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Aid payments to farmers to be weighed against prevented planting

On Thursday, the U.S. Department of Agriculture announced its plans for farmer aid as a result of the ongoing trade war with China. An aid package was utilized last year to bolster farmers hurt by the lack of demand for many agricultural products (primarily soybeans, though not exclusively), and a similar $14.5 billion aid package was announced earlier. But details were not discussed in the initial announcement, and so the prevailing thought in the market was that payments would be made to specific crops.

Instead, the U.S. Department of Agriculture plans to provide payments to farmers based on the number of acres planted to any crop in a large list of qualified crops, and multiplied by a single county rate. The first part, the crops, include barley, corn, peas and lentils, soybeans, chickpeas, wheat, and many others. So effectively, all of the major grains and oilseeds are included in this program. The second part, the county rate, is going to be determined by the expected impact of the trade war on each county. Details on this part of the equation are thin, but it is thought that the trade war impact will likely be measured by the percentage of the county planted to soybeans. So the higher percent planted to soybeans, the larger the payment per acre, and vice versa.

The expected average payment per acre is roughly $50. This is important for a key reason relating to this year's slow planting progress. It appears that prevented planting acres will not be eligible for the aid package, which may push some farmers that had planned to take prevented planting on corn to switch to another crop (likely soybeans). However, prevented planting is (on average) closer to $300 to $400 per acre, so the $50 per acre from the aid package is not necessarily going to get all farmers to change plans.

Wheat

Wheat markets have been firmer, bolstered by storms and wet weather across the plains. Crop ratings for the winter wheat crop improved in Monday's USDA report, with 66 percent of the crop rated good or excellent from 64 percent a week ago. Spring wheat planting is also not far behind, with 70 percent done compared to 80 percent for the five-year average pace. But the ongoing wet weather and storms are a concern. Quality and disease will be an issue, and broader support from the corn market is also supportive to wheat.

Durum

The durum market has held steady for the last several weeks.

Canola

The canola market has gotten a boost with trade tensions building between the U.S. and China. While the diplomatic relationship between Canada and China is far from cozy, the longer the trade war goes on between the U.S. and China, the greater the chance that Canada and China can rebuild some trade of canola. Planting in Canada has been progressing well, with dry weather in the Prairie Provinces allowing for 63 percent of the crop to be planted. Rains are needed, and there could be some support for prices if dry conditions persist.

Barley

The U.S. barley crop is catching up to normal planting, with 76 percent complete. This is just a bit behind the five-year pace of 84 percent.

Mustard seed

Mustard seed market continue to be quiet, with little excitement to report. Planting in Canada is progressing well, just behind the normal pace. And exports are also slightly lagging last year's pace.

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