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March 2012 Archive for PFA Pioneer Blog

RSS By: Chip Flory, Pro Farmer

This is a private blog for Pioneer.

1.7 bu. per acre already lost from 2012 corn supplies?

Mar 30, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Just lost 1.7 bu. per acre off 2012 corn supplies

March 30, 2012

Today's USDA Grain Stocks Report sent the corn, soybean and wheat markets sharply higher. While smaller-than-expected March 1 corn stocks were the fuel in Friday's market, it did supply support for new-crop futures, as well.

It had to support new-crop futures... if it didn't, the 3.943-million-acre increase in corn planting intentions would have weighed heavily on new-crop futures.

The source of support for new-crop corn futures was the expected smaller 2012-13 supply cushion. USDA currently estimates 2011-12 corn carryover at 801 million bu., but March 1 stocks suggest a carryover closer to just 650 million bushels. That means the 2012-13 marketing year is now expected to start with a supply side cushion that is 150 million bu. smaller than estimated just a few weeks ago. Traders will be looking for the cut to old-crop carryover stocks in the April Supply & Demand Report.

That's where the "1.7-bu. cut to 2012 corn supplies" comes into play. Corn plantings today were estimated at 95.864 million acres. If combines roll across 92.5% of those acres, harvested corn acres will reach about 88.7 million this fall. If the 2012-13 supply cushion is cut another 150 million bu. in the April Supply & Demand report, that's like losing 1.7 bu. per acre off those 88.7 million harvested corn acres. That's a big reason new-crop futures found support from tighter old-crop stocks.

However, if all those 95.864 million acres are planted and the 88.7 million acres are harvested and the national average yield hits our projection of 162 bu. per acre, there will be plenty of supply for the 2012-13 marketing year. Under that production scenario, there would be enough room to support record-large corn use and to push 2012-13 corn carryover up to about 1.6 billion bushels. If the market is hit with a carryover estimate that high in the May Supply & Demand Report (USDA's first official look at the 2012-13 marketing year), today's futures price of $5.40 could look like an excellent selling opportunity.

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Getting ready for acreage, grain stocks and a 2012 farm bill.

Mar 26, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Getting ready for USDA Reports and 2012 farm bill

March 26, 2012

Thought we'd talk about a couple of things this week: 1) build up to Friday's USDA reports; and 2) some perspective on the current farm bill process from Pro Farmer Washington consultant Jim Wiesemeyer.

Build up to Friday's USDA reports will focus on the Prospective Plantings Report... and corn acres in particular. Traders expect corn plantings to reach at least 95 million acres, up about 3 million from last year. Soybean acres are expected to be about steady with year-ago at 75 million. Unfortunately, if USDA's survey work reveals corn planting intentions of 95 million acres, most traders will immediately assume corn plantings will reach 96 million this spring. If corn planting intentions come in under 95 million, that estimate will probably be ignored in anticipation that plantings will reach at least 95 million acres.

Yeah... simply put, it will be really difficult to get a price-positive acreage estimate for corn. Traders believe they know more than USDA's survey of farmers.

However, when everything is released Friday, the market may be more responsive to the Quarterly Grain Stocks Report. The quarterly corn stocks data has been exceptionally unpredictable the last few quarters with examples of stocks being above and below average pre-report trade expectations.

Last week's Pro Farmer newsletter also included a look at the summer weather outlook from three well-respected weather-watchers. The long-term outlook calls for La Nina to continue to fade, bringing mostly normal conditions to the Midwest. The risk area is the northwest Corn Belt where drier-than-normal soil conditions could persist through the growing season. But, traders are beginning to become more optimistic about the potential to reach a national average corn yield of 160-bu.-per-acre or bigger this year.

Now... on to Washington. Last week, Pro Farmer Washington consultant Jim Wiesemeyer's daily column on included a summary of his frustrations over the lack of leadership around the 2012 farm bill. Jim's full "rant" is reserved for Pro Farmer Members, but we did summarize his opinions in Pro Farmer newsletter last week and we'll share that with you here:

The real farm bill issues lawmakers and stakeholders must confront
by Pro Farmer Washington Consultant Jim Wiesemeyer

Lawmakers, especially from this Congress, are quite adept at pointing to reasons they can’t get something accomplished. This is magnified in the case of trying to get an omnibus farm bill done, especially before the Nov. 6 elections. But the timing of that measure is just one of several contentious issues that Ag Committee leaders, stakeholders and others will have to deal with for the omnibus measure.

