Soybeans
The news for soybeans over the past couple of weeks has gone from bad to worse. The USDA’s planted acres and stocks reports, both survey based, were bearish for soybean prices. Soybean acres in the U.S. are larger than corn acres for only the second time in history. The total was pegged at 89.56 million acres, down 1 percent from a year ago total as farmers shifted into other crops like cotton, rice and spring wheat. In Arkansas, acreage is up 2 percent from last year to 3.6 million acres. Soybean stocks came in at a record high 1.22 billion bushels as of June 1, up 26.5 percent from the same date in 2017.  Export cancellations, especially from China, are also taking their toll on the market, totaling over 5 million metric tons for the marketing year. Another round of tariffs, $200 billion worth of Chinese goods annually, sent soybean futures sinking to new contract lows. 

Corn
Corn futures are also trading at contract-low levels, with significant spillover weakness from soybeans being a key factor in the downturn. Corn acres are pegged at 89.13 million acres, down 1 percent from the year ago total. Arkansas farmers report having 650,000 acres of corn planted this year. Nationally, 75 percent of the crop is rated good to excellent, and weather forecasts continue to look favorable across the corn belt for the time being. Corn stocks are also higher than year-ago totals, pegged at 5.31 billion bushels, up 1.4 percent from the year-ago total, and the third highest total on record.

Cotton
Cotton futures are attempting to stabilize after a sharp selloff. USDA has pegged all cotton production at 13.518 million acres, with 420,000 acres in Arkansas. Strong export movement has continued to provide some support for cotton despite the trade war with China. On July 6, both countries implemented tariffs, which included a 25 percent tariff on U.S. cotton. Another round of tariffs was announced by the U.S. this week, and included textiles imported from China. Forty-one percent of the crop is rated good to excellent. However, drought stress is hitting the Texas crop particularly hard, with 42 percent of its crop in the poor to very poor category.

Rice
Rice futures have enjoyed a rally but are finding resistance in the $12 area for the time being. U.S. acreage is pegged at 2.84 million acres, up from 2.463 million a year ago. Arkansas farmers planted 1.391 million acres this year. Despite a slow start thanks to a record-cold April, the record-setting heat in May pushed the crop forward and Arkansas is now 21 percent headed, right in line with the five-year average. The June 1 stocks report provided support for rice, with rough rice stocks down 32 percent from a year ago at 45.1 million cwt. Milled rice stocks were down 6 percent at 5.05 million cwt.

Livestock
The dog days of summer are taking their toll on the cash livestock markets. Holiday buying is over, and demand will slow somewhat as we move toward fall. However, export sales and shipments of beef are running 22 percent ahead of last year, providing underlying support for the market. Domestic and export demand for pork is also strong. Futures are trading at a discount to cash markets, as traders appear to be cautious in light of larger supplies and trade concerns as trade continues to be uncertain.

Ag contributes to deficit reduction
According to a recent article by Dr. John Newton, American Farm Bureau Federation Director of Market Intelligence, both the House and Senate versions of the 2018 Farm Bill contribute to deficit reduction by reducing spending. The Congressional Budget Office’s May 2013 Baseline for Farm Programs projected farm program spending over a 10-year period at approximately $978 billion. CBO’s most recent May 2018 baseline for USDA’s mandatory farm programs projected 10-year outlays at $867 billion. The most recent CBO cost estimates for the House and Senate committee-passed farm bills show that from fiscal years 2019 to 2023, H.R. 2 would reduce direct spending by $7 million and S. 3042 would reduce direct spending by $107 million – meaning both bills are effectively budget-neutral.

A comparison of the House and Senate committee-passed farm bills to the May 2013 baseline shows a cumulative difference in farm bill spending of approximately $112 billion over a 10-year period – driven by both the 2014 and 2018 committee-passed farm bill reforms. That’s more than $100 billion toward deficit reduction — a strong signal that agriculture is doing its part to reduce the federal deficit by cutting spending in several key farm program categories such as nutrition and crop insurance.