Evening Report -- Advice -- (VIP) -- June 21, 2013

June 21, 2013 10:22 AM
 

HOG PRODUCERS: HEDGE 25% OF 2ND-HALF PRODUCTION... Following a very strong rally from the early spring lows, hog futures are signaling a top is in the works. With seasonal patterns also pointing to a top soon, hog producers were advised this morning to hedge 25% of expected 3rd-qtr. production in August lean hog futures and 25% of expected 4th-qtr. Production in December lean hogs. Our fills were $97.20 in Aug. hogs and $81.75 in Dec. hogs. Be prepared to increase hedge coverage if futures confirm a market top.

 

CATTLE ON FEED REPORT: NEGATIVE COMPARED TO PRE-REPORT EXPECTATIONS... USDA's monthly update on feedlot activity shows all three categories on the negative side of the average pre-report trade guesses. While down 3.4% from year-ago, the total number of cattle in feedlots on June 1 came in slightly higher than anticipated thanks to greater-than-expected Placements and fewer-than-expected Marketings last month.

COF Report

USDA

Average

Range

% of year-ago levels

On Feed

97
96.5

94.3-97.6

Placements

98

95.9

84.3-99.8

Marketings

97

97.9

97.0-101.1

A weight breakdown of placements last month shows great disparity between the movement of lighter and heavier weight calves into feedlots. Obviously, there was enough backgrounding of calves during late winter/early spring to push heavyweight placements up significantly. But tight calf supplies continue to limit the number of lighter calves available to place on feed. During May, lightweight placements dropped 25%, 6-weight placements were down 16.7%, 7-weight placements increased 4.7% and heavyweight placements rose 19.6%.

With all three categories on the bearish side of their respective average pre-report trade guesses, the data gets a negative read. But with feedlot numbers continuing to trend well below year-ago, the report is not bearish.

 

COLD STORAGE REPORT: NEGATIVE PORK, FRIENDLY BEEF... USDA's monthly update on frozen meat inventories showed pork stocks were record-large for the end of May, while beef stocks came in well below pre-report guesses. This data may cause pork demand concerns to resurface, while it should help ease some beef demand concerns.

Pork stocks as of May 31 totaled 661.786 million lbs., which was just under the average pre-report guess of 663 million pounds. Pork stocks dropped 5.6% from the end of April, but came in 4.1% greater than year-ago.

Beef stocks of 478.528 million lbs. were well below the average pre-report guess of 511.5 million pounds. Beef stocks declined 6.2% from April and dropped 3.9% from year-ago.

Total poultry stocks at 1.200 billion lbs. Were up 6.3% from month-ago and 4.9% greater than May 2012.

 

HOUSE FARM BILL BILLED AS MAJOR GOP DEFEAT... The proposed House farm bill was defeated in a vote of 195-234, with only 24 Democratic members voting for the measure. The bill didn’t even draw a majority of the House Ag Committee’s Democrats -- just nine of the panel’s 21 Democrats voted for the bill. All but one of the panel’s 25 Republicans, Bob Goodlatte (Va.), voted for passage. Overall, 171 Republicans voted for the measure and 62 opposed it; just 24 Democrats were in favor and 172 opposed. Thus, the defeat is being billed as another stinging loss for the House GOP leadership team of John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.), even though the two did more to support a farm bill than most leadership in decades. However, the stunning defeat gave House Minority Leader Nancy Pelosi (D-Calif.) an opportunity to call her GOP counterparts "amateurs" in running the House, which she did.

Democratic leadership says Republicans went from a bipartisan bill that cleared the Ag Committee to a partisan bill when they allowed an amendment to impose work requirements on food stamp recipients. Pelosi noted that 61 Republicans who voted for the amendment didn’t vote for the final bill. The amendment also increased Democratic opposition. She says, "It’s a stunning thing."

Looking ahead, a possible change in another farm bill attempt might include a President Obama-pushed proposal to cut crop insurance buy-up premiums. Some lawmakers would then move some of the savings to a worker-training assistance program. This would supplement the aforementioned amendment that added a work requirement to receive SNAP benefits. Opponents of the GOP amendment, including Peterson, said it provided no money for training and would have led states to move people off SNAP to receive incentive money states could then use without limit.

