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June 2012 Archive for PFA Pioneer Blog

RSS By: Chip Flory, Pro Farmer

This is a private blog for Pioneer.

Jim Weisemeyer's election preview

Jun 29, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Corn planted acres up, harvested acres down

June 29, 2012

It's not very often the June Acreage Report from USDA can add 2.315 million acres to expected soybean harvested acres and the market can close higher. Planted soybean acres were about 500,000 above the average pre-report trade estimate, so the harvested acreage number blew-away trade expectations, as well.

 

Nonetheless, soybean futures charged higher again today. Without stress-relieving rains in the near-term, the contract high in November soybeans set earlier this week will likely get pushed aside next week.

 

And did you notice that while USDA's planted corn acreage estimate is up about 540,000 acres from March intentions its harvested acreage estimate is now about 250,000 acres below the harvested acreage projection in the June S&D Report. Add in declining yield potential, and the crop is at least 900 million bu. smaller than projected in the June S&D Report.

 

Wiesemeyer's Election preview


 

The period from July Fourth to early September usually provides the best information as to who voters want in Washington, and a lot can happen in that time. Pro Farmer Washington Consultant Jim Wiesemeyer says this makes his current election predictions subject to change (perhaps major ones), especially in light of a host of global economic woes.

 

Jim gives 75% odds Republicans will keep the House, as Democrats would need a net gain of 25 seats to wrest control from the GOP. The Senate outlook is dicier. Jim says a 50/50 seat outcome is certainly possible in the chamber (counting the independents as caucusing with the Democrats). Under this scenario, the vice president would break voting ties. And of course, that depends on who lands the White House.

 

Noting most election-year experts still see the presidential race as too-close-to-call, Jim says if he had to guess, he’d put 55% odds on President Obama squeaking by GOP candidate Mitt Romney.

 

Jim boils key swing states down to nine (largely based on campaign spending thus far): Nevada, North Carolina, Ohio, Virginia, New Hampshire, Colorado, Iowa, Pennsylvania and Florida.

 

Hispanics make up a major part of the voting population in Neveda. (17%), Colo. (13%) and Florida (19%), so this demographic could have an influence on presidential and congressional contest outcomes.

 

Some refine the battleground list further to: Florida, Ohio, Viginia, New Hampshire, Iowa and Colorado. Of these, Romney must win Florida, Ohio and Virginia.

 

Obama can keep the White House with victory in one of those states and one of the other three on the list.

To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.

House next to take on farm bill

Jun 26, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Corn crop and markets are on "the edge"

Farm Bill baton passed to the House

June 22, 2012

If you haven't read the lead item in this week's Pro Farmer, here it is:

 

Weather markets heating up — Corn and soybean futures are knocking on the door to a weather market. If June 24 weather updates don’t hold a chance for rain in the eastern Corn Belt, corn and soybean futures will knock down the door to that weather market. We’re on the edge — early planted corn fields in central Illinois are starting to tassel and silks will arrive by the end of this week. That’s when irreversible damage to corn yield potential is possible. Bean yields can still recover, but beans would be a willing participant in the rally and wheat futures would “tag along,” too. That’s especially true with what appears to be a “more stable” situation in Europe that should prevent a “risk-off” attitude in commodities this week. But — IF the pattern changes and surprise rains appear in the forecast, be ready to make aggressive 2012-crop sales. Another potential roadblock to a weather rally will be position-evening ahead of USDA’s June 29 Acreage and Quarterly Grain Stocks Reports.

 

There are too many acres on "the edge." They're on the edge of severe stress and on the edge of pollination at the same time. That's going to lump a bunch of acres into downtrending yield potential by the end of next week if soil moisture levels aren't recharged soon. That's why this weekend feels like the Fourth of July. The "edge" of stress and pollination is normally reserved for that pivotal time period. But we've still got a full week left in June... so the risk to the crop is very real.

 

As we said in this week's Pro Farmer, supply-scare (or weather) rallies are normally furious and short-lived. That's why you've got to be ready to pull the trigger on 2012-crop sales in the week ahead.

