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July 2012 Archive for PFA Pioneer Blog

RSS By: Chip Flory, Pro Farmer

This is a private blog for Pioneer.

At Risk: Chinese Bean Market

Jul 27, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

At Risk: Chinese Bean Market

July 26, 2012


The new-crop bean:corn price ratio is about 2:1. I've had many producers tell me they aren't interest in increasing bean acres unless the price ratio is closer to 2.8:1 or even 3:1! The reason the ratio is so low right now is because of expectations of a big South American crop. But a big South American crop won't fix an exceptionally tight stocks situation here. And that's where the risk is for U.S. soybeans going forward.


We've never given South American producers as much incentive to increase acres as we are right now -- and they will respond. That means Brazil and Argentina will be securing a bigger share of the Chinese marketing in the 2012-13 marketing year and South America stands a good chance of becoming the "reliable supplier" of soybeans (which means the "supplier of choice") for China. If it happens, it'll take years to rebuild the U.S. soybean export market.


That's why the "acreage battle" for 2013 acres in the U.S. should get started very soon. November 2013 soybean futures have to start gaining on December corn futures (in a big way, and fast) as growers are making acreage decisions this fall. If not, we'll put down a pile of nitrogen that will lock in a huge amount of corn acres for 2013, potentially making beans an "after thought" in the U.S. crop mix.

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

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

House Farm Bill and Disaster Aid Proposal

Jul 13, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Disaster Aid proposal


House Farm Bill Highlights

July 13, 2012


Senate Finance Chairman Max Baucus (D-Mont.) Friday called for disaster aid, including a one-year extension of the controversial SURE disaster assistance program that expired last year and three aid programs for livestock producers. The requested aid would cover 2012 crop and livestock losses from wildfires in the West and the Midwest drought. Baucus did not propose any budget offsets for the measure.


Along with SURE, the bill would extend the Livestock Indemnity Program, which compensates ranchers for animals that die, as well as the Livestock Forage Program and the Emergency Livestock Assistance Program.


The Supplemental Revenue Assistance (SURE) program was created by the 2008 Farm Billl but funded only through Fiscal Year 2011. The program is controversial for several reasons,including a separate $100,000 payment cap.


The House Ag Committee marked up its farm bill last Wednesday and cleared it shortly after midnight Thursday by a wide margin of 35-11. The panel methodically considered scores of amendments and fended off efforts to temper the measure’s $16-billion cut over 10 years to food stamp program (SNAP) funding. The Senate-passed version shears just $4 billion from the program.


According to the Congressional Budget Office, the pre-markup House farm bill would spend $957 billion while saving $35.1 billion over 10 years. This level of savings is $12 billion more than saved in the Senate version.


Other ag panel farm bill amendment action includes:

• Passed an amendment that would require USDA to establish an undersecretary for trade.

• Passed an amendment that repeals the GIPSA rules finalized since 2008 and prohibits USDA from finalizing the remaining rules, as congressional members say USDA overreached in its initial proposed rule.

• Passed an amendment that would require USDA to report to Congress within 90 days on how it plans to change country-of-origin (COOL) labeling to prevent retaliatory actions by Mexico and Canada.

• Passed an amendment that would require USDA to assess the workload of field offices and solicit public comment on planned closures before going forward with them.

• Defeated an amendment that would eliminate supply management from dairy price support.

• Defeated an amendment to modify the sugar program.


The broad support for the bill in the panel ups the odds the farm bill will be brought to the floor for House consideration. Whether this occurs ahead of the Nov. 6 elections is the next focus.

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

Reviewing the RFS waiver process

Jul 06, 2012

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter

Corn planted acres up, harvested acres down

July 6, 2012

With drought spreading across the Midwest and robbing pollinating corn of yield potential, prices shot higher this week. In the 13 days from the June 15 low in December corn at $5.06, the new-crop contract gained $2.07 to the July 5 high of $7.13. Even after today's price setback, December corn futures are still up $1.87 since June 15.


The strong price advance generated what we call "crazy" rumors about how the government might step in to help make sure we've got an ample supply of corn. The craziest of all the rumors was talk of an export embargo. That won't happen. It's the market's responsibility to sort out "who gets what" of old- and new-crop corn supplies and the government getting involved in the process would be disastrous.


The other rumor was that EPA is considering cutting the renewable fuels use mandate by 20%. That raises a lot of questions. First, EPA does have the ability to adjust mandated usage levels -- it does it every November when it ratchets down the level of cellulosic ethanol "required" to be used under the Renewable Fuels Standard (2). That decision is made and announced in November and set mandated usage levels for the next year.


The current RFS2 requires use of 13.2 billion gallons of conventional (corn-based) ethanol in 2012; 13.8 billion gallons in 2013; 14.4 billion gallons in 2014; and 15 billion gallons in 2015.


We asked Pro Farmer Washington consultant Jim Wiesemeyer to review the process for requesting a waiver from RFS2 mandated ethanol usage levels. Here's what he found:


"This question hasn’t come into focus since the 50% waiver request by Gov. Rick Perry (R-Texas) in 2008 that was rejected by EPA – a day before USDA's August Crop Production report that year.


"According to a report from the Congressional Research Service, a waiver can be requested by a state or a fuel provider, or the EPA administrator can waive the overall RFS requirement for a given year. The administrator can undertake the waiver at their own discretion – no request would be required.


"If a waiver is granted, then all fuel suppliers’ quotas would be reduced by a similar percentage. 'As the law is written, EPA may not waive the requirement for an individual state or supplier within a state, but must reduce the entire national mandate,' CRS noted.


"But to grant the waiver, certain conditions must be met. The EPA administrator, along with the Secretaries of Agriculture and Energy must determine that one of the two following conditions are met:

  • there is inadequate domestic renewable fuel supply; or
  • implementation of the requirement would severely harm the economy or environment of a State, a region,  or the US.


"But, as CRS points out, it’s not exactly clear how EPA will interpret the aforementioned conditions. When EPA published its final rule for the RFS, they specified they would not set specific criteria for any such waiver.


"Within 90 days of receipt of the waiver petition, EPA must act to approve or disapprove the petition, after public notice and opportunity for comment. If EPA does grant a waiver, the waiver expires after one year, but may be extended by the EPA administrator in consultation with the Secretaries of Agriculture and Energy."


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

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