Secretary of Agriculture Sonny Perdue announced some preliminary details on the tariff aid package. As expected, it is heavily weighted towards soybeans. Initial payment rates for soybeans are at $1.65 per bu., 1 cent for corn, 86 cents for sorghum, and 14 cents per bushels of wheat. Hogs payments are down at $8.00 per head. There are payment caps at $125,000 and payments will be based on 50 percent on the 2018 production. Interested producers can apply after harvest is 100 percent complete and they can report their total 2018 production. Beginning September 4th of this year.

U.S. and Mexico have reached a preliminary trade deal. The new trade agreement would be called the United States-Mexico Trade Agreement, while completely discarding the NAFTA name. The biggest changes in the agreement have favored the automobile sector requiring that a certain percentage of each car to be assembled with parts from either country. In the new deal all tariffs from agriculture related products are to be removed. Not all details have been finalized so changes are still possible. Pressure is mounting on Canada to come to the table. All three countries have been quoted that a trilateral agreement would be ideal for all countries involved.

China and U.S. trade negotiations seemed to have stalled after 3 days of negotiations. It was reported that China quietly removed U.S. crude oil from its retaliatory tariff list. They are expected to resume importing U.S. crude in October. This news has offered hope for the ag sector but many feel a solid resolution is unlikely in the near future. While not confirmed, sourced indicate China will be reluctant to make any progress before the mid-term elections.

Crop ratings were released Monday afternoon with no change to corn at 68 percent good to excellent and a 1-point improvement for soybeans at 66 percent good to excellent. This was not surprising as much of the Corn Belt saw beneficial rains last week. As with the previous week and as noted on the ProFarmer tour, the corn crop remains about a week ahead of schedule in the dough, dent and mature stages. Soybeans are also ahead on maturity.

Soybean carryout is gaining more attention as the possibly looms of a number much larger than 785 million bushels. Obviously, any additional increases in yield in the U.S. estimates will add to carryout, but there are others concerns that could add to ending stocks; such a reduction in demand from African Swine Flu in China and acreage expansion in South America could add more to world supplies.

U.S. Ethanol production is a strong point for US corn demand. While corn usage was down slightly for last week, weekly consumption remains around 110 million bushels or 5.74 billion annually. Ethanol production is up about 3 percent year to date, but the price of corn has kept plants profitable at thin margins.

No news continues to be the theme on any trade negotiations on the Chinese tariff issue. This is discouraging as this is typically the period when South American supplies run low and China turns to the U.S. to secure soybean needs. The lack of an export program to China, coupled with ongoing issues with African Swine Fever and efforts by China to use alternate protein sources is pushing thoughts of U.S. soybean carryout even higher.

Developing outside forces continue to plague the U.S. soybean farmer. China continues to displace soybean imports with lesser-used alternatives such as sunflowers, cottonseed meal, and rapeseed meal. Officials in the country say they can displace roughly 10 million metric tons using these products. Although the exact number is obscure, China may be forced to use some of their state reserves. This is a very good possibility since there is not enough importable soybeans outside the U.S. to satisfy China’s appetite.

Corn exports have softened lately and looks to miss the USDA’s yearly projection by about 40 million bushels. Soybean exports are about 80 million bushels behind last year but about 18 million bushels ahead of the USDA’s estimate. New crop sales to China are 25 percent of where they were ago at this date.

The USDA has released net farm income projections for 2018 that are expected to drop nearly 10 billion dollars from last year. After adjusting for inflation this would be just slightly above 2016 levels and the lowest level seen since 2002. Debt to asset ratios at the farm level are expected to rise.

For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at mhoover@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.