February 10, 2016

USDA World Supply And Demand Numbers Bearish

USDA released their February World Agricultural Supply and Demand numbers Tuesday morning to little fanfare as analysts expected only small changes across the board.  While that was largely true, carryout numbers of all three grains slightly exceeded analysts pre-report estimates:

  Feb USDA Report Pre Report Estimate Range of Estimates January USDA Estimate
Corn 1.837 bbu 1.815 bbu 17.52-1.947 bbu 1.802 bbu
Soybeans 450 mbu 449 mbu 425-491 mbu 440 mbu
Wheat 966 mbu 949 mbu 930-975 mbu 941 mbu


Global stocks of all three major grain categories increased as well.  Notably, USDA did not change their Brazilian soybean production estimate leaving it steady at 100 mmt for the 2015-2016 season.  Analysts were looking for a small decrease.  Argentinean soybean production was increased by 1.5 mmt to 58.5 mmt.


Stalled Cargo of French Wheat Leads to Court Action in Egypt

Major news outlets including Reuters News are reporting that international grain trader, Bunge Limited, has finally challenged a decision by Egypt’s state grain buyer to reject a cargo of French wheat that’s been stalled in an Egyptian port for weeks.

Egypt has fueled confusion in the global wheat market about whether it would accept shipments with any presence of ergot, a poisonous fungus that can cause serious illness or death if people consume contaminated grain products.

The company claims that the quality of the cargo of French wheat met the terms of Egypt’s tender — that allowed a maximum of 0.05% ergot at loading.

Bunge commenced legal proceedings against the country’s grain authority the General Authority for Supply Commodities (GASC). The state grain buyer did not issue an immediate reaction.

bunge logo



USDA May Face Lawsuits Over ARC-County Yields

After a bevy of issues this fall with the new ARC-County payments, USDA may face litigation for the way it tallied final county yields in some areas.  The issue arose this fall when FSA released the payment rates for the 2014 crop and some producers received less than what had been projected previously.

ARC-County and the Price Loss Coverage Program were both parts of the 2014 farm bill.  Farmers were given a choice of which program they wanted to enroll their individual crops in and that choice lasts for the life of the farm bill.  Many farmers used the projected payments as a source of cash flow in their own projections,with approximately 96% of soybean acres and 91% of corn acres enrolled in the ARC-County program. That program requires FSA to calculate a final county yield for each crop, the results of which are used to determine final payment rates.

The problem stems from the system FSA used to compile yield data.  ARC-County covers 21 commodities in more than 3,000 counties nationwide.  Because ARC is based on a five year rolling average, FSA needed five years of historical data plus one year of current data for each county, meaning there are approximately 100,000 possible crop and county combinations.  FSA has stated they have solid data for around 43,000 of those, primarily in prime production areas.  Marginal areas and outlying areas tend to have holes in their database, meaning FSA had to resort to secondary methods to calculate payments.

Some have argued those secondary methods were inconsistent with farm bill language.  FSA officials would not be quoted but said the agency has a solid system for coming up with yields considering the challenges it had.