Evening Report (VIP) -- October 8, 2013

October 8, 2013 09:40 AM
 

 

CONSULTANT RAISES U.S. CORN/SOYBEAN YIELD ESTIMATES... Crop consultant Dr. Michael Cordonnier raised his U.S. corn and soybean yield estimates as early harvest reports continue to be mostly positive. Noting his disappointment that USDA will not release its October survey-based crop pegs on Friday, which would have included updated planted and harvested acreage estimates based on Farm Service Agency certified acreage data, he says it appears the worst-case yield scenarios have been avoided.

Dr. Cordonnier raised his corn yield estimate 2 bu. to 154 bu. per acre and continues to use a harvested acreage tally of 88.2 million, which is 900,000 less than USDA currently has plugged into its balance sheet. That results in a crop estimate of 13.58 billion bushels. He says reasons for a better-than-expected corn yields might include:

  • Cool weather helped the pollination process;
  • Cool temperatures after pollination helped plants retain kernels by reducing the moisture requirements during kernel set;
  • Hotter and drier weather in August did not occur until the corn plants were well advanced in the grain filling process;
  • There could have been residual fertilizers left in the soil from last year's very poor corn yields;
  • A lack of early frost allowed even the later-planted corn time to reach maturity;
  • Corn genetics have improved to the point where the crop is not impacted as much by adverse conditions.

Dr. Cordonnier raised his soybean yield by 0.5 bu. to 41 bu. per acre and is using the same harvested acreage estimate of 76.37 million that USDA currently has plugged into its balance sheet. That results in a crop estimate of 3.13 billion bushels. "The soybean crop is also performing somewhat better than expected probably due to the rains that started to fall in September," he notes. "These late-summer rains probably helped the yields of the latest-planted soybeans and the lack of an early frost helped the late-planted soybeans mature as well."

 

 

CONSULTANT LEAVES SOUTH AMERICAN CROP PEGS UNCHANGED... Dr. Cordonnier left his South American corn and soybean crop estimates unchanged from last week. He notes while rains across central Brazil are encouraging producers to step up their planting pace, there are still some outlying areas that are too dry. In Argentina, Dr. Cordonnier notes that if corn planting remains slower than normal, producers may switch to soybeans.

He currently pegs South American soybean production at 158.8 MMT, up 8.5% from last year, and corn production at 100.6 MMT, down 9.9% from year-ago.

 

 

AUSSIE WEATHER MODELS POINT TO NEUTRAL ENSO... The Australian Bureau of Meteorology says sea surface anomalies currently reflect neutral ENSO conditions and virtually all indicators reflect the likelihood that will remain the case through the Southern Hemisphere summer (Northern Hemisphere winter).

The bureau adds, "In the tropical Indian Ocean, the negative Indian Ocean Dipole (IOD) event has weakened considerably over the past several weeks, with neutral values persisting since early August. The majority of the international models indicate these neutral values are likely to persist, suggesting that the 2013 negative IOD is most likely at an end. Two models suggests a brief return to the negative IOD values."

 

 

CME TO ALLOW LIMITED PRE-EXECUTION COMMUNICATIONS ON SOME GRAIN & OILSEED OPTIONS... CME Group announced yesterday that it will allow "pre-execution communications," where customers can discuss details of electronic grain and oilseed options trades at specific times each day. Pending regulatory approval, Chicago Board of Trade and Kansas City Board of Trade grain and oilseed options traders will be allowed to discuss "size, side of market or price of an order, or a potentially forthcoming order" between 7 p.m. CDT and 7:45 a.m. CDT each business day beginning Nov. 11, according to CME's release. The exchange still prohibits such communications during other trading hours for electronic grain and oilseed options and at all times for the corresponding electronic futures products and for open-outcry grain and oilseed trade.

The change comes in response to demand from European customers, Reuters cites CME spokesman Damon Leavell as saying. Such communication is not necessary during the day trading hours, he continues. This decision has sparked some concern that this could give electronic traders an advantage over those in the open-outcry market.

 

 

FARM GROUPS FILE APPEAL ON CHESAPEAKE BAY RULING... The National Corn Growers Association (NCGA) and the American Farm Bureau Federation (AFBF) have each filed notices to appeal a September decision to uphold federal pollution limits for the Chesapeake Bay, the nation's largely estuary. The National Association of Home Builders has also challenged the ruling. U.S. District Court Judge Sylvia Rambo ruled that the Environmental Protection Agency had not overstepped the bounds of the Clean Water Act in its efforts to reduce pollution in the bay because six states and Washington, D.C. had agreed to the plan to set and enforce standards for pollution reduction, and the states were allowed to decide how to the meet the limits.

AFBF President Bob Stallman says, "This case isn’t about whether or not to protect the Chesapeake Bay -- we all share that goal. This case is about whether EPA can dictate where farming will be allowed, where homes can be built, and where businesses can be established. By taking over decisions like that, EPA has turned the whole concept of cooperative federalism out the barn door."

The NCGA press release states, "We continue to believe the policies and science behind Chesapeake Bay TMLD [Total Maximum Daily Load] are wrong and that it goes beyond the scope of Clean Water Act authority. We hope the Third Circuit Court of Appeals will reconsider these arguments and ultimately provide state and local jurisdiction more flexibility to work with agriculture in meeting water quality goals."

 

 

GAO REPORT CRITICIZES USDA ON SUBSIDY RULES... A new report from the Government Accountability Office (GAO) provides some support for tightening subsidy eligibility rules in the new farm bill. GAO did the report at the request of Sen. Chuck Grassley (R-Iowa). GAO said the current definition of "actively engaged" is so broad that an individual can live far from an operation, and not even visit it, but still qualify for its subsidies. The report also noted that USDA’s subjective criteria make it hard for Farm Service Agency (FSA) offices to decide whether subsidy recipients make the significant contribution of active personal management that the rules require.

GAO recommended, "Congress should consider modifying the definition of significant contributions of management activities, either as it did in recent deliberations on reauthorizing the farm bill or in other ways designed to make contributions more clear and objective."

Both the Senate-passed farm bill (S 954) and the House version (HR 2642) deal with the definition of what it means to be "actively engaged" in farming, the requirement for getting government payments.

The report also said USDA’s enforcement efforts have lagged, with FSA state offices often far behind in finishing compliance reviews. Only 14% of the assigned 2010 compliance reviews and 24% of the 2009 reviews were finished within the expected timeframe, the auditors found. As of this June, 13 state offices still had not completed the compliance reviews assigned in 2009. Get more details on report findings.

 

 

ANOTHER SUPER COMMITTEE?... According to The Hill, the House could vote as soon as today to put together a committee of House and Senate members who would work toward a solution to reopen the government and raise the debt ceiling. Also today, President Barack Obama said he would accept a short-term bill on these matters and allow for broader negotiations, but only if the deal is a "clean" one.

 

 

BANKER SURVEY REFLECTS SLOWDOWN IN FARMLAND PRICE GROWTH... An index of banker sentiment reflects a decline in the pace of growth in farmland prices. The farmland-price index maintained by Dr. Ernie Goss, Creighton University economics professor, as part of the monthly Rural Mainstreet Index (RMI) declined for the ninth time in the past ten months. The September index fell to 54.0 from 55.8 in August, he reports. Click here for more.

 

 

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