Evening Report -- July 27, 2012

July 27, 2012 10:46 AM

NWS 6-10 DAY FORECAST CONTINUES TO GRADUALLY IMPROVE... The area of normal temps and above-normal precip has expanded in each 6- to 10-day forecast from the National Weather Service (NWS) this week. The forecast for Aug. 2-6 calls for normal temps across the entire eastern Corn Belt, virtually all of Iowa, Minnesota, eastern South Dakota, the eastern two-thirds of North Dakota and eastern and north-central Missouri. The far western and southwestern Corn Belt is still expected to see above-normal temps during the period. The precip outlook calls for above-normal rainfall over the entire eastern Corn Belt along with eastern and north-central Iowa, all but far southwestern Minnesota and far eastern North Dakota. Normal temps are forecast for the rest of Iowa, southwestern Minnesota, Missouri and the key production areas in the Dakotas. The far western and southwestern Corn Belt is expected to see below-normal precip. Click here for related maps.


INFORMA SLASHES CORN & SOYBEAN PRODUCTION PEGS... Sources familiar with Informa Economics say the firm has updated its U.S. corn and soybean production forecasts based on the assumption that August weather will continue this growing season's stressful trend -- specifically for rainfall to average half of normal and temps to average 3°F above normal. The firm reportedly reduced its harvested acreage projection for corn by 2 million to 85.67 million acres with a yield of 134 bu. per acre (down 8.5 Bu from its July forecast). This would put production at 11.5 billion bushels.

Informa also reportedly trimmed its soybean harvested acreage projection by 250,000 to 75.1 million acres with a yield of 38.5 Bu per acre (down 1.5 Bu from its previous forecast). This combination would put soybean production at 2.9 billion bushels.

Today's projections do not include the Aug. 1 survey results that will be included in the firm's Aug. 3 crop report.


SHIP CORN OR UNLOAD FERTILIZER?... That’s the logistics conundrum at the Port of Paranagua, Brazil. PF South American consultant Dr. Michael Cordonnier says, "There are 120 vessels at the Port of Paranagua and 46 are waiting to unload fertilizer. If a boat shows up today with fertilizer, it won’t be unloaded until mid-September. That’s awfully late for 2012-13 bean plantings."

If the port unloads fertilizer instead of loading corn for export, it will be tough to ship the talked-about 15 million metric tons (MMT) of corn this calendar year. Dr. Cordonnier says, "To export 15 MMT of corn this year, they need to ship 2 MMT each month... they’ve never shipped 2 MMT of corn in a month."


SECOND QUARTER GDP DECLINES, BUT TOPS EXPECTATIONS... Today's advance estimate showed gross domestic product (GDP) increased at an annual rate of 1.5% for the second quarter of 2012. While this is below 2.0% GDP in the first quarter, the rate of growth was slightly better than expectations for 1.3% growth. Nevertheless, this confirms tepid economic conditions in the U.S. as growth at or below 2% is not enough to improve the unemployment rate, which stands at 8.2%.

Some economists say the sluggish growth increases odds the Fed will act sooner rather than later on additional economic stimulus, while others say the slightly better-than-feared second quarter GDP buys the Fed some additional time. The Federal Open Market Committee (FOMC) holds its next policy meeting July 31-Aug. 1, although few are expecting any action then. The more likely scenario would be at the annual economic policy symposium at Jackson Hole, Wyoming, in late August or following the Sept. 12-13 FOMC meeting, when Fed Chairman Ben Bernanke holds his next quarterly press briefing.

But history says the Fed does not act in presidential election years, especially right ahead of the election. If that stance holds true this year, the Fed wouldn’t come with additional stimulus until after the Dec. 11-12 FOMC meeting, when Bernanke also has a press conference.

Timing of additional stimulus remains uncertain, but the belief the Fed will be there to "save" the U.S. economy — along with a pledge this week by the European Central Bank to do whatever it takes to preserve the euro-zone — is acting as a security blanket for investors.

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