Evening Report -- Advice -- (VIP) -- June 13, 2013

June 20, 2013 09:48 AM
 

CORN CASH-ONLY MARKETERS: TRIM OLD-CROP GAMBLING STOCKS... July corn futures have rallied roughly 70 cents from the April low and basis has also strengthened during that span. With the contract set to enter delivery on June 28 and July corn holding around a 75-cent premium to the September contract, we want to act now to capture the price strength. Cash-only marketers were advised this morning to sell 15% of 2012-crop to get to 90% sold on old-crop. Be prepared to finish old-crop sales if the rally in July corn futures stalls after filling the April 1 gap.

 

CORN PRODUCERS: INCREASE 2013-CROP SALES... December corn futures have moved into the upper end of the range that has contained prices all spring, a level that has stalled previous rallies in March, April and earlier this month. With the market showing weakness this morning, there are indications this resistance will again turn back December corn. As a result, hedgers and cash-only marketers were advised this morning to make a 15% cash forward contract sale for harvest delivery on expected 2013-crop production. This pushes new-crop sales to 25% of expected production via cash forward contract.

 

HOUSE FARM BILL GOES DOWN TO DEFEAT... The House of Representatives today defeated the farm bill (HR 1947) by a vote of 195-234. The vote count showed very few Democratic members voting for it, but an ample though obviously not enough GOP members voting for it -- 171 with only 23 Democratic yeah votes. Rep. Collin Peterson (D-Minn.) clearly did not do his job in getting enough Democratic members to vote for the bill, even though he predicted 50 such votes, as opposed to earlier readings of only 20 to 30 Democratic votes, which proved accurate.

The size of the $20.5 billion cuts for food stamps gave the bulk of Democratic members cover to vote no, along with the White House veto threat.

The failure of the House to clear the bill vindicates GOP leaders last year who said they did not have the votes to pass a farm bill.

The next House farm bill step is murky. And, GOP leadership, sources say, will not allow another "simple" extension of the 2008 Farm Bill, despite the leverage of so-called "permanent" law hanging over that issue. Click here for reactions.

 

USDA COMMISSIONS STUDY ON QUARTERLY GRAIN STOCKS "SURPRISES"... USDA Chief Economist Joseph Glauber says the department has commissioned an industry study on the agency's Quarterly Grain Stocks Report in an attempt to assess and address why there has been so much divergence between pre-report expectations and the survey findings themselves, according to Reuters newswire. While there have always been some discrepancies between USDA's stocks estimates and report expectations, the frequency of these has increased in recent years. Since March 2010, 12 of the past 14 stocks reports have surprised the markets and generated major futures price swings.

Reuters cites Glauber as saying, ""When NASS does its survey, they essentially do a census of all the commercial operations. So you would think with more grain being held off-farm, those numbers should be even better. Whereas on the farm they do it by survey, so there are some inherent sampling errors. But there's been a lot of theories why those expectations vary. I don't know that there will be an answer."

 

COF REPORT TO AGAIN SHOW TIGHTER FEEDLOT SUPPLIES... Traders look for tomorrow afternoon's Cattle on Feed Report to show all categories below year-ago levels. The average pre-report trade guesses put On Feed at 96.5%, Placements at 95.9% and Marketings at 97.9% of year-ago levels.

Report expectations

Avg. Trade Guess

Range

% of year-ago levels

On Feed

96.5

94.3-97.6

Placements

95.9

84.3-99.8

Marketings

97.9

97.0-101.1

As is usually the case, the read on the report will come from the Placements category, and particular the weight breakdowns. Many analysts feel a slight improvement in pasture conditions resulted in a slower pace of cattle entering feedlots last month. But with the ongoing drought in the Southern Plains holding strong, this may not have been the case.

 

EXTENDED OUTLOOK POINTS TO DROUGHT IMPROVEMENT ALONG EASTERN EDGE OF DROUGHT FOOTPRINT... The National Weather Service's Climate Prediction Center (CPC) has issued its extended weather outlooks and they don't provide much (if any) guidance for the Corn Belt growing season. Other than the forecast for above-normal temps in Nebraska westward and southward through September and above-normal precip for the far eastern edge of the eastern Corn Belt, the outlooks call for equal chances of normal, below- and above-normal temps and precip for the region.

Forecasts for above-normal temps across the Central and Southern Plains and west of the Rockies, combined with below-normal precip in the Southern Plains and Pacific Northwest will lead to a continuation of a large drought footprint in the already-drought stricken West. The forecast calls for some improvement along the eastern edge of the drought area, which includes eastern portions of Nebraska, Kansas, Oklahoma and Texas. Click here for related maps.

 

DROUGHT MONITOR REFLECTS SLIGHT EXPANSION IN WESTERN STATES... The National Drought Monitor reflected a slight expansion of drought in the western states, which led to slight overall expansion for the contiguous United States.

Minor drought improvement was noted in the South, which includes Texas. But with over 95% of Texas covered by drought, it still has a long way to go, especially with the most intense drought conditions concentrated in the HRW wheat and cotton areas of the state. Drought still covers nearly 80% of the High Plains, which includes the Dakotas southward through Kansas, along with the drought-covered states of Colorado and Wyoming. Minor drought improvement was noted in Nebraska, with 8% of the state now drought-free -- all in the southeast.

Drought was further trimmed in Iowa, with "abnormally dry" conditions covering a small area in the northwest, while "abnormally dry" to "moderate drought" is still hanging on in southwest Minnesota. Click here for related maps.

 

FROMAN CONFIRMED AS NEW U.S. TRADE REPRESENTATIVE... The Senate today voted to confirm Mike Froman as U.S. Trade Representative by an easy 93-4 vote. He will take office just ahead of the kickoff of negotiations on the U.S. and European Union trade agreement next month.

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