Evening Report (VIP) -- April 4, 2013

April 4, 2013 10:08 AM
 

DROUGHT MONITOR REFLECTS MINOR CHANGE ACROSS PLAINS AND MIDWEST... According to the National Drought Monitor, 33.29% of the contiguous U.S. is drought-free, which is a minor decline from 34.96% last week and compares to 43.56% last year at this time. Very little change was reported across the Plains and Midwest.

The region classified as the "High Plains," which stretches from Kansas to North Dakota and includes Colorado and Wyoming, showed very little drought improvement, with just under 5% drought-free and over a half of the region in "extreme" drought. There was no change made to the drought classifications in Kansas, with 17% in "exceptional" drought and 62% in "extreme" drought. Texas saw further degradation, with nearly 12% in "exceptional" drought (10.5% last week) and Oklahoma saw very little change from last week. Click here for Plains maps.

For the Midwest, the drought monitor notes that only a few tenths of an inch of precip were reported in a few areas from Illinois and Iowa northward through the Great Lakes region and Minnesota, keeping dryness and the drought profile unchanged from last week. No changes were made to Iowa's drought classifications and 75% of Nebraska remains in "exceptional" drought. Click here for Midwest maps.

 

NEUTRAL-ENSO CONDITIONS EXPECTED THROUGH SUMMER... The National Weather Service's Climate Prediction Center (CPC) says neutral-ENSO conditions are likely through summer. It says most models forecast neutral conditions to continue through fall, with dynamic models predicting warmer conditions, which would reflect a trend toward El Nino. "There is less confidence in the forecasts for the last half of the year, partly because of the so-called "spring barrier," which historically leads to lower model skill beginning in late spring. Thus, ENSO-neutral is favored into the Northern Hemisphere summer 2013," states CPC.

Meteorologist Gail Martell of MartellCropProjections.com says the trend has been for warmer sea surface temperatures in the eastern equatorial Pacific, although a full-fledged El Nino has not yet developed. "There seems to be an even split between scientific models, with half indicating seas are warming with an emerging El Nino and the other half predicting cooling and La Nina," she points out.

 

MATO GROSSO FARMERS HAVE 20% OF EXPECTED CORN CROP SOLD... South American crop consultant Dr. Michael Cordonnier says farmers in Mato Grosso, Brazil, have forward sold only 20% of their anticipated corn production compared to 45% sold at this date last year. Producers are uncertain exactly how much crop they'll get this year given record planted acreage of safrinha corn, which is extremely variable depending on weather. Dr. Cordonnier also cites the recent decline in corn prices as a factor in the slowed forward sales.

With sales running lighter than year-ago and soybean movement slowed, Dr. Cordonnier says a lack of storage space is a concern. "The movement of soybeans out of the state has been slow due to congestion at the ports and long lines of trucks waiting to unload at grain terminals and port facilities. The soybeans are not moving out of the state at the pace that is needed to free up enough storage space for the anticipated record corn crop," he notes, adding that much of the corn could be stored in open-air piles, which could create quality concerns if the corn is not removed by the start of the rainy season in September or October.

 

CHINA BEGINS TO CULL POULTRY... Xinhua news is reporting that authorities in Shanghai closed a live poultry trading zone in an ag products market and began slaughtering all birds after detecting H7N9 bird flu from samples of pigeon from the market. The outlet is also reporting a person who had close contract with a deceased bird flu patient in Shanghai is under treatment in quarantine after developing flu-like symptoms.

 

$16,000 FOR CENTRAL ILLINOIS FARMLAND... LandOwner Editor Mike Walsten reports a high-quality piece of central Illinois farmland garnered a new high of $16,000 per acre March 15. Click here for details on the sale.

 

NASS TO RESUME MONTHLY MILK PRODUCTION RELEASE... USDA announced Wednesday the National Ag Statistics Service (NASS) will now provide an estimate of monthly milk production, partially reversing a prior decision to suspend the report from this month through September as a result of spending reductions forced by sequestration. NASS will utilize existing information from federal milk marketing orders to calculate a monthly milk production figure. But as the release noted, there will not be data on milk cow numbers or on milk per cow as that portion was generated solely via the producer survey/data collection by NASS. However, NASS has indicated that at some point, some type of survey must be conducted to help verify the data it will be using to make the monthly calculation of milk output.

 

ANALYSIS: RFS2 COMPLIANCE EXPENSE OFFSET BY ETHANOL BLENDING MARGINS, TAX CREDIT... "Through 2012, a reasonable argument can be made that the costs of compliance with RFS2 were largely or even more than offset by a combination of positive ethanol blending margins and the VEETC [volumetric ethanol excise tax credit]," according to a FarmDoc Daily article by Scott Irwin and Darrel Good of the University of Illinois. They say the large quantities of ethanol available under RFS2 may have trimmed retail gasoline prices by up to 2 cents per gallon. But the authors acknowledge there is considerable uncertainty regarding this estimate due to the lack of transparency on how the positive blending margins were distributed among market participants. Plus, VEETC claims came at a cost to taxpayers. Irwin and Good also note they did not take into account the possible effect of rising motor gasoline supplies from increasing amounts of ethanol, which could also trim the price of gasoline for consumers.

Looking ahead, the authors say that these conclusions about the expense of complying with RFS2 and its effect on gasoline prices could change substantially. Ethanol blending margins are expected to stay in the black, but "the collision between the E10 blend wall and the RFS2 mandate in 2013" and possibly an even greater divide from 2014 forward would raise concerns about sharply higher compliance costs." High renewable identification number (RIN) prices this year are an early warning for the possibility of increases in such costs, according to the article.

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