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USFR Weekly Recap - July 14-15, 2012

July 14, 2012



EPISODE # 2031
JULY 14-15, 2012



Most of the drama of the current drought has been centered on the corn crop and rightly so. We’ll know in just a few days what the maximum is going to be, and stunted, brown plants make compelling video. But as more than a few of our marketing experts are trying to tell us, it's the soy crop that could be the true catastrophe. Demand is unrelenting, and unlike corn, we can't just shut down ethanol plants to free up feed supplies. Perversely, curtailing Ethanol could actually increase soy demand by decreasing the DDG supplies. Nor can we substitute wheat. This summer’s commodity fireworks show will have at least two acts, so don't leave early.



The rapid and continuing decline of major crops in the corn belt are now showing up in the USDA supply ledger. The USDA lowered its US corn yield production by 20 bushels to the acre after six straight weeks of crop decline. USDA now set the average yield at 146 bushels to the acre. Production estimates were lowered by 1.8 billion bushels from last month. There was huge uncertainty about what the USDA would do but I think if one took a poll of where you would like to see the USDA come out, I think 146 is probably in that range. Maybe a few bushels high that on some level there was a bit of a sigh of relief that the USDA is at least in the market's perception playing it safe on this report. Ending stocks for 2012/13 are projected at 1.2 billion bushels, down 698 million from last month's projection. The USDA projects soybean production at just over 3 billion bushels. The harvested acreage is 2.3 million acres higher than the June projection. The soybean yield took a hit down 3 ½ bushels to 40 ½. The USDA slightly lowered its winter wheat productions forecast by 1%, compared to its June forecast. The AG department set production at 1.6 billion bushels. The yield is forecast at 47.7 bushels an acre, up about half a bushel from last month. The 2012 Farm Bill is moving onto its next step. The House AG committee approved its version this week. Direct and countercyclical payments along with the acre program would disappear. The committee rejected an amendment that would have eliminated supply management from the dairy price support. Committee leaders say it will save 3 ½ billion dollars for each of the next 10 years. Most of those savings come at the expense of the Food Stamp program. Further progress is uncertain, as speaker Boehner weighs the political consequences of bringing it to the floor. Meanwhile the USDA announced a package of changes that could deliver faster disaster assistance to farmers and ranchers. One change speeds up the timeframe of disaster declarations from his office. As a result about a third of the country more than 1000 counties received that designation. Most of those counties are in the Southwest US. The Secretary also lowered interest rates on emergency loans by a point and a half. USDA also lowered the penalty to farmers who use CRP lands in 2012 by 15%.



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