AgWatch


Sign-Up For The Market Facilitation Program Ends December 6, 2019

DR. AARON SMITH

KNOXVILLE, TENN.
   On Thursday, the USDA released details for the 2019 trade mitigating support package for farmers. The 2019 version of the Market Facilitation Program (MFP) is very different than the 2018 version. 2018 MFP payments were paid based on production for specified commodities ($/bu or $/lb). For example, for each bushel of soybeans produced in 2018 producers were eligible to receive a payment of $1.65/bu. The 2019 version of MFP pays producers based on 2019 aggregated planted acres for specified commodities (alfalfa hay, barley, canola, corn, crambe, dried beans, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, triticale, upland cotton, and wheat). All 2019 planted acres for eligible commodities produced on a farm will be added together and multiplied by the county payment rate, however, planted acres cannot exceed 2018 planted acres for the farm. Acres must have been planted before August 1, 2019 to receive payment.
   Each county has its own payment rate (county specific payment rates can be found at:
https://www.farmers.gov/sites/default/files/documents/PaymentRates.pdf). In Tennessee, the average payment rate per planted acre is $62/acre with a range of $16/acre (Anderson County) to $126/acre (Hardeman County). Producers that filed a prevented planting claim and planted an FSA-certified cover crop, with the potential to be harvested qualify for a $15 per acre payment. Acres that were not planted in 2019 are not eligible for an MFP payment. Planted acres for 2019 are not available at this time, however 2018 FSA acreage data indicates the potential for up to 3.016 million acres eligible for payment in Tennessee (approximately $187 million to producers).
   Sign-up for the program is at local Farm Service Agency (FSA) offices and begins Monday, July 29 and ends December 6, 2019. Payments will be made in up to three payments. The first payment will be comprised of the greater of 50 percent of a producer’s calculated payment or $15 per acre. The first payment will be made in mid-to-late August. The second and third payments will be evaluated as market conditions and trade opportunities dictate. If conditions warrant, the second payment will be made in November, and the third in early January. Payment restrictions per legal entity ($250,000) and adjusted gross income (average 2014, 2015, and 2016 AGI of less than $900,000) will be imposed.
   The payments will help mitigate some of the financial losses producers have experienced due to trade disruptions.
   Corn
   Ethanol production for the week ending July 19 was 1.039 million barrels per day, down 27,000 from the previous week. Ethanol stocks were 23.689 million barrels, up 324,000 barrels. Corn net sales reported by exporters for July 12-18 were up from last week with net sales of 4.8 million bushels for the 2018/19 marketing year and 15.2 million bushels for the 2019/20 marketing year. Exports for the same time period were down 15 percent from last week at 22.8 million bushels. Corn export sales and commitments were 93 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to the previous 5-year average of 103 percent. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Upper-middle and Northwest Tennessee and weakened at Memphis and Northwest Barge Points. Overall, basis for the week ranged from 2 over to 28 over with an average of 14 over the September futures at elevators and barge points. September 2019 corn futures closed at $4.14, down 16 cents since last Friday.     For the week, September 2019 corn futures traded between $4.13 and $4.32. Sep/Dec(’19) and Sep/Dec(‘20) future spreads were 10 and 2 cents.
   Nationally, the Crop Progress report estimated corn condition at 57 percent good-to-excellent and 13 percent poor-to-very poor; corn silking at 35 percent compared to 17 percent last week, 78 percent last year, and a 5-year average of 66 percent; and corn dough at 5 percent compared to 16 percent last year and a 5-year average 10 percent. In Tennessee, the Crop Progress report estimated corn condition at 85 percent good-to-excellent and 2 percent poor-to-very poor; corn silking at 88 percent compared to 80 percent last week, 94 percent last year, and a 5-year average of 92 percent; and corn dough at 45 percent compared to 33 percent last week, 61 percent last year, and a 5-year average of 46 percent. In Tennessee, September 2019 corn cash forward contracts averaged $4.17 with a range of $3.99 to $4.32. December 2019 corn futures closed at $4.24, down 11 cents since last Friday. Downside price protection could be obtained by purchasing a $4.30 December 2019 Put Option costing 28 cents establishing a $4.02 futures floor. December 2020 corn futures closed at $4.16, down 2 cents since last Friday.
   Soybeans