 

PRO FARMER REACTION TO HOUSE FARM BILL FAILURE... As the farm bill failed to pass, our Representatives failed all of us in the process. That's not to say this was a "perfect bill" -- it wasn't. But when our Representatives failed to move the bill into conference committee with the Senate, they eliminated all opportunity to make it better. Too many of our Representatives proved again they don't understand the legislative process is a negotiating process. There must be give and take. Too many refuse to give -- and only take.

 

UNCERTAIN FATE FOR FARM BILL... While unlikely, the chief Republican vote-counter, Majority Whip Kevin McCarthy (Calif.), says the bill could come back to the floor this week. House Ag Chairman Frank Lucas (R-Okla.) says he will make another attempt to move a farm bill but did not know when or under what circumstance. Some say it could take several months for GOP leaders to take over and construct a package that could garner the needed 218 votes for passage.

And Republican leaders do not want another extension of the 2008 Farm Bill, even though this is what most observers predict. Peterson says he thinks the bill can be salvaged, but added, "Without a bill, we'll end up with an extension. There is no way we are going back to permanent law."

 

BANKER SURVEY UNCOVERS MORE SLOWING IN FARMLAND VALUES... The strength in farmland values continues to ease, according to the monthly survey of rural bankers across 10 Midwestern states conducted by Dr. Ernie Goss, Creighton University. The farmland index included in the Rural Mainstreet Index (RMI) declined for the sixth time in the past seven months, Goss found. The index decreased to 58.4 from 62.1 in May (50 is considered "growth-neutral"). Read more from LandOwner Editor Mike Walsten.

 

BULL SPREAD UNWINDING AMID BASIS STRENGTH A WARNING SIGN... Pro Farmer Editor Chip Flory and Senior Market Analyst Brian Grete discuss bull spread unwinding and old- versus new-crop fundamentals in this week's Pro Farmer Profit Briefing clip on AgDay TV. Click here.

 

MONSANTO SAYS GMO WHEAT INCIDENT 'SUSPICIOUS'... Monsanto officials today said that based on testing it has conducted following the discovery of GMO plants in a wheat field in Oregon is suspicious" and was an isolated incident that could not have happened through normal farming practices. During a conference call with reporters today, Monsanto Chief Technology Office Robb Fraley said the evidence indicates someone intentionally introduced the biotech wheat seed into the Oregon field. The company said testing it has conducted has found no sign of GMO wheat material outside of that field.

A Monsanto spokesperson also says all GMO wheat seed that was shipped to a government seed storage facility in Colorado was previously destroyed -- at the company's request. "We have documentation of what seed was sent to the Colorado facility and documentation of its subsequent destruction," spokesman Thomas Helscher said. "At our direction, the seed was destroyed (incinerated) as it was old material and we had no plans for its future use."

 

LEADING EDGE CONFERENCE JUST GOT A LITTLE MORE INTERESTING... Federal Reserve Board Chairman Ben Bernanke roiled the financial markets this week at his press conference following the Fed meeting. Plans to begin scaling back Fed purchases of Treasuries could lead to higher interest rates ahead, something we’ll hear all about at the July 8-9 Pro Farmer Leading Edge Conference in Des Moines, Iowa, from LaSalle Economics President Dr. Vince Malanga. And if that isn’t enough, the massive failure of the House to pass the farm bill has lit Washington Consultant Jim Wiesemeyer’s fuse! You don’t want to miss his views on this subject! Call 1-800-772-0023 to register. Click here for more information.

 

SENATOR BOXER, EPA TO PROBE TEXAS EXPLOSION AT JUNE 27 HEARING... Senator Barbara Boxer (D-Calif.) is spearheading the Senate inquiry into the April West, Texas, fertilizer explosion contending the supply depot illegally stored ammonium nitrate. The Environmental Protection Agency (EPA) disagrees, noting the ammonium nitrate fertilizer on the site was in the less volatile, dry form, and, therefore did not qualify as an "extreme hazard" and would not have been subject to regulation. Boxer chairs the Senate Committee on Environment and Public Works and has scheduled a hearing on the matter for Thursday, June 27. Click here for more on this story from Inputs Monitor Reporter Davis Michaelsen.

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