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Coats 6-17-2019.jpg
Many acres prevented from being planted this year may not be eligible for MFP payments. However, they may qualify for pending disaster aid (H.R. 2157) and for prevented planting benefits under crop insurance.

Market uncertainty rises while disaster assistance emerges

While disaster assistance emerges to benefit affected producers, market uncertainty is rising.

Historic rainfall and subsequent flooding in many U.S. field crop production areas continues to be reflected in rising U.S. row crop prices. Corn and wheat prices are up, and soybean, rice, and cotton prices look to be benefitting from the situation. Production uncertainty will likely remain throughout this season.    

Corn: Excessive rainfall is alarmingly problematic with final 2019 U.S. corn planted acreage remaining highly uncertain and certainly below USDA’s initial March 29, 2019 planting intentions report, implying a possible near term price move to $5.22 per bushel.

That said, producer efficiency, swine flu, global policy disputes and competition, and other geopolitical uncertainties will continue weighing heavy on corn prices, June 14, 2019 close $4.53 per bushel, Charts B14 to B17.

Wheat: Wheat price strength is a key function of rising corn prices. With the Eastern Midwest expected to remain inundated with continuing rain showers the week of June 17, 2019, will likely be supportive of higher corn and wheat prices, as well as near term price support for soybeans and long grain rice, June 14, 2019 close $5.39 per bushel. Presently, there is little reason to believe wheat prices following the lead of corn prices will not reach their July 2018 high of $5.93 per bushel. As ongoing market dynamics unfold we will adjust our price outlook expectations, Charts B25 to B28.

Soybeans: The June 14, 2019 close was $8.97 per bushel. Given soybeans 2018/19 USDA bearish balance sheet and current reasonably strong 2019 production expectations, though not as strong as earlier expected, soybeans prices likely will remain near term in a sideways trading range of $7.77 to $9.30 per bushel. Final planted soybean acreage remains uncertain as long as excessive rainfall continues in the major U.S. Eastern Midwest production region, Charts B10 to B13.

Long Grain Rice: Near term rice remains in a sideways trading range. The primary trading range presently is July $10.31 to $11.71 per cwt. or $4.64 to $5.27 per bushel, June 14, 2019 July close $11.64 per cwt. or $5.23 per bushel. USDA’s bearish U.S. and global fundamentals for the 2018/19 and 2019/20 marketing periods are weighing heavy on this market, so now we wait on the June 28, 2019 USDA NASS Acreage Report to provide near term acreage guidance, Charts B18 to B20.

Cotton: Price weakness remains problematic. Cotton prices need to hold above .64-cents the week of June 17, 2019 or serious price weakness could emerge, June 14, 2019 close .66-cents per pound. USDA’s June 28, 2019 Texas, Oklahoma, and Kansas cotton planted acreage by state may be supportive to bullish for cotton prices, given the region’s own set of weather related cotton planting and production challenges, Charts B21 to B24.

Select Government Assistance  

The 2018 Farm Bill is very similar to the 2014 Farm Bill’s policy mechanisms, but with increased program participation flexibility during the life of the farm legislation. Producers will have the opportunity to sign-up for the 2019 and 2020 production years in the fall of 2019 after the final USDA FSA Rules and Regulations have been released. The 2018 farm legislation provides U.S. producers with risk protection and financial support. The three components of the farm safety net are:

  • Farm commodity programs,
  • Crop insurance, and
  • Disaster assistance programs.

Trade Aid Being Finalized

USDA again plans in 2019 to fund and implement three separate components of the trade aid package in addition to 2018’s $12 billion funding package.

  • The Market Facilitation Program (MFP) for 2019, administered by the Farm Service Agency, is intended to provide $14.5 billion in direct payments to an array of commodity producers.
  • A Food Purchase and Distribution Program, valued at $1.4 billion and administered through the Agricultural Marketing Service, is expected to be used to purchase surplus commodities affected by trade retaliation such as fruits, vegetables, some processed foods, beef, pork, lamb, poultry, and milk. These are for distribution by USDA’s Food and Nutrition Service to food banks, schools, and other outlets serving low-income individuals.
  • The Agricultural Trade Promotion Program, valued at $100 million, is to be administered by the Foreign Agriculture Service to assist in developing new export markets for U.S. producers.

On May 31, 2019 the Congressional Research Service (CRS) says, USDA has released preliminary information about the 2019 MFP. Not public are what the payment rates will be and how they will be determined. However, unlike the 2018 MFP, which limited payments to producers of seven commodities, the 2019 MFP proposes to make payments to producers of an expanded list of field crops (alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long-staple cotton, flaxseed, lentils, long- and medium-grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, and wheat), as well as milk, hogs, and certain specialty crops (tree nuts, fresh sweet cherries, cranberries, and fresh grapes).

For field crop producers, a single county payment rate per acre is to be calculated on a county-by-county basis using an as-yet-unannounced formula that is to consider historical production activity. Payments are to be based on each farm’s 2019 planted acres. In contrast, 2018 MFP payments were based on harvested production.

As a result, any acres prevented from being planted this year may not be eligible for MFP payments. However, they may qualify for pending disaster aid (H.R. 2157) and for prevented planting benefits under crop insurance. A farm’s total acres eligible for MFP in 2019 cannot exceed its 2018 plantings.

Hog producer payments are to be based on hog inventories, while dairy producer payments are to be per hundred pounds of historical milk production. The reference periods for these have yet to be determined. MFP payments may be made in a series of payments.

The first of these is to begin in late July or early August. The second and third tranches are to be evaluated relative to market conditions and trade opportunities—for example, a successful conclusion to the U.S.-China trade negotiations could temper the need for further MFP payments. Otherwise, if conditions warrant, the second and third payments may be made in November 2019 and early January 2020.