   Net sales reported by exporters were down compared to last week with net sales cancellations of 2.9 million bushels for the 2018/19 marketing year and net sales of 8.2 million bushels for the 2019/20 marketing year. Exports for the same period were down 30 percent compared to last week at 23.4 million bushels. Soybean export sales and commitments were 105 percent of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to the previous 5-year average of 103 percent. Average soybean basis strengthened at Northwest and Upper-middle Tennessee and weakened at Memphis and Northwest Barge Points. Basis ranged from 48 under to 15 over the August futures contract at elevators and barge points. Average basis at the end of the week was 7 under the August futures contract. August 2019 soybean futures closed at $8.83, down 18 cents since last Friday. For the week, August 2019 soybean futures traded between $8.81 and $9.04. August/September soybean-to-corn price ratio was 2.13 at the end of the week. September 2019 soybean futures closed at $8.88, down 19 cents since last Friday. Aug/Sep and Aug/Nov future spreads were 5 and 18 cents.
   Nationally, the Crop Progress report estimated soybean condition at 54 percent good-to-excellent and 12 percent poor-to-very poor; soybeans blooming at 40 percent compared to 22 percent last week, 76 percent last year, and a 5-year average of 66 percent; and soybeans setting pods at 7 percent compared to 41 percent last year and a 5-year average of 28 percent. In Tennessee, the Crop Progress report estimated soybean condition at 82 percent good-to-excellent and 1 percent poor-to-very poor; soybeans blooming at 56 percent compared to 40 percent last week, 70 percent last year, and a 5-year average of 60 percent; and soybeans setting pods at 27 percent compared to 13 percent last week, 36 percent last year, and a 5-year average of 29 percent. In Tennessee, October/November 2019 soybean cash contracts average $8.74 with a range of $8.34 to $9.02. November 2019 soybean futures closed at $9.01, down 18 cents since last Friday. Downside price protection could be achieved by purchasing a $9.20 November 2019 Put Option which would cost 41 cents and set an $8.79 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.13 at the end of the week.
   Cotton
   Net sales reported by exporters were up compared to last week with net sales of 163,000 bales for the 2018/19 marketing year and 208,000 bales for the 2019/20 marketing year. Exports for the same time period were up 3 percent compared to last week at 318,300 bales. Upland cotton export sales were 116 percent of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to the previous 5-year average of 107 percent. Delta upland cotton spot price quotes for July 25 were 59.56 cents/lb (41-4-34) and 61.81 cents/lb (31-3-35). Adjusted World Price (AWP) increased 0.26 cents to 56.07 cents.
   Nationally, the Crop Progress report estimated cotton condition at 50 percent good-to-excellent and 10 percent poor-to-very poor; cotton squaring at 78 percent compared to 60 percent last week, 77 percent last year, and a 5-year average of 80 percent; and cotton setting bolls at 33 percent compared to 20 percent last week, 40 percent last year, and a 5-year average of 37 percent. In Tennessee, the Crop Progress report estimated cotton condition at 74 percent good-to-excellent and 6 percent poor-to-very poor; cotton squaring at 79 percent compared to 63 percent last week, 96 percent last year, and a 5-year average of 87 percent; and cotton setting bolls at 24 percent compared to 13 percent last week, 48 percent last year, and a 5-year average of 40 percent. December 2019 cotton futures closed at 64.54, up 1.47 cents since last Friday. For the week, December 2019 cotton futures traded between 62.9 and 64.68 cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.92 cent and 1.76 cents. Downside price protection could be obtained by purchasing a 65 cent December 2019 Put Option costing 3.2 cents establishing a 61.8 cent futures floor. March 2020 cotton futures closed at 65.46, up 1.48 cents since last Friday. December 2020 cotton futures closed at 66.3, up 0.57 cents since last Friday.
   Wheat
   Nationally, the Crop Progress report estimated winter wheat harvested at 69 percent compared to 57 percent last week, 79 percent last year, and a 5-year average of 79 percent; spring wheat condition at 76 percent good-to-excellent and 4 percent poor-to-very poor; and spring wheat headed at 92 percent compared to 78 percent last week, 96 percent last year, and a 5-year average of 94 percent. In Tennessee, the Crop Progress report estimated winter wheat harvested at 100 percent compared to 99 percent last week. In Tennessee, July 2019 wheat cash contracts ranged from $4.67 to $5.05 for the week.
   Wheat net sales reported by exporters were up compared to last week with net sales of 24.2 million bushels for the 2019/20 marketing year. Exports for the same time period were up 73 percent from last week at 18.2 million bushels. Wheat export sales were 33 percent of the USDA estimated total annual exports for the 2019/20 marketing year (June 1 to May 31), compared to the previous 5-year average of 37 percent. September 2019 wheat futures closed at $4.96, down 6 cents since last Friday. September 2019 wheat futures traded between $4.83 and $5.07 this week. September wheat-to-corn price ratio was 1.20. Sep/Dec and Sep/Jul future spreads were 8 and 25 cents.     December 2019 wheat futures closed at $5.04, down 9 cents since last Friday. In Memphis, June/July 2020 cash contracts ranged from $5.19 to $5.27. July 2020 wheat futures closed at $5.21, down 10 cents since last Friday. Downside price protection could be obtained by purchasing a $5.30 July 2020 Put Option costing 40 cents establishing a $4.90 futures floor. ∆
   DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee

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