Ag trade uncertainty looms over US planting season
Houston, 8 February (Argus) — Trade policy uncertainty could cloud the outlook for US crop values as farmers prepare to make their 2018 planting decisions.
China threatened anti-dumping measures over US sorghum this week in an apparent retaliation for US tariffs on other goods, a move that could play an outsized role on other crops. And the North American Free Trade Agreement (Nafta) — which has undergone several troubled rounds of renegotiations — is also in threat of faltering, which could have a ripple effect on US growers.
But the export trade ambiguity has so far had little impact on farmer planting intentions. For now, they are using familiar rules of thumb when deciding between corn, soybeans or other row crops: crop prices and crop rotations.
Early planting estimates from the USDA call for 91mn acres each for corn and soybeans for the 2018-19 season. Fertilizer wholesalers in the midcontinent said farmers will likely continue traditional crop rotation schedules and are paying close attention to crop profitability. Currently, the corn-to-soybean price ratio comparing futures prices of the crops marginally favors soybean acreage.
That scenario would keep US fertilizer demand in line with levels seen in 2017, which was echoed by Canada-based producer Nutrien this week.
But longer term, shifting trade policies and patterns could impact US farmer profitability.
One change could come from China opening an anti-dumping investigation into US sorghum imports this week. Sorghum is a smaller US row crop, accounting for only 5mn acres in 2017, but China was the leading buyer of US sorghum in 2017 at 4.6mn t, accounting for 82pc of total exports.
The opening of the investigation spurred higher corn futures prices because of potential switching from sorghum to corn by the feed sector. It also stoked concerns that China could eventually take aim at larger US crops, such as soybeans, which could have major repercussions on prices. China is the top importer of US soybeans in 2017, at 31.9mn t, accounting for 58pc of total exports.
There also remains significant uncertainty around the future of Nafta, which could have a major impact on US corn prices if scrapped or altered. Little progress has been made after six rounds of Nafta negotiations, which ended on 28 January, and talks could extend beyond March.
About 30pc of total US agricultural exports rely on Nafta and 13 states have more than 50pc of their exports hinging on demand from Mexico and Canada, according to the American Farm Bureau Federation (AFBF).
Mexico was the top buyer of US corn in 2017, importing 14.7mn t and accounting for 28pc of total exports, according to the USDA. Canada reduced its US corn needs in 2017 by 6pc from the prior year to 836,919 t. Combined, both countries accounted for about 30pc of total US corn exports.
Mexico was the second biggest consumer of US soybeans in 2017 at 3.9mn t.
The AFBF said in November that if the US withdrew from Nafta farmers and ranchers would be "less competitive in our top export markets and could result in billions of dollars of agricultural products accumulating in inventories, further weakening the US farm economy."