Planting Intentions, U.S.-China Relationship Among Key Factors Driving North American Crop Protection Market
In the last outlook for the North American market in October 2020, the underlying sentiment was one of a rebound from the flood-hit 2019 campaign, even if that rebound was caveated with some caution, writes Bob Fairclough at AgriBusiness Global. That caution revolved mainly around the impending U.S. elections at that time, ongoing concerns with the Chinese/U.S. trade deal, the Market Facilitation Program, and overall COVID-19 fiscal response, likely final net farm income, the full impact of the derecho, and the consistently reduced “ending stocks” of both corn and soybeans as reported by WASDE. Canada for its part was beset by ongoing trade issues with China such that the outlook for the final 2020 North American market at that time relied on some crystal ball gazing.
Many of last year’s unknowns have been resolved. The U.S.’s 2020 election result in favor of the Democrats is one clear outcome. China also stayed the course on its commitment to the Phase 1 Trade Agreement throughout 2020, with China buying from the U.S. a reported $27.3 billion of agricultural products, according to the Peterson Institute for International Economics. While this was a significant increase over 2019, those purchases only represented some 82% of China’s initial commitment to purchase $33.4 billion of agricultural products in 2020.
Given challenges brought about by COVID-19 then, 82% of target should nonetheless be considered as a success story as it still allows the Biden administration to focus on the U.S./China relationship from a reported “position of strength” going forward. The COVID-19 pandemic also threatened net farm income in 2020, although a late rally in commodity prices as well as additional federal payments (which generated close to 40% of that income) meant that final net farm income actually improved significantly to $121.2 billion in 2020. One additional uncertainty in October 2020 was the full impact of the August derecho, which is now considered to have impacted 850,000 acres of crops, about 50% more than originally estimated. That derecho impact along with then a significant uptick in demand from China in Q4 pushed commodity prices up significantly with prices for corn reaching a six-year high at close to $5 per bushel by December 2020 and with soybeans hitting over $10 a bushel the best since 2007.
Read more at AgriBusiness Global.
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