Evening Report (VIP) -- August 14, 2013

August 14, 2013 10:01 AM
 

GREENREPORT SEPARATES THE 'HAVES' AND 'HAVE-NOTS'... The Kansas Applied Remote Sensing (KARS) "GreenReport Vegetation Condition Map" reflects a distinct separation from the "haves" and the "have-nots" in terms of growing conditions this year. Areas of stress are becoming even more apparent from the "yellow" shaded areas, while better areas are reflected by various shades of "green." Click to view the maps.

 

ETHANOL PRODUCTION INCREASES SLIGHTLY, STOCKS DECLINE... The Energy Information Administration (EIA) reports ethanol production for the week ended Aug. 9 was up 4,000 barrels per day (bpd) from the previous week to 857,000 bpd. Ethanol stocks dropped 291,000 barrels to 16.4 million barrels.

 

COOL TEMPS FURTHER DELAY CORN CROP DEVELOPMENT... As the end of the growing season approaches, concern about whether the corn and soybean crops will reach maturity and harvest moisture in time this fall is mounting due to the late planting date for many crops along with recent unseasonably cool temps. University of Illinois crop sciences professor Emerson Nafziger provides some insight on this topic.

Nafziger says that corn is around 10 days to two weeks behind normal and says the number of days behind will 'stretch' as the weather cools." Late-planted corn typically requires fewer growing degree days (GDDs) to reach maturity than corn planted at a normal date, but that is not the case this year due to recent below-normal temps. "This means less chance of premature death and a better chance to fill grain completely. But for late-planted corn it also means late maturity," Nafziger explains.

A 50% frost date is estimated for Oct. 20 for Illinois, which signals a mid-season corn hybrid planted in early June should mature before that date. "But drydown slows quickly as we move into October, and even early-planted corn will dry slowly after maturity unless September is unusually warm," Nafziger cautions. He goes on to explain that corn planted in mid-June is not likely to mature before the normal frost date if temps are normal. Learn more.

 

BEANS IN NEED OF WARMER TEMPS... Nafziger also provides some perspective on the soybean crop, which he says is around two to three weeks behind normal. While the Illinois crop looks healthy, podsetting is later than normal and beans planted the second half of May haven't reached or moved past the start of podfill. Therefore, "If temperatures continue to be cooler than normal, we can expect the crop to reach maturity only by late September or early October," Nafziger reports.

Cool temps cause other issues for the bean crop as well. While Nafziger says the crop "has good photosynthetic ability due to its healthy, complete canopy" and below-normal soil water use rates extend the water supply, "below-normal daytime temperatures (and clouds) mean less photosynthesis, and cool nights can physiologically limit growth rates and photosynthetic rates the next day." He says this may result in below-normal pod numbers or pods initiated in late August that may not fill.

Nafziger says the best situation would be for both night and day temps to return to normal or just above normal with enough rain to enable the crop to photosynthesize fully as seeds fill. Even then, how the crop finishes this fall will be key. "Good soybean yields are still possible if the weather remains good into September, but seed-filling rates will remain slow as long as temperatures remain low," Nafziger explains.

 

MORE FARM BILL INSIGHT FROM PETERSON... As noted in "First Thing Today," Rep. Collin Peterson (D-Minn.), ranking member on the House Ag Committee, left little doubt the fate of the new farm bill is murky when he spoke Tuesday at the Minnesota Ag Leadership Conference. Importantly, Peterson said House Speaker John Boehner (R-Ohio) "wants a farm bill completed by Sept. 30," but "I don't think [House Majority Leader Eric] Cantor (R-Va.) wants a bill." Peterson said it "doesn't appear Boehner and Cantor are on the same page, and that is a problem."

Peterson said despite Senate Ag Committee Chair Debbie Stabenow's (D-Mich.) remarks about no further extension of the 2008 Farm Bill, that is a viable option and if so, he would want it to go into 2015. "And if any extension would reduce direct payments, that would be like writing a new farm bill, so that won't be easy to get, either... it has to be a straight extension," Peterson said. Get more farm bill details from Peterson's speech.

Also of note, Peterson said what is wrong with Washington, in part, is that "Fox News is a tool of the GOP, and MSNBC is a tool of the Democratic party, and that has helped polarize a lot of issues."

 

PF MIDWEEK MARKETING GAME PLAN UPDATE...

CORN: Hedgers and cash-only marketers are 100% sold in the cash market on the 2012-crop. You should be current with that advice. For 2013-crop, hedgers and cash-only marketers have 25% of expected new-crop production sold via cash forward contracts for harvest delivery. While attitudes are bearish and the market is struggling to put in a low, we are willing to wait on a corrective recovery before advancing new-crop marketings. But be prepared to use an extended corrective bounce to increase new-crop cash sales and/or add hedge coverage.

BEANS: Hedgers and cash-only marketers are 100% sold in the cash market for 2012-crop. You should be current with that advice. For 2013-crop, hedgers and cash-only marketers have 20% of expected new-crop production sold via cash forward contract for harvest delivery. With futures signaling a short-term low is in place and attitudes seemingly shifting, we are content to allow futures to correct as far as possible. But be prepared to increase cash sales and/or add hedge coverage when the corrective rally shows signs of stalling.

WHEAT: The wheat market needs corn futures to put in a low before it can post more than a modest corrective bounce. With spring wheat harvest underway, futures may face a period of seasonal pressure. But with futures overdue for a corrective bounce, we aren't willing to make sales at current levels.

COTTON: Hedgers and cash-only marketers have 50% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton at 83.87 cents. If futures confirm the upside breakout from the extended, choppy range with a weekly high close, be prepared to lift the hedge coverage and make cash sales.

CATTLE: The cattle market is in the process of putting in a seasonal low. As a result, fed cattle producers should continue to carry all risk in the cash market. The big premium fall- and winter-month feeder cattle contracts is keeping us from advising long hedge coverage for feeder cattle buyers. But be prepared to add long coverage on a price pullback, as tightening supplies point cash feeder cattle prices higher, longer-term.

HOGS: Hog producers have 50% of expected 4th-qtr. production hedged in Dec. lean hog futures at an average price of $82.12 1/2. Be prepared to use the recent price strength to heavy up 4th-qtr. coverage and to add 3rd-qtr. hedge coverage in Oct. lean hog futures and 1st-qtr. 2014 coverage in Feb. lean hog futures.

FEED: Continue to carry corn-for-feed risk in the cash market until the corn market signals a low is in place. Soybean meal futures have put in a low, but a sharp move higher developed very quickly and prices are now at the point where we aren't willing to chase the market higher with long coverage.

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