SOYBEAN PRODUCERS: INCREASE 2013-CROP CASH SALES... While there are serious planting delays across the Corn Belt, we still firmly feel price strength in the soybean market must be rewarded with sales. With November soybean futures showing signs of falling back into the long-term downtrend, the recent push above that level looks like a potential bull trap. We advise soybean hedgers and cash-only marketers to make a 10% 2013-crop cash forward contract sale for harvest delivery to get to 20% sold in the cash market on expected new-crop production.
Hedgers should continue to hold the 50% hedge in November soybean futures. With November beans looking technically toppy, we expect to see additional near-term price pressure that will allow us exit the hedge with less of a loss than at current levels.
CLOTURE CLEARS THE WAY FOR SENATE FARM BILL VOTES... The Senate voted (75-22) in favor of cloture today, which will limit debate on the farm bill and will get rid of some of the amendments that had slowed forward-progress on the bill. The chamber will vote on its farm bill Monday at 4:30 p.m. CT.
ENSO-NEUTRAL CONDITIONS MOST LIKELY THIS SUMMER... The National Weather Service's Climate Prediction Center (CPC) says that ENSO-neutral conditions continued for the month of May, "as reflected by the persistence of near-average sea surface temperatures (SSTs) across much of the equatorial Pacific Ocean." But CPC did note that below-average sea surface temperatures (SSTs) strengthened in the eastern Pacific.
Most models favor a continuation of ENSO-neutral conditions, though a small number of models predict weak La Nina conditions "as soon as the Northern hemisphere summer," according to CPC. The consensus therefore signals there is a greater chance for La Nina than El Nino, but CPC says there is around a 60% or greater chance of ENSO-neutral for the Northern Hemisphere this summer.
MIDWEST DROUGHT CONTINUES TO RETREAT... According to the National Drought Monitor, the drought footprint continues to shrink; 54.98% of the contiguous U.S. is now covered in drought, down around 2 percentage points from last week and roughly 9 points below last year at this time. The monitor reports that drought-stricken areas of the Great Plains, Midwest and northern and interior portions of the West saw improvement thanks to major rains. Temps in the Midwest were largely below-normal west of the Mississippi River, while states to the east of the river saw above-normal temps during the reporting period.
Drought has been removed from southeast Nebraska, though its hold on rest of the state as well as northwest Iowa remains. However, the Drought Monitor reports that only minor adjustments were made to the Midwest in this week's map.
In contrast, conditions continued to deteriorate in areas of the Southwest, the Great Basin and interior parts of the Pacific Northwest due to below-normal precip this winter and spring and above-normal temps for much of the region. Heavy rainfall in some areas of Oklahoma sharpened the drought gradient in the state, with one-category improvements being seen in central, north-central and northeast Oklahoma. Kansas also benefited from heavy rain in the southeast and south-central part of the state. "Mirroring Oklahoma, the far western part of Kansas has been much drier with long-term deficits remaining, leading to a slight expansion of exceptionally dry (conditions)," the Drought Monitor states. See maps and get more details.
NO MAJOR CONCLUSIONS FROM RFS-RELATED HEARING WEDNESDAY... No new ground was broken during a House subcommittee hearing Wednesday, where panel members split along party lines over the renewable fuel standard (RFS), with Republican members taking aim at the regulation, notably the use of E15. Some panel members noted EPA has the authority to waive the RFS if the regulation's impacts are sufficiently severe. But EPA was criticized by some lawmakers about a lack of guidance on this.
EPA very correctly noted the situation for 2014 will likely be dicey. While blenders can use carryover RINs from 2012 to meet their 2013 obligations, EPA told lawmakers the level of carryover 2013 RINs will be "critical" to whether the increased RFS requirements for 2014 can be met. This issue will stay in focus, especially if EPA makes good on its pledge to have the 2014 recommendations out by late this summer. That will allow plenty of time for lawmakers and others to focus on the plan and whether it is workable. Learn more.