Evening Report -- July 19, 2012

July 19, 2012 09:45 AM
 

EXTENDED WEATHER OUTLOOK: STRESSFUL CONDITIONS THROUGH THE GROWING SEASON... The National Weather Service's Climate Prediction Center (CPC) has issued its extended weather forecasts, which signal poor conditions for filling corn and soybeans. The outlook for August calls for a continuation of hot and dry conditions across the Midwest. Meanwhile, above-normal precip is expected over the four-corners region. The CPC's outlook for August through October calls for more of the same -- above-normal temps and below-normal precip for the Midwest. In fact, the best chance for above-normal temps is centered over the eastern and southern Corn Belt.

As a result of the forecast and the current soil moisture profile, CPC says in its Seasonal Drought Outlook that drought will persist across current drought areas that include the Midwest and Plains, while some improvement is expected over the four-corners region. "Dryness and drought, exacerbated by above-normal temperatures, have been increasing both in extent and intensity across much of the central and northern U.S.," states the outlook. "Unfortunately, drought is expected to develop, persist, or intensify across these areas, and temperatures are likely to average above normal. Some widely-scattered relief may come in the form of cold front passages or organized thunderstorm clusters (MCSs), but widespread relief for much of the area is not expected. In the Southeast, recent widespread thunderstorm activity has slightly eased drought there, and the three-month outlook favors increased odds for above normal precipitation along the central Gulf." Click here to view related maps.

 

 

DROUGHT MONITOR SHOWS 81% OF NATION COVERED BY DROUGHT... According to the National Drought Monitor, 81% of the contiguous US is covered by some form of drought, which compares to 36% last year at this time and 49% at the start of the year. The monitor says rain hasn't been able to keep up with above-normal temps across the nation, with hot and dry weather dominating regions from the Central Plains to the Ohio Valley, Great Lakes and Northeast.

According to the monitor, 86% of the Midwest is covered by some form of drought, which is two percentage points higher than last week. Most alarming is that 54% of Indiana is how covered by "extreme" drought, which is up from 30% last week. In the High Plains, which includes the Dakotas, Nebraska, Kansas, Colorado and Wyoming, 96.5% is covered by drought, with "extreme" drought favoring the southern area of the region. Click here to view related maps.

 

 

TRADERS PREPARE FOR CATTLE REPORTS... USDA will release its Cattle on Feed (COF) and Cattle Inventory Reports on Friday at 2:00 p.m. CT. Traders expect the COF Report to show On Feed numbers up from year-ago, although Marketings are expected to be well below year-ago, with Placements expected to be down about a percentage point from the June 2011 level.

COF expectations

Avg. Trade Guess

Range

% of year-ago levels

On Feed

102.6

100.0-103.8

Placements

98.9

92.6-104.1

Marketings

93.8

92.0-101.0

 

The Cattle Inventory Report will reflect tightening cattle numbers, with All Cattle & Calves expected at 98.6% of year-ago levels. Traders are also anticipating the data to show producers have held some heifers back for breeding, as the beef replacement category is expected at 101.3% of year-ago levels. However, the report won't likely show the full effects of this year's drought, as pasture conditions have rapidly declined across the country since the end of June, which could temper producers' expansion plans moving forward.

Semiannual Cattle Inventory Report Expectations

Avg. trade guess

Range

% of year-ago

All cattle & calves

98.6

97.9-99.5

Annual calf crop

98.4

98.0-99.2

Total Cows/heifers calved

98.4

97.8-99.5

beef cows/heifers calved

97.9

97.1-99.0

milk cows/heifers calved

100.3

99.7-101.0

Heifers 500 lbs. and over

99.3

98.7-100.0

Beef replacement heifers

101.3

100.6-102.4

Milk replacement heifers

99.5

98.8-100.0

Other heifers

98.3

96.7-101.0

Steers 500 pounds and over

99.2

98.2-100.0

Bulls 500 pounds and over

97.1

95.0-99.0

Calves under 500 pounds

97.9

97.3-98.5

 

 

 

PRESSURE MOUNTS FOR HOUSE FARM BILL ACTION... Last Thursday, the House Ag Committee cleared its markup of the House farm bill. Since that time, pressure has mounted from stakeholders and lawmakers for the House to move forward with its bill. Most recently, 62 House representatives, including 38 Republicans, signed a letter urging House leaders to bring the farm bill to the floor in July. The group cited the need to support the ag industry, the economic stimulus farm bill subsidies provide and the importance of food stamps in light of the weak economy as reasons the bill should be passed soon.

 

 

SELECTIVE MEMORY FOR DEMOCRATIC LEADERS?... It appears some Democratic lawmakers have short memories -- during the 2008 Farm Bill, Democratic farm bill leaders (who controlled the bill) let three livestock disaster and the SURE program expire for the 2012 season in order to meet budget/spending goals. Some of these same leaders and the Obama administration are now pressuring Republican leaders to complete their farm bill soon, citing the need to retroactively fund expired livestock disaster programs, but not SURE.

 

 

LIVESTOCK/MEAT GROUPS CALL FOR REFORM OF RFS... A coalition of livestock and poultry groups is urging Congress to reform the federal Renewable Fuels Standard (RFS), which mandates the amount of ethanol that must be produced annually, citing a study that labels the RFS mandate as a "lose-lose" situation as it has meant higher food prices but not lower prices at the gas pump. Click here for more detailed study findings and recommended reforms to RFS.

 

 

NCGA OPPOSES CHANGES TO RFS... In contrast to the aforementioned coalition, National Corn Growers Association President Garry Niemeyer released a statement asserting now "is not the time for changes" to the Renewable Fuels Standard, which he says is "revitalizing rural America, reducing our dependence on foreign fuel and reducing the cost of gasoline." He says removing this would ensure consumers see higher fuel prices. Niemeyer also noted that as with any crisis, the worst drought in years has led to "numerous inaccuracies and exaggerations, especially when it comes to the impact on food supply and retail food prices." Get more details here.

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