Evening Report (VIP) -- Advice -- March 7, 2014

March 7, 2014 09:09 AM
 

Corn and soybean producers: Reward the rally with sales… May corn futures have rallied nearly 90 cents from their winter low, while December futures have rallied nearly 60 cents. The trend is definitely higher, but that's too much of a rally to pass up, especially since basis is weakening. Corn producers are advised to make a 10% 2013-crop cash sale. This pushes hedgers to 70% sold on old-crop and cash-only marketers to 60% sold. Corn producers are also advised to sell another 10% of expected 2014-crop production via cash forward contract sale for harvest delivery. This pushes both hedgers and cash-only marketers to 30% forward priced on new-crop. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Soybean hedgers and cash-only marketers are also advised to increase new-crop sales to take advantage of the $1-plus rally in November soybean futures. Make a 15% cash forward contract sale for harvest delivery to get to 25% priced on expected 2014-crop production. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

 

Wheat producers: Increase old- and new-crop sales… Wheat futures have rallied stronger and the rally has lasted longer than we anticipated. With futures around $1 off the winter lows, it's time to reward the rally. Cash-only marketers are advised to make a 15% 2013-crop sale to get to 90% sold on old-crop. Hedgers and cash-only marketers are advised to sell 15% of expected 2014-crop production via cash forward contract for harvest delivery to get to 50% priced on new-crop. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

 

Traders expect USDA to trim old-crop soybean carryover... When traders return on Monday, they will be focused on evening positions ahead of the USDA Supply & Demand Report to be released that day at 11:00 a.m. CT. Given ongoing strong demand for old-crop soybeans, traders expect USDA to trim its estimate of 2013-14 carryover by 9 million bu. to be equal with the previous marketing year's total of 141 million bushels.

2013-14 carryover

Avg.

Range

USDA Feb.

2012-13

in billion bushels

Corn

1.487

1.431-1.656

1.481

0.821

Soybeans

0.141

0.125-0.150

0.150

0.141

Wheat

0.568

0.545-0.615

0.558

0.718

 

After USDA trimmed old-crop corn carryover last month more than expected, traders look for that figure to be up around 6 million bu. from last month to 1.487 billion bu., while wheat carryover is expected to rise by around 10 million bu.

 

February jobs data better than expected... After back-to-back months of disappointing jobs data, this morning's monthly employment report showed the economy added 175,000 non-farm payrolls in February. Expectations were for job gains of around 150,000 due to inclement weather during the month. Unemployment ticked up from 6.6% to 6.7%.

December and January payrolls were revised up a combined 25,000 from previous reports. The more upbeat jobs data will likely keep the Fed in the mode of trimming back its monthly asset purchases. Click here for more.

 

PEDV spreads to North Dakota... The National Animal Health Laboratory Network (NAHLN) says 252 new cases of porcine epidemic diarrhea virus (PEDV) were confirmed in the last reporting period, bringing the grand total to 4,106. While down from the previous week's high, the tally continues to grow and North Dakota reported its first confirmed case.

Iowa, the No. 1 pork-producing state in the nation, continues to lead the number of total confirmed cases at 1,356, with the next largest tally from Minnesota at 594 confirmed cases. North Carolina is third on the list at 436 cases. Today we learned that at least two East Coast packing plants (presumably in North Carolina) were cutting production by one day a week to four due to tighter available supplies because of PEDV.

 

Canada imposes minimum grain shipment requirements on major railways... Canada's government issued a Order in Council today that will force Canadian National Railway Co. and Canadian Pacific Railway Ltd., the nation's two largest railways, to transport at least 500,000 MT of grain per week, each, or face noncompliance fines of up to C$100,000 ($90,000) per day. These actions come as Canada struggles to ship a record-large wheat and canola crop. Frigid weather this winter has further complicated the situation.

The order takes effect immediately and is effective for 90 days, though it can be renewed as needed. The order allows the companies four weeks to increase deliveries to a combined target of 1 MMT per week, which would be more than double the current volume being transported. The railways are also required to report regularly regarding the amount of volume carried.

Agriculture Minister Gerry Ritz also announced the government will introduce legislation when parliament returns to establish measures that "ensure Canada maintains a world-class logistics system that gets agricultural products to market more efficiently," according to the press release.

 

Number of E85 fueling stations has risen substantially since 2007... The U.S. Energy Information Administration (EIA) today released a story titled "E85 fueling station availability is increasing." The topic is especially timely considering recent blows to the ethanol industry. The story notes that the number of retail fueling stations offering E85 has grown significantly since 2007, but that the pace of growth has slowed the past two years. Also, adoption has varied by region, with states outside of the Midwest seeing the most rapid growth. But while advances have been made, just 2% of retail stations in the U.S. offer E85. Get more details and charts.

 

Livestock producers encouraged to keep good records... USDA's Farm Service Agency Administrator Juan M. Garcia is urging livestock producers impacted by natural disasters, including the drought in the West and the unexpected early winter storm across the Midwest, to keep thorough records. "This includes livestock and feed losses and any additional expenses that are result of losses to purchased forage or feed stuff," Garcia notes. Doing so will help them to take advantage of livestock disaster programs the 2014 farm bill restarted and retroactively reinstated back to 2012.

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