Evening Report -- July 20, 2012

July 20, 2012 09:43 AM
 

 

JULY CROP TOUR NEWSLETTER AVAILABLE... The July issue of the Crop Tour newsletter features the declining track of corn and soybean crop conditions, as well as reports from our regularly featured crop scouts. The newsletter is available at this link.

 

CATTLE ON FEED REPORT: NEUTRAL... Despite slightly lower-than-expected Placements and slightly higher-than-anticipated Marketings last month, the On Feed figure came in just above the average guess. But all three categories were within the pre-report guess ranges and not far from the average guesses. That gives the report a mostly neutral read and should mean limited price reaction in live cattle futures next Monday. If anything, the report data might favor mild bear spreading.

A breakdown of weights on calves placed into feedlots last month showed lightweight placements steady with year-ago, 6-weights down 15.8%, 7-weights down 7.1% and heavyweight placements up 13.6% from year-ago. Given rapidly declining pasture conditions, it's likely more lighterweight calves will be placed into feedlots this month.

COF Report

USDA

Average

Range

% of year-ago levels

On Feed

103

102.6

100.0-103.8

Placements

98

98.9

92.6-104.1

Marketings

94

93.8

92.0-101.0

 

CATTLE INVENTORY REPORT: CATTLE HERD CONTINUES TO CONTRACT... While a small cattle/calf inventory was anticipated, USDA's numbers came in slightly lower than the average trade guess. That gives the report data a friendly tone as the U.S. herd remains the smallest in over a half century.

Also supportive is the beef replacement heifer category, which came in at 100% of year-ago. While that signals cow/calf operators are holding back more heifers than they were, they still are holding back enough to build the herd. And with pasture conditions worsening, it's likely any plans to expand the herd will be put on hold until the drought is broken.

Semiannual Cattle Inventory Report

USDA

Avg. trade guess

Range

% of year-ago

All cattle & calves

98

98.6

97.9-99.5

Annual calf crop

98

98.4

98.0-99.2

Total Cows/heifers calved

98

98.4

97.8-99.5

beef cows/heifers calved

97

97.9

97.1-99.0

milk cows/heifers calved

100

100.3

99.7-101.0

Heifers 500 lbs. and over

98

99.3

98.7-100.0

Beef replacement heifers

100

101.3

100.6-102.4

Milk replacement heifers

98

99.5

98.8-100.0

Other heifers

97

98.3

96.7-101.0

Steers 500 pounds and over

99

99.2

98.2-100.0

Bulls 500 pounds and over

95

97.1

95.0-99.0

Calves under 500 pounds

97

97.9

97.3-98.5

 

COLD STORAGE REPORT: RECORD PORK STOCKS DESPITE MONTHLY DRAW DOWN... Pork stocks in storage at the end of June totaled 591.685 million lbs., which was just above the average, pre-report trade guess and record large for the month. Pork stocks declined 7% from May, but stand 19.5% above year-ago.

Beef stocks on June 30 totaled 470.832 million lbs., which was well below the average guess of 504.6 million pounds. Beef stocks dropped 5.4% during June, but stand 8.8% above the June 2011 inventory.

Poultry stocks rose 4.8% during June to 1.199 billion pounds. But that's down 5.7% from last year's inventory at the end of June.

 

DROUGHT 'DECADE-ALTERING' IMPACTS... Pro Farmer Washington consultant Jim Wiesemeyer summed up impacts from drought this way: "Ag/food is in a peculiar state... extraordinary volatility... some big winners and losers... some are tentative and others aggressive. This drought is 'decade altering' and is likely to result in some lasting structure changes and relationships. Policy-wise, it will show that corn and soybean producers are far better protected via crop/revenue assurance than most other crops and definitely livestock producers. It also means the need for equity... balance in the coming farm bill end zone. Some are saying there will eventually be a push for a whole farm safety net program"

 

HEAT DOME WEAKENS, INCREASING RAINFALL CHANCES... We've heard this before: The forecast for the Midwest is more promising for rain because of a weakening heat dome. That's the forecast for next week, with rains of 1 to 1.5 forecast for South Dakota, southern Minnesota, northeast Iowa, western Wisconsin and northern Illinois, says meteorologist Gail Martell of MartellCropProjections.com. She says the forecast also calls for rains in Indiana and Ohio.

