a year ago," Hill noted.

Greg D. Horstmeier can be reached at greg.horstmeier@dtn.com

Follow him on Twitter @greghorstmeier

(ES/AG)

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