- DTN Headline News
Todd's Take
Monday, February 24, 2020 1:01PM CST
By Todd Hultman
DTN Lead Analyst

Coming off 2019 -- when USDA made optimistic planting estimates when corn wasn't planted, counted unharvested corn in fields as part of stored grain, and insisted production reached 13.69 billion bushels (bb) in spite of cash prices to the contrary -- this week's Ag Outlook Forum added even more confusion to the mix.

It all began Thursday morning when USDA Chief Economist Robert Johansson said in his presentation he expects U.S. ag exports to total $139.5 billion in 2020, up just $4 billion from 2019. He also expects net cash farm income to fall, from $120.4 billion in 2019 to $109.6 billion in 2020. Neither of those estimates match the initial enthusiasm of the phase-one trade agreement with China.

DTN Ag Policy Editor Chris Clayton reported on Ag Secretary Sonny Perdue's response to the low expectations Thursday. You can read that here:

https://www.dtnpf.com/….

In short, the secretary tried to say USDA's estimates did not include the impact of the phase-one agreement, but in fact, those statements don't line up with what the chief economist said in his posting on Feb. 6 or in Thursday's presentation.

On Feb. 6, the Office of the Chief Economist posted:

"Publicly available information and data pertaining to the (phase-one) Agreement will be reflected in USDA's World Agricultural Supply and Demand Estimates (WASDE) report beginning in February 2020 and will also be reflected in subsequent and related reports such as the Outlook for U.S. Agricultural Trade."

https://www.usda.gov/…

Slide number six of Johansson's presentation on Thursday showed China's U.S. ag purchases estimated at $19.5 billion in 2020, a number that is well below the $36.5 billion target in the phase-one agreement.

In spite of the conflicting explanations, I think there is enough information here to untangle the knots and have a sense of what is happening moving forward.

On Friday morning, USDA's Grains and Oilseeds Outlook estimated U.S. ending corn stocks at a whopping 2.637 bb in 2020-21, based on the 94.0 million acre planting estimate. The export estimate of 2.100 bb is actually higher than I expected and almost certainly includes phase-one purchases.

USDA's U.S. soybean ending stock estimate of 320 million bushels for 2020-21 is more bullish for prices than USDA's farm price estimate of $8.80 per bushel. The 2.050 bb export estimate is also bullish and can only be achieved with help from this year's phase-one agreement.

If you have followed this column or heard me talk this winter, you know I never expected China to reach the $36.5 billion purchase target in the phase-one agreement, as it was highly unlikely from the start and was weakened by a commercial consideration clause that gave China wide latitude in the purchases it actually makes.

However, I still consider phase one to be modestly bullish for grain prices in general and especially so for soybeans. I'll say again that even $20 billion or $25 billion of ag purchases from China would be significant improvement over the past two years.

Obviously, USDA is in the uncomfortable position of not wanting to admit the $36.5 billion target will probably not be reached. This time around I tip my hat to Chief Economist Johansson for providing a reasonable starting point for corn and soybean export estimates in 2020, given the factors we know.

I'm not going to blame politicians for trying to look good -- it's what they do. But it's interesting that the coronavirus may end up providing the excuse they need to avoid talking about the shortcomings of the commercial consideration clause in the phase-one text.

I have serious concerns about whether USDA's planting totals can be reached in 2020 and I have disagreements with USDA's price estimates for corn and soybeans, but we have a whole season ahead to learn more about that.

As typically happens at this event, Friday's new USDA estimates aren't likely to have much price impact and there will be many changes ahead. They have, however, started the conversation from a reasonable place.

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

Follow him on Twitter @ToddHultman

(BE/CZ )


blog iconDTN Blogs & Forums
DTN Market Matters Blog
Editorial Staff
Tuesday, February 25, 2020 10:08AM CST
Friday, February 21, 2020 11:39AM CST
Friday, February 14, 2020 11:12AM CST
Technically Speaking
Editorial Staff
Monday, February 24, 2020 9:14AM CST
Tuesday, February 18, 2020 8:53AM CST
Monday, February 10, 2020 8:24AM CST
Fundamentally Speaking
Joel Karlin
DTN Contributing Analyst
Friday, February 21, 2020 8:08AM CST
Wednesday, February 19, 2020 11:04AM CST
Tuesday, February 18, 2020 10:59AM CST
DTN Ag Policy Blog
Chris Clayton
DTN Ag Policy Editor
Tuesday, February 25, 2020 2:29PM CST
Tuesday, February 25, 2020 11:19AM CST
Friday, February 21, 2020 11:36AM CST
Minding Ag's Business
Katie Behlinger
Farm Business Editor
Wednesday, February 19, 2020 12:08PM CST
Tuesday, February 11, 2020 1:24PM CST
Friday, January 17, 2020 4:55PM CST
DTN Ag Weather Forum
Bryce Anderson
DTN Ag Meteorologist and DTN Analyst
Tuesday, February 25, 2020 2:55PM CST
Friday, February 21, 2020 2:16PM CST
Thursday, February 20, 2020 12:43PM CST
DTN Production Blog
Pam Smith
Crops Technology Editor
Thursday, February 13, 2020 11:14AM CST
Friday, January 31, 2020 2:40PM CST
Thursday, January 9, 2020 10:55AM CST
Harrington's Sort & Cull
John Harrington
DTN Livestock Analyst
Monday, February 24, 2020 2:43PM CST
Monday, February 17, 2020 10:48PM CST
Monday, February 10, 2020 4:00PM CST
South America Calling
Editorial Staff
Tuesday, February 11, 2020 5:13PM CST
Tuesday, February 4, 2020 5:18PM CST
Thursday, January 30, 2020 2:52PM CST
An Urban’s Rural View
Urban Lehner
Editor Emeritus
Thursday, February 20, 2020 1:35PM CST
Monday, February 10, 2020 8:59AM CST
Monday, February 3, 2020 9:51AM CST
Machinery Chatter
Dan Miller
Progressive Farmer Senior Editor
Friday, February 14, 2020 2:50PM CST
Thursday, February 6, 2020 4:06PM CST
Monday, January 27, 2020 3:59PM CST
Canadian Markets
Cliff Jamieson
Canadian Grains Analyst
Tuesday, February 25, 2020 3:17PM CST
Monday, February 24, 2020 3:18PM CST
Friday, February 21, 2020 3:21PM CST
Editor’s Notebook
Greg D. Horstmeier
DTN Editor-in-Chief
Tuesday, December 31, 2019 10:39AM CST
Friday, November 22, 2019 5:37PM CST
Monday, November 11, 2019 2:26PM CST
Copyright DTN. All rights reserved. Disclaimer.
Powered By DTN