Meanwhile, the National Weather Service Midwest regional office says heat will intensify next week in the Central Plains and Midwest. It says, "Excessive Heat Warnings are in effect through Tuesday and Wednesday for a handful of urban centers and metropolitan areas: Kansas City, Memphis, St. Louis and Topeka. Covering 29 counties in northwest Missouri and northeast Kansas, the Excessive Heat Warning for Kansas City notes daytime highs will top out around 100 degrees today with heat indices around 100-105 through Saturday. High temperatures Sunday are expected to reach 110 degrees in several locations, which will push heat indices to 106-111 degrees. Overnight lows will drop only to the mid-70s to low 80s. St. Louis forecasters issued an Excessive Heat Warning in effect from noon Sunday to 7 p.m. CDT Thursday. Temperatures of 104-105 Sunday through Wednesday will push heat index values to 100-110 degrees in east-central Missouri and south-central Illinois. Topeka, Kan., is under an Excessive Heat Warning from noon Saturday to 8 p.m. Wednesday. High temperatures of 98-105 degrees will mean heat indices of 100-105 degrees for 23 counties in northeastern Kansas. Higher temperatures Saturday through Wednesday will push the heat index to 104-109 degrees every day of the forecast period. Memphis forecasters are expecting heat indices of 110-113 degrees today and through the weekend. The rural Plains of Kansas and Nebraska will likely see some of the hottest temperatures from the weekend through next Wednesday. Forecasters said the Hill City, Kan., forecast calls for daily highs of 106-107 degrees through Tuesday. Dodge City and Garden City forecasts call for 105-106 degrees. Goodland, Kan., and North Platte, Neb., forecasts call for 102-105 degrees and Omaha, Neb., should see 100-104 degrees. Hastings, Neb., forecasts call for highs of 100-102 through Tuesday with heat index values of 100-105 degrees. The Sioux Falls, S.D., area will contend with actual temperatures of 96-98 degrees and heat index values of 100-105 degrees."

 

DROUGHT COMPARED TO 1956... Forget 1988, according to the Palmer Drought Index, this year's drought is worse. In fact, it's the worst drought conditions since 1956, with 55% of the contiguous U.S. facing moderate to extreme drought in June, according to the Palmer Drought Index. Of course, 1956 isn't the best comparison, as then-record corn yields were achieved that year. There's no chance this year's corn crop will be anywhere near record yields when all is said and done — even if there's an unexpected and dramatic shift in the weather the remainder of the growing season.

With conditions worsening significantly this month, it appears this year's drought could rival the historic 1934 "Dust Bowl" when nearly 80% of the country was struck with moderate to extreme drought. Craig Solberg with Freese-Notis Weather says this growing season has turned out to be exactly what was expected — hot and dry — just more extreme than what everyone anticipated. The first warning sign that a hot summer was coming was warm winter conditions, which correlate very strongly with hot summers.

And heat is the real curse for the corn crop. Solberg points out that since 1970, 11 years with summer (June 1 to Aug. 31) Corn Belt temps of 1.0° F or more above normal, only two years (1973 and 1987) have produced an above-trendline national average corn yield. And if you
move that threshold up to 1.4° F above normal, none of those 11 years have produced an above-trendline yield.

In addition to the heat this summer, rainfall has been severely below normal with much of the Corn Belt experiencing one of the top 15 driest months of June on record. And the extreme dry conditions have carried into July. Solberg says, "We are well on our way to recording a top five driest June-July period on record and maybe the driest ever." Years when hot temps are combined with very dry conditions, such as this year, it's a double-whammy for the corn crop as there's no relief.

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