The share of payments to be issued in each tranche has not been announced. USDA has not indicated whether payment caps for individual producers will be imposed on MFP payments and whether an adjusted gross income (AGI) threshold may be enforced. USDA did apply payment limits and an AGI threshold to 2018 MFP payments. Another uncertainty is how USDA will notify MFP outlays at the World Trade Organization, where the United States has committed to limit outlays on programs that alter production incentives to less than $19.1 billion annually.

Supplemental Appropriations

On June 3, 2019, Congress passed H.R. 2157 (FY2019 supplemental), which authorized supplemental appropriations for new and existing agricultural programs at the USDA, among other assistance. The Congressional Budget Office (CBO) estimates that the FY2019 supplemental totals more than $19.1 billion in new budget authority over 10 years. The agriculture title (Title I), including nutrition assistance, is estimated to total $5.37 billion over the same period, or roughly 28% of the total act. All of the agriculture portion is designated as emergency spending.

Other Market Outlook for the Week Beginning June 17, 2019

$WTIC Light Crude Oil: Testing support and likely regaining price strength, June 14, 2019 close $52.51 per barrel, trading range presently $49.34 to $58.50 per barrel, Charts B6 to B9.

Geopolitical dynamics coupled with possible supply disruptions make this market challenging for analysts, so be highly respectful of price action.

$CRB Index: This index likely has put in a near term low of 170, June 14, 2019 close 175.

With global deflationary forces, remaining problematic; with many of the world’s commodities still surplus burdened; with the ongoing global realignment of the world’s currency, bond, equity, and commodity markets; and with a number of key global policy disputes, there simply remain limitations to this index’s near term upside, unless oil prices regain their upward advance, Charts B1 to B5.

Interest Rates: 10-Year U.S. Treasury Yield: Consolidating but downside bias remains. June 14, 2014 close 2.09 support at 2.00 and 1.87. Correction of the downside is warranted not required, Charts A1 to A4.

Given time the potential to revisit the July 2016 low of 1.43 is likely. The November 2018 high was 3.24. That said, global economic and geopolitical dynamics coupled with global government and central bank intervention will define the 10-Year U.S. Treasury Yield or interest rate.

U.S. Dollar Index: The U.S. Dollar Index remains in a slowly rising sideways to up trading pattern, which will likely be sustained for a period, Charts A5 to A8.

The dollar is currently at 97.07 on June 14, 2019. Consider the following about the U.S. dollar:

  • First, the slowly rising dollar is placing a drag on U.S. domestic and global growth, given today’s global economic and political dynamics, and
  • Second, a lower dollar would be supportive of current U.S. economic activity and global economies in general.

Global Equity ETF-ACWI: A bearish interpretation for this ETF is likely to continue to develop. June 14, 2019 price is $72.70 with a current trading range of $71.00 to $75.00, breaking below $71.00 would provide potential downside to $67.00 or lower, a slowly rising dollar will continue to put additional downside pressure on price.

Global equity market performance as measured by the All Country World Index ETF-ACWI, a broad range of international developed equity and emerging market companies, Chart A19B. Its previous all-time high was $75.94 in January 2018 and its near term low was in December 2018 at $60.92.

Emerging Markets ETF-EEM: This global emerging market ETF remains dangerously weak, which is a near term function of U.S. dollar strength, global market rebalancing, ununiform global economic momentum, debt burdened emerging economies and global geopolitical uncertainties.  

Emerging Markets ETF-EEM, Chart A20, made a high in January 2018 of $50.98, a low in October 2018 of $37.02, June 14, 2019 price was $41.10. The dollar’s near term slowly unfolding strength, China’s aggressive policy actions negative impact on global economic activity, coupled with European Union economic uncertainties are three key factors, which could limit near term potential upside to this ETF.

S&P 500: Expect near term price weakness. June 14, 2019 S&P 500 at 2890. Big Picture the S&P 500 moves in a sideways to up range of 2655 to 3068. Current all-time high was 2954 on May 1, 2019 and recent December 2018 low was 2347. No reason not to expect a potentially broad sideways to up trading range, Chart A16.

Conservation Webinar

Title:  Conservation Program Opportunities for Rice with Josh Hankins, Director of Grower Relations and Rice Stewardship Partnership for USA Rice, Thursday, June 20, 2019, 10 AM CST

Description: Great strides have been taken over the years to conserve our nation’s working ricelands with significant reductions in land, water, and energy use. As new conservation tools and programs emerge they present an opportunity to keep building on those accomplishments, but finding those opportunities is often the challenge. Also, learn about the USA Rice – Ducks Unlimited Rice Stewardship Partnership’s new opportunities for rice farmers.

Presenter: Josh Hankins is the Director of Grower Relations and Rice Stewardship Partnership for USA Rice. Josh is headquartered in Arkansas and leads efforts to deliver on-the-ground conservation initiatives, assisting rice producers with increased on-farm energy and nutrient use efficiencies, water and soil conservation and wildlife management. His efforts through public-private partnerships have helped bring in over $50 million of conservation funding to the rice farming industry.

Josh has wide-ranging work experience in the fields of agriculture, finance, and medicine. Josh grew up in Faulkner County, AR, received his degree from Pepperdine University in California, and lives in Little Rock with his wife and two daughters.

Link to register:

No Crystal Ball

Since no one has a crystal ball or knows the future always consult an investment professional or professionals before making investment decisions. The world’s most talented speculators, investors and money managers are challenged by today’s global business environment.   

Bobby Coats is a professor and extension economist in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail:

Download Slide Show for charts and expanded details, Click Download Link


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