Evening Report -- Advice (VIP) -- July 23, 2013

July 23, 2013 09:42 AM

HOG PRODUCERS: EXIT 3RD-QTR. HEDGE COVERAGE... August lean hog futures are firming as traders work to narrow the discount the contract holds to the cash market. As a result, it's time to step out of 3rd-qtr. hedge coverage. Hog producers were advised this morning to exit the 50% 3rd-qtr. hedges held in August lean hog futures. Our exit was at $98.32 1/2, which resulted in a loss of 65 cents for the position.

After this push higher, we may look to rehedge a portion of 3rd-qtr. production in October lean hog futures.



CONSULTANT LEAVES CORN, BEAN CROP ESTIMATES UNCHANGED... Pro Farmer Crop Consultant Dr. Michael Cordonnier says he has concerns with crops in the top corn and soybean production state of Iowa, but those concerns didn't result in any changes to his crop or yield estimates this week. Dr. Cordonnier continues to forecast corn production at 13.49 billion bu., with the national average yield at 153 bu. per acre. His primary concern is late-planted corn in the driest areas of Iowa and Missouri, which won't pollinate until early August. He says, "Even if the corn in these drier areas pollinates successfully, the crop is still going to need rainfall to avoid kernel abortion and tipback on ears." Dr. Cordonnier has a neutral to lower bias toward the corn crop.

For soybeans, Dr. Cordonnier remains at a crop estimate of 3.22 billion bu. and a yield of 42 bu. per acre. His biggest concern is the soybean crop in Iowa. He maintains a neutral to lower bias toward the soybean crop.



FIRST LOOK AT 2013-14 GROWING SEASON IN SOUTH AMERICA... South American farmers are in the midst of planning their 2013-14 acreage. Dr. Cordonnier says one key development is the sudden devaluation of the Brazilian real. A weaker real could have major impacts in the country as that equates to more money for Brazilian farmers as corn and soybeans are priced in dollars.

In his first look at the 2013-14 Brazilian growing season, Dr. Cordonnier projects soybean production to rise by 3% to 5% to 84.5 MMT to 86 MMT, as higher prices and a weaker real will encourage more planted acreage. He anticipates Brazilian corn production will decline from this year's crop to 70 MMT to 71 MMT due to reduced safrinha (second season) corn production.

In Argentina, Dr. Cordonnier says government policy may ultimately be the biggest influence on plantings for the year ahead. He expects soybean acreage to increase by 2% to 3% and production to rise to 55 MMT. He expects Argentine corn production to hold near steady, but improved weather should slightly increase production to 26 MMT.



APPRAISAL UPDATE FINDS COOLING IOWA, NEBRASKA FARMLAND MARKETS... Recent issues of LandOwner newsletter have talked about the stabilizing process that is underway in the Midwest farmland market. New data released to LandOwner from Farm Credit Services of America (FCSAmerica) supports this view. The Omaha-based lender monitors ag real estate value trends through its semi-annual appraisal update of 65 benchmark farms located throughout its service area that covers Iowa, Nebraska, South Dakota and Wyoming.

Its July 1 update shows the value of the 21 Iowa benchmark farms rose slightly more than 6% during the first half of 2013, compared to the 13.8% surge the last half of 2012. The 19 Nebraska benchmark farms show a 7% rise -- down from 12.3% the last half of 2012. Those gains amount to about a one-percentage-point gain per month. In our view, that type of increase points to a market that is transitioning into a stabilizing market. Get more details.



CROP COMMENTS REFLECT CROP CONCERNS IN IOWA... On Pro Farmer's Crop Tour page, a grower from Audubon County in western Iowa comments that area of the state missed out on yesterday's rains. Meanwhile, a Grundy County, (northeast) Iowa observer shared pictures of corn flattened by the wind that accompanied last night's storm system. Read the full comments here. We would love to expand our coverage of corn and soybean conditions around the country. Send us your comments and location. (We will not publish names.)


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