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3 Big Things Today, April 18

Wheat Futures Higher Overnight; Illinois Economists Gauge Effect Should China Impose Soybean Tariff.

1. Wheat Futures Rise Second Day Amid Diminishing Rainfall Outlook

Wheat futures were again higher overnight as diminishing prospects for rain in the Southern Plains underpins prices.

Parts of Texas and southern Oklahoma are projected to get some rain Friday and Saturday, offering some drought relief in the area, but some of the precipitation forecast in other parts of the Southern Plains has been reduced, Commodity Weather Group said in a report.

Drier weather in the six- to 15-day outlook likely will draw moisture levels back down in western Kansas, southeastern Colorado, and northwestern Texas, the forecaster said.

Corn and soybeans were little changed.

Wheat for May delivery rose 3¢ to $4.84½ a bushel overnight on the Chicago Board of Trade, while Kansas City futures added 5¼¢ to $5.04¾ a bushel.

Corn futures rose a penny to $3.81¼ a bushel overnight.

Soybean futures for May delivery fell ¼¢ to $10.57 a bushel. Soy meal lost a dime to $381 a short ton, and soy oil rose 0.12¢ to 31.57¢ a pound.


2. Illinois Economists Consider Effects on U.S. Farm if China Were to Impose Soybean Tariffs

With China announcing a 179% antidumping duty on U.S. sorghum imports, some investors are again worried that the Asian nation will take levies on agricultural goods more seriously.

Some believe the talk between China and the U.S., which have each threatened to impose tariffs on $50 billion worth of the other’s goods, is nothing more than trade posturing, and so far, they’ve been proven mostly right, as leaders from both nations have backed down their bluster after an initial round of flexing.

Still, economists at the University of Illinois wondered what would happen to a farm in Illinois should China impose its 25% levy on U.S. soybeans.

In a report titled “Impacts of Chinese Soybean Tariffs on the Financial Positions of Central Illinois Grain Farms” by Krista Swanson, Gary Schnitkey, Todd Hubbs, Jonathan Coppess, Nick Paulson, and Carl Zulauf, the economists looked at the economics on a 1,700-acre farm in Illinois on high productivity land from 2018-2021 should China impose the tariff.

For the baseline, the economists assumed soybean prices would be $9.70 in 2018 and $9.50 in the years after. If China were to impose the levy, prices would immediately fall to $8.85, according to the report. The first year’s decline would be the biggest since there wouldn’t yet be an acreage response.

Prices would then bump up to $9 for each subsequent year.

Corn prices also would fall in 2019, 2020, and 2021 from $3.70 a bushel to $3.50 due to the ensuing acreage response since more growers would choose the grain over soybeans.

Without the tariffs, the income on the 1,700 acres would average $50,000, but that would fall to $6,500 with the levies, the university report said. Costs including cash rent would drop in 2019 and beyond along with prices.

The declines would result in income moving up to $24,000 by 2021, which is “still a very low income,” the economists said in an audio file.

“With the tariffs, there’s serious financial deterioration,” they said. “That would include loss of working capital, increased debt-to-asset ratio, and loss of net worth. If farmland price declines because cash rents come down, resulting in a $20,000 price decline, the net-worth loss on this farm would over $500,000.”


3. Winter Storm Bears Down on Iowa, Minnesota; Still Dry in Southern Plains

Winter storm warnings and winter weather advisories are in effect in much of northern Iowa and southern Minnesota this morning as snow and strong winds are expected, according to the National Weather Service.

“A wintry mix of precipitation is expected on the southern edge into portions of central Iowa, as well,” the NWS said in a report early Wednesday morning. “The system should pass east by Wednesday evening with improving conditions during the late evening hours.”

As much as 7 inches of snow will accumulate along with a light glaze of ice. A few rounds of thundersnow are possible, and heavier snow will fall at a rate of an inch or two an hour. Travel isn’t advised, as deep, blowing snow is forecast, the agency said.

In the Southern Plains, meanwhile, another red-flag warning is in effect, as it’s going to be extremely dry again today.

Winds in much of west-central Oklahoma and northern Texas are expected to gust up to 40 mph, while relative humidity is pegged at 11%, the NWS said.

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