Evening Report (VIP) -- April 2, 2014

April 2, 2014 10:20 AM
 

Weekly ethanol production highest of 2014... According to data from the Energy Information Administration, ethanol production the week ending March 28 of 922,000 barrels per day (bpd) was up 37,000 bpd from the previous week and marks a new high for 2014. The four-week average for ethanol production stood at 892,000 bpd for an annualized rate of 13.67 billion gallons. Stocks rose 1.4% to 15.9 million barrels.

 

Hard freeze may have damaged western European wheat crop... USDA's Joint Ag Weather Facility points that out after an unseasonably mild winter, a pronounced southward shift in the jet stream ushered sharply colder weather into western Europe, with widespread hard freezes noted in the United Kingdom, France and Spain.

Regarding the condition of the crop, USDA noted: "The abrupt cold snap may have burned back jointing winter grains from northern Spain into southeastern portions of the United Kingdom. Similar low temperatures (-4 to -2°C) were noted in Germany and Poland, although winter crops were not yet into the temperature-sensitive jointing stage of development. However, some localized burnback was possible in Hungary, where winter wheat was developing rapidly due to a much-warmer-than-normal winter and early spring."

The weekly global weather highlights also take note of "widespread, locally heavy rains" in crop producing regions of southern Queensland and northern New South Wales in Australia, providing a needed boost in topsoil to advance winter crop planting. Click here for additional global weather highlights.

 

AFBF expresses major opposition to EPA's proposed 'waters' rule... The American Farm Bureau Federation (AFBF) after taking the time to review the 371-page proposed rule from the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers that defines waters of the United States under the Clean Water Act says its findings are "dismaying" and the proposed rule poses a "serious threat to farmers, ranchers and other landowners." AFBF President Bob Stallman notes, "EPA says its new rule will reduce uncertainty, and that much seems to be true: there isn’t much uncertainty if most every feature where water flows or stands after a rainfall is federally regulated." For Stallman's statement from AFBF detailing the group's opposition to the rule, click here.

 

Crop insurance indemnities pass $11.5 billion... Crop insurance indemnities reached $11.547 billion as of March 31, up slightly from the prior week but still behind the 2012-crop record of $17.431 billion, according to Risk Management Agency (RMA) data. As 2014 crop sales continue, RMA reports that 87.482 million net acres are insured, just behind the 90.212 million net acres insured for 2013 crops at this point a year ago. Get more details.

There are also some new developments relative to 2015 crops, in part due to the new farm bill. Approved Insurance Providers (AIPs) normally have until April 1 to submit their Plan of Operations to RMA under the Standard Reinsurance Agreement (SRA), but RMA said that while they expected the plan submissions by April 1, the agency "will consider revisions submitted by May 19, 2014. The extension is to provide additional time for the Approved Insurance Providers to consider the Farm Bill impact in their 2015 plan documentation submission."

 

PF midweek marketing game plan update...

Corn: Use the recent rally to get current with old- and new-crop cash sales advice. Hedgers have 70% of 2013-crop production sold in the cash market, while cash-only marketers are 60% priced on old-crop. Hedgers and cash-only marketers have 30% of expected 2014-crop production sold via cash forward contract for harvest delivery. Futures have risen to levels where we are more willing to increase cash sales, but we will let the market run as far as possible before doing so. The immediate sharp price reaction following USDA's March 31 trend-setting reports signals there is more near-term upside potential.

Soybeans: Use price strength to get current with old- and new-crop cash sales advice. Hedgers are 100% sold on 2013-crop production in the cash market, while cash-only marketers are 90% sold on old-crop. Hedgers and cash-only marketers have 25% of expected 2014-crop production sold via cash forward contract for harvest delivery. With November futures returning above the $12.00 level, we are keeping a close eye on the market as that was an initial upside target. But bulls clearly hold near-term momentum, so we will wait for a sign buying has stalled before increasing sales.

Wheat: Hedgers are 100% sold in the cash market on 2013-crop production, while cash-only marketers are 90% sold. Hedgers and cash-only marketers are 50% forward priced on expected 2014-crop production. While no serious chart damage has been done, wheat futures are currently signaling a near-term high has been posted. On confirmation of a high, we'll increase sales. But given ongoing drought concerns in the U.S. Southern Plains and political tensions in the Black Sea region, another leg up cannot be ruled out.

Cotton: Hedgers and cash-only marketers have 75% of 2013-crop production sold in the cash market and 25% of expected 2014-crop production sold via forward contract for harvest delivery. Get current with those sales levels and be prepared to increase marketings. The broadening pattern of the uptrend is a potential topping signal, but no chart damage has yet been done.

Cattle: Fed cattle producers are effectively hedged on 1st-qtr. and 50% of 2nd-qtr. marketings at $144.20 in April live cattle futures. In addition, hedgers hold April $136.00 put options that were purchased for $1.325 covering 1st-qtr. and 50% of 2nd-qtr. marketings. Stick with these positions for now.

Hogs: Hog producers have 50% of 2nd-qtr. and 50% of 3rd-qtr. marketings hedged in $126 June lean hog put options that were purchased for $3.90. That puts a floor on these marketings at $122.10. Hold those puts as insurance against a potential steep correction. Extreme price volatility could be a sign of topping. Therefore, be prepared to extend coverage on another strong push to the upside.

Feed: All corn-for-feed and meal risk is carried in the cash market. We aren't willing to chase the market higher by locking in current prices, but we would use a corrective pullback to lock in some coverage.

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