Farm bill timeline: Ag panel leaders (at least three of the top four) were ready to sign off on a farm bill plan last fall that would have been linked to the so-called Super Committee. That version was basically written behind closed doors and would not have been subject to amendments nor a filibuster, but it had the needed details.

Now several Ag panel members are citing all sorts of hurdles in getting a farm bill done, including complaints that House and Senate leadership won’t provide floor time for debate. But all the panel leaders have to do is lead: Hold a markup session, using last fall’s farm bill as a foundation, and see if there are enough votes for passage (which is likely the case). Only then can they blame leadership for not allowing floor time (it’s only March 24) to consider the measure before the elections.

Cuts ahead: The latest GOP House budget proposal directs House Ag Committee leaders to cut $33.2 billion from farm spending over 10 years. And the proposal tasks the Ag Committee to deliver details on those cuts by May 1 — this year. So the House Ag Committee now has a number and a date. Let’s see if they meet both. The House Ag panel’s last farm bill field hearing is April 20, followed by DC-based sessions. The Senate Ag Committee actually moved up its final hearing so that members could get started writing the bill.

But is the House Ag Committee really bound by the budget instructions? Sources tell us the House Ag panel will proceed with its farm bill work, which may not contain that level of cuts.

Lame duck? Some believe a new farm bill will be debated and voted on in a post-election, lame-duck session of Congress. But the lame-duck session is already jam-packed with the expiring 2001 and 2003 Bush tax cuts, a possible increase in the debt limit, a surface transportation bill, Fiscal Year 2013 spending bills and more.

What if Obama loses? Do you think President Obama will want to deal with Republicans in writing a farm bill and extending the Bush tax cuts if he loses reelection? We would see a far different Obama if he loses.

Farm bill hangups: There is a long list of farm bill issues farm-state lawmakers and commodity group lobbyists have identified, including:

• Eliminating direct payments impacts rice and cotton producers and, to a degree, wheat, more than other program crops. (True.)

• Keeping target (reference) prices and raising them is more important for rice producers in the mid-South and Delta. (True.)

• Per-farm vs. county-triggered price levels for a revenue-assurance program. (Here is an opportunity for Ag Committee leaders to lead. Why should farmers in states like Illinois and Iowa “pay” via big revisions to a revenue-assurance program to deal with problems in other states? Much more on this at

• Crop insurance doesn’t fit some crops (rice) like other crops. (True.) That is why a farmer’s-choice safety net is the right approach. The debate will still be on how much target prices should be increased, and the method used to determine those levels. (That is a good discussion to have.)

• Keep farm programs simple. (Can’t happen.) An effective safety net is not simple. To FSA officials who say they may not have the time/people to implement a more complex farm bill — that doesn’t square with the push to move portions of crop insurance into their offices.

Long-term crop insurance outlook: The program pays up to 62% subsidies for buy-up policies and crop insurance has bigger spending than current farm program outlays. In debt debates, budget-cutters go where the money is, so future cuts are likely. (And the Environmental Working Group (EWG) is refocusing on crop insurance with direct payments likely gone. See for more on this topic!)

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Bull spreads are working in corn, soybeans

Mar 16, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Another way to export corn

March 16, 2012

The grain markets had an impressive week (if you're bullish or still have some grain in the bin)! And maybe even more impressive than the flat-price gains were gains in "bull spreads." This spread is a long-nearby/short-deferred position. In corn and soybeans, a bull spread normally means being long old-crop and short new-crop futures, but a bull spread can be established in contracts representing the same crop year (long May/short July corn, for example).

