LIVESTOCK PRODUCERS: LIFT 2ND-QTR. FEED COVERAGE... Last week's USDA reports put heavy pressure on the corn and soybean meal markets. The inability of these markets to recover after the initial wave of post-report selling has us concerned more price pressure lies ahead. As a result, livestock producers are advised to lift the 25% 2nd-qtr. feed coverage in long July corn futures and long July soybean meal futures. The corn position resulted in a loss of 49 cents while the meal position netted a $4.90 profit.
The sharp price break will eventually give us an opportunity to extend feed coverage, but carry all risk in the cash market until there are solid signs the downside has been exhausted.
WEEKLY ETHANOL PRODUCTION IMPROVES... The Energy Information Administration reports ethanol production the week ended March 29 improved 2,000 barrels per day (bpd) from the previous week and was up 3,000 bpd from the four-week average to 807,000 bpd. Ethanol stocks rose just 0.2% from the previous week to 17.5 million barrels. The market expects further ethanol production gains to have been made this week as lower corn prices have improved margins.
ARGENTINE PRODUCERS PLEASED WITH SECOND-CROP CORN... Pro Farmer Member and Argentine trader and farmer Eduardo Reynolds says he is very pleased with his second-crop corn yields and says as long as central Argentina remains frost-free for another 10 to 15 days (as indicated by the forecast), the crop will finish very well. He also reports early soybean yields are better than expected overall, especially given the variety of weather seen throughout the season. But he notes some second-crop soybeans are showing signs of freeze damage and some areas have recently seen too much rain to continue harvesting.
But what he writes regarding the government signals a growing frustration with how controlling it has become. He says, "If we make it through this harvest and are still around and keep on farming, it will indicate that we are very resilient and real farmers. It is tough when you have a government that is constantly complicating things."
INFORMA SEES WINTER WHEAT YIELDS STEADY WITH YEAR-AGO... Informa Economics reportedly estimates the U.S. winter wheat crop at 1.631 million bu., which if realized, would be 14 million bu. lower than last year's crop. Informa reportedly sees a slight drop in harvested acres from last year, but projects the average winter wheat yield at 47.2 bu. per acre -- steady with year-ago.
Informa also reportedly raised its forecast for the 2012-13 South American corn crop. The firm estimates Brazil's corn crop at 71.95 MMT (up from 71.6 MMT previously) and the Argentine crop at 25.3 MMT (up from 25.3 MMT previously). It also reportedly pegs China's 2013-14 corn crop at 213 MMT, up from 205 MMT previously.
For soybeans, Informa reportedly raised Argentina's crop to 52 MMT from 51 MMT previously, but lowered the Brazilian bean crop to 84.5 MMT from 83.25 MMT.
GILLIBRAND ANNOUNCES DAIRY POLICY PROPOSAL... A plan to help provide long-term support and certainty for dairy farmers by providing a safety net for small producers, as well as improving inventory reporting and transparency was announced Tuesday by Sen. Kirsten Gillibrand (D-N.Y.), a plan she "doesn't think it will cost that much." The plan, dubbed the Dairy Pricing Reform Act, would reform the way the USDA sets dairy prices.
A new farm bill has several hurdles to clear, including eventually getting one savings figure rather than the divergent savings in coming Senate and House farm bill proposals. As for dairy policy, an eventual key in the Senate will be which plan gets the support of Sen. Patrick Leahy (D-Vt.) who, history shows, can get lawmakers to follow his support for or opposition to various dairy policy proposals. Over in the House, Speaker John Boehner (R-Ohio) has been very vocal in his opposition to last year's proposed dairy gross margin proposal, especially supply management language contained in the program pushed hard by Rep. Collin Peterson (D-Minn.), ranking member on the House Ag Committee. Get more details.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. If you are not current with advised old-crop sales, catch up is no longer recommended. While there's more downside risk, cash-only marketers must hold some old-crop in the bin until we know more about this year's production. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. While we'd like to be more heavily sold on new-crop, there's a lot of time to market this year's crop and the further prices drop now, the greater the odds of a weather rally at some point during the growing season. Hedgers should be prepared to add hedge coverage if December futures drop through Monday's lows as that would open risk to at least the $5.11 area -- and possibly to under $5.00.
BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. If you are not current with this advice, catch up is not recommended. While there's more downside risk, cash-only marketers must hold some old-crop in the bin until we know more about this year's production. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers should be prepared to hedge a portion of production if November soybean futures violate support at $12.25 1/4, as that would open sharp downside price risk.
WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Wait on a corrective bounce to get current with old-crop sales. For 2013-crop, a solid corrective rebound will be used to make initial sales. While the price posture is bearish, we still have hopes of a spring rally given HRW crop concerns.
COTTON: Hedgers are 100% sold on 2012-crop in the cash market, with cash-only marketers 85% sold on old-crop. Get current with recommended old-crop sales. Hedgers and cash-only marketers have 25% of expected 2013-crop production sold via cash forward contract for harvest delivery. Be prepared to make additional new-crop sales if December cotton futures signal a major market top is in place.
CATTLE: Demand concerns are making it difficult for live cattle futures to put in a low. But the downside is also limited by tightening supplies. Fed cattle producers should continue to carry all risk in the cash market. Recent price action signals a low is in place for feeder cattle futures, but the upside remains limited until the live cattle market puts in a low. Feeder cattle buyers should continue to carry risk in the cash market for now.
HOGS: While demand concerns continue to hang over the market, lean hog futures continue to work off the lows. Hog producers should carry all risk in the cash market for now.
FEED: All feed coverage has been lifted. The sharp price break will eventually give us an opportunity to extend feed coverage, but carry all risk in the cash market until there are solid signs the downside has been exhausted.