 

Farm bill baton passes to the House

 

Senate leaders came together to pass their version of the farm bill last week, putting pressure on the House to move forward with its version. While initial indications were the House Ag Committee would release farm bill language last week and hold a markup this week, the Ag panel markup is now slated for July 11. That will start the second of three stages of getting to the end zone on the 2012 farm bill. The House must pass its version to get the 2012 bill to a House-Senate conference committee. It's the conference committee where plenty of negotiation will take place.

 

One Senate feature of farm policy we do not expect to be included in the House version is the linkage between crop insurance payments and conservation compliance. Most likely, the House will leave this out and it will be a major point of negotiation in the conference committee.
 

 

To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.

Reallocation of old-crop corn supplies

Jun 15, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Check out the Crop Tour newsletter!

And old-crop corn is being "reallocated."

June 15, 2012

The June issue of Pro Farmer's Crop Tour newsletter is now available. The newsletter, sponsored by Pioneer, is available at www.profarmer.com, or at this link. In the newsletter, we focus on U.S. corn and soybean yield potential and take a look at soil moisture supplies in China. We also have crop reports from Illinois, Iowa, Minnesota and Nebraska. And your invitation to join us on the 2012 Pro Farmer Midwest Crop Tour is included in the June issue of Crop Tour newsletter.

 

Is old-crop corn being reallocated?

 

We heard talk today that some end-users of corn are reselling their supplies to other end-users. The only reason they would do that is if basis has appreciated enough that they can make more by reselling their corn supply than they can make from processing what ever it is they process. And, basis has probably done just that.

 

The same thing happened in the summer of 1996 when the corn market was trying to hold on to the final 400 million bu. of 1995-crop corn. Basis was very strong that summer (it's the summer that turned HTAs into a four-letter word for many marketers), and end-users could easily make more money from reselling corn than they could through processing. When end-users started to reallocate existing old-crop supplies, the rally in basis ended and turned south and the end of the rally in futures wasn't far behind it.

 

This is something that doesn't happen very often, and when it does, the impact is obvious. Basis starts to fade quickly because some end-users are out of the buying market and competition for corn is much lower. Futures also take a signal from weaker basis and follow with a price slide. Both are a strong indication the market has done its job of rationing old-crop supplies. And once rationing has occurred, the path of least resistance in old-crop futures is to the downside.


To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.

Don't forget the 'rules' of farm policy

Jun 01, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Don't forget the 'rules' of farm policy

June 1, 2012

Somebody should have reminded the writers of the Senate's proposed version of the 2012 farm bill that there are international trade rules that must be followed in farm policy. Those rules were agreed to, written by and are enforced by the World Trade Organization (WTO). And the rule is really pretty simple: Don't distort trade.

 

That, however, is where "simple" gets complicated. Just what "distorts trade?" Basically, it's anything that might impact the supply or demand of any of the commodities. That's why direct payments (while wildly unpopular with taxpayers and most lawmakers) are perfectly acceptable under the WTO. Those payments are made regardless of price action or what a farmer decides to plant. And direct payment levels don't change... prices could be sharply higher or sharply lower and the direct payments stays the same.

 

The Senate's proposed safety net in the 2012 farm bill, the Ag Risk Coverage (ARC) program, would work like crop revenue coverage. In years with average price and average production, there would be no ARC payment. But, In years with average price and below-average production, ARC would kick out payments. Also... in years with below-average price and average production, ARC payments would likely be made. Simply put, the current year's crop revenue would determine the size of the ARC payment.

 

When a program like this is available, that's when farmers show just how really sharp they are at pushing the pencil. They can figure out which crop will make best use of the ARC program in their operation and they will make planting decisions based on that analysis. Which they should! (When the pie is passed, take a piece!)

 

But because the ARC program could (likely "would") impact farmers' crop mix, it then becomes market distorting and would very likely be the topic of several U.S. trips to the WTO's woodshed in the years ahead.

 

That is not to say it isn't a good safety net. In fact... it's a very good safety net. We're just not sure if it's the right safety net that will keep us out of WTO's court of disputes.


To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.

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