And as the name suggests, a bull-spread market is a bullish signal for flat-price, as well. It indicates either strong demand for old-crop supplies or tight old-crop stocks. We included some spread analysis in this week's Pro Farmer newsletter and we thought we'd share it with you here:

"The bull spreading signals attitudes are bullish and there’s a 'pull' for old-crop futures, though for different reasons. For corn, the catalyst is tight old-crop supplies. While there is still corn in bins across the countryside, supplies are tighter than normal and much of what’s in storage has already been priced for deferred delivery. And producers who have old-crop corn that’s not yet priced aren’t willing to part with it at sub-$7 prices. At the same time, hopes of record production this year are capping the upside in new-crop futures. Result: The old-crop/new-crop spread is widening.

"Once corn priced for late-spring/early summer starts to actively move, the 'pull' on old-crop futures could decline some, but the tight stocks situation isn’t going to be alleviated until new-crop supplies are available. Therefore, traders should continue to actively bull spread corn through summer. The risk is bull spreads have widened sharply and “everyone” is long old-crop, short new-crop.

"For soybeans, strength in old-crop futures is tied to demand, particularly from China. Old-crop soybean supplies are abundant, but Chinese demand is keeping nearby futures in a leadership role on the price rally. The reason bull spreads haven’t run more aggressively is USDA is projecting a draw down in carryover for 2012-13. Because there are plenty of old-crop soybean supplies left to price, the market could face a sharp unwinding of bull spreads once China switches the bulk of its business to South America."

Also, we talked about the "forward curve" in corn and soybeans. Basically, this is just another spread analysis that looks at the "carry" in the market. "Carry" is incentive for farmers to put crop in the bin at harvest rather than moving it to market at harvest. For corn, March 2013 futures ended Friday at a 10-cent premium to December 2013 futures. That's 10 cents to store corn for three or four months. At 2 to 3 cents per month in storage costs, the market is offering some incentive to put corn in the bin. The carry out to May is about 16 cents and is about 21 cents to the July 2013 contract. If you've got on-farm storage, capturing that carry (selling for deferred delivery) is a good way to help pay for the bin.

It's a completely different story in soybeans. November 2012 soybean ended Friday a half-cent below January 2013 futures and are trading at a premium to March, May and July 2013 futures. That means there is no incentive to put beans in the bin. So if you're thinking about locking in some $13 2012-crop soybean prices, make the sales for fall delivery. The market is giving you incentive to move soybeans from the combine, to the cart, to the truck and to town at harvest.


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Another way to export corn

Mar 09, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Another way to export corn

March 9, 2012

This winter I've been impressed by row-crop-only producers' interest in the livestock, poultry and dairy markets. It seems the message to "support our biggest consumer" message has gotten through loud and clear. In reality, the feed market took a year off from being the biggest consumer of corn, but USDA says Feed & Residual use will once again top the list of corn-users in the 2012-13 marketing year at a projected 5.2 billion bushels.

But we are producing more beef and pork in the U.S. than we can consume. Pork exports in 2011 were a record at nearly 500 million pounds. That was up from just over 400 million lbs. in 2010. The U.S. Meat Export Federation says pork exports account for $55.55 of the value of each pork carcass. Pretty impressive stuff!

On the beef side, 2011 exports were a record of about 284 million pounds. The USMEF says those exports account for about $206 of every beef carcass. WOW! The good news is beef exports will go through a "development year" in 2012 as U.S. trade reps negotiate with Japan and other Asian markets to reopen those markets to beef from animals 30-months-old and younger. Right now, most Asian markets take beef from animals only 20-months and younger. If successful with that process this year, we'll have back about 95% of the market that was lost when BSE was found in the U.S. in 2003. (It might take 10 years, but we'll get it back!)

The bottom line on beef, pork and poultry exports is that it's just another way for the U.S. to export corn and soybeans... a value-added product for the feed we grow here.

Friday's USDA Supply & Demand Report included export estimates for corn of 1.7 billion bu., down from 1.835 billion bu. last year and 1.98 billion bu. the year before that. Soybean exports are estimated at 1.275 billion bu., down from about 1.501 billion bu. the past two years.

But... some of that cut in export demand for corn and soybeans has been offset by bigger exports of beef and pork in 2011 and an outlook for another strong year of redmeat exports in 2012.


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