Blog » Final 2019 Harvest Prices
Final 2019 Harvest Prices
"Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals and happiness." ~Thomas Jefferson
2019 Harvest Price
Friday marked the close of the harvest discovery period for the 2019 crops. The chart contains the average from the month long discovery period. RMA has not 'officially' released these values yet. They will do so early this week, but history has shown that this value changes little if at all.
What do the above numbers mean? Assuming 85% coverage level and optional unit structure, revenue losses will be paid on fall canola and fall wheat only if you have a production loss as well. On the other hand, spring wheat would have a revenue payment on an average or less yielding crop.
Here's a quick formula for reference:
Harvested bushels x harvested price x share = Revenue to count
Guaranteed revenue (from schedule of insurance) - revenue to count (from above) = Revenue excess or shortfall
Guaranteed revenue = acres x yield x price x coverage level x share.
45 Days - This is the length of time the MPCI policy allows for revenue claims to be turned in after the announcement of current crop year harvest prices. 45 days from a Tuesday or Wednesday announcement would take us to October 18th, 2019. A revenue claim for barley, fall canola and wheat would have to be turned in prior to this date.
2020 Projected Price
We're sailing along in a market that cannot seem to find any footing. August was not a friendly month for grains and new crop prices reflect that. As indicated previously, RMA annually recalculates the basis differential between Chicago vs Portland after September first. Sometime this coming week the current basis of $.79 will be updated and reflect the new 5 year average, which will then be included in the discovery average.
China - The ongoing protests that have occurred for the past 13 weekends in Hong Kong, have taken a marked turn of greater and more violent interaction between police and protesters.
Endangered species - Apparently wolves aren't the only threatened species...
https://www.drovers.com/article/online-threats-lead-cancellation-washington-wolf-meetings
Fertilizer - Analysts on a recent podcast shared the carryover inventory from this spring the greatest influence on pricing, as well as the Chinese currency devaluation as advantages for producers in the coming crop year.
Hemp - This crop seems to be the rage in some circles. At this time, only seed production is eligible for crop insurance for 2020. Fiber and or oil production may yet be approved in the future, but is not available today.
https://www.agweb.com/article/five-guys-socal-farms-goes-big-cbd-hemp
and this from EPA...
https://www.croplife.com/crop-inputs/epa-seeks-public-comment-on-pesticide-applications-for-hemp/?
Identify Theft - This seems to be an ever present danger and creeping closer to 'home' for each of us. Recently we've had customers share their personal stories about this happening to them to some degree.
https://www.propertycasualty360.com/2019/08/30/6-clear-signs-that-youre-a-target-of-identity-theft/?
The recommendation from various entities is for everyone to 'freeze' their credit. This is accomplished by calling the three major credit bureaus - Equifax, Experian and TransUnion, and placing a lock on your ssn so unauthorized credit isn't granted.
https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs
Markets - As stated above, the past month has been hard on the commodities. I believe market strengthening will first begin in the corn market and then correspondingly lift the wheat market. If an early frost is not received, this strengthening may not occur until late fall when the market finds fewer corn bushels than expected. USDA will provide a yield estimate in their next update scheduled for next week. This will mark the first crop report for the year to include yield estimates that will be based upon surveyors actually walking the field estimates. Keep mind, more than 25 million acres of corn have not yet reached dough stage, correspondingly, soybeans have more than 15 million acres not yet setting pods. Accuracy of in field estimates will be suspect...some have suggested a frost prior to halloween will be detrimental to crop development and quality.
Apples - Exports are down almost 30% for the 2018/19 season (last year's crop), effective 9/1 tariff increase of 10% brings total tariffs to 60%.
Biofuels - This week saw the closing or slowdown of another ethanol plant, making the total sixteen thus far this year. Unless and until the waiver gallons are reallocated, this market has been put off the rails by big oil. What a tangle web we weave...
https://www.dtnpf.com/agriculture/web/ag/news/article/2019/08/26/interagency-review-documents-show?
Cattle - I mentioned this in the last update how producers lost $100 per head on fat cattle after the fire; yet packer margins are more than $400 per head, which is well above prior record of $300 per head. Box beef prices are up almost 10%. Cattle harvest numbers have increased 8% the first week and 9% the second week since the fire and closure of the Holcomb plant. All coincidence I'm sure, nonetheless, USDA's Packers and Stockyards Division will be investigating.
https://www.reuters.com/article/us-tyson-foods-fire-usda/usda-to-probe-beef-market-after-tyson-foods-slaughterhouse-fire-idUSKCN1VI2CR
Dollar - Continues strengthening and causing headwinds for commodities, especially wheat sales. Currently at a high of 99.023, highest level since May 2017.
Wheat - Statistics Canada released data indicating all wheat estimates to be down 3% from 2018, 3% higher than 5-year average, but below USDA estimates. Spring wheat is estimated to be up almost 5% from last year and the largest spring wheat crop in six years. Ukrainian wheat crop available for export has increased, up 3 MMT to 19 MMT for the 2019/20 marketing year.
MFP - Round two of the market facilitation payments are beginning to show and be received. Alfalfa growers are eligible this go around, allowing only 2019 reported acreage. Here's a link to USDA's methodology of determining said payment rate per county. As always, contact your local FSA officer for the nitty gritty on this program.
https://www.usda.gov/oce/trade/USDA_Trade_Methodology_Report_2019.pdf
Weather - The doughty areas are not shrinking and the corn and bean crop continue to be significantly behind normal maturation stages for this time of year. I caught a podcast suggesting mid-October may a date required to get many acres across the 'finish line' assuming warm, sunny days. The same podcast also suggested that the weeks of September 16th - 20th and September 30th - October 4th models were forecasting strong cold air masses that could bring temperatures below freezing. Predicting that far out has poor accuracy at best and Lord knows what any hurricane activity does to disrupt normal weather patterns.
With areas beginning to plant the 2020 wheat crop, here's the near term precipitation forecast, for what it's worth.
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