Evening Report (VIP) -- August 29, 2013

August 29, 2013 09:52 AM
 

MIDWEST DROUGHT EXPANDS AND INTENSIFIES... The National Drought Monitor reflects expansion of drought across the Midwest, with "extreme" drought introduced to 26 counties in Iowa to cover 22.4% of the state. The drought summary notes warm and dry conditions have resulted in a late-season flash drought across the Midwest.

Demonstrating this year's weather extremes, the monitor notes: "Burlington, Iowa (in the southeast corner of the state) in 2013 had its wettest spring on record since 1898, with 19.23 inches of precipitation (+7.83 inches above normal). Burlington is now on track to experience its driest summer on record since 1898, with only 3.86 inches of precipitation so far (-8.41 inches below normal). Portions of the Midwest are also on track for having one of the driest Augusts on record." Click here for related images.

 

NWS 6-10 DAY FORECAST DRY... The National Weather Service forecast for September 4-8 calls for a mix of temps across the Corn Belt, but for below-normal precip across the region. The best chance for dry conditions is in Missouri and the eastern Corn Belt. While some relief from hot temps is expected across the eastern Belt, hot and dry conditions in the western Belt will maintain stress on the filling crops. Click here for related maps.

 

BRAZILIAN PRODUCERS PLANNING TO INCREASE SOY ACRES... South American crop consultant Dr. Michael Cordonnier says rising soybean prices and a weakening Brazilian currency will encourage an even greater expansion of 2013-14 soybean acreage in Brazil. As a result, he has raised his expansion expectations from 3% to 5%, to 4% to 6%, with an upward bias. He now estimates the crop between 85 MMT and 87 MMT.

Dr. Cordonnier says larger soybean acreage will come from additional switching from full-season corn in southern Brazil to soybeans, the conversion of degraded pastures to soybean production in central Brazil and additional land clearing for new soybean production in northeastern Brazil. He reminds that safrinha acreage in Brazil will be determined by the profitability of growing corn and not by the soybean/corn price ratio.

 

DOLLAR STRENGTH LIMITS BUYING IN COMMODITIES... Strength in the U.S. dollar index led to a risk-off stance across the financial markets today, which spilled into the commodity markets. Investors are keeping a close eye on the situation surrounding Syria, as U.S. allies are not in agreement on what to do on the matter. British Prime Minister David Cameron called the House of Commons to an emergency session today and said it was in Britain's national interest to maintain an "international taboo against the use of chemical weapons." President Obama so far has said he has not yet made a decision. Jim Wyckoff's "Tech Talk" digests happenings in the outside markets.

 

CHANGES TO RFS UNLIKELY TO BE PART OF DEBT CEILING PACKAGE... OPIS, a renewable energy news service, reported Wednesday that if a bill is reported out of the House Energy and Commerce Committee to reform the renewable fuel standard (RFS2) -- a possibility after lawmakers return Sept. 9 -- House Majority Leader Eric Cantor (R-Va.) may attach it to a debt ceiling package. But congressional sources in the House, and especially the Senate, predict RFS reform language will not be part of any final debt ceiling hike passage.

"The Majority Leader listed a number of options to fix this issue [of the RFS], and one option was if we came up with a good bipartisan reform agreement out of the Energy & Commerce Committee, then maybe we could try attaching it to a must pass bill like the debt ceiling," Cantor spokeswoman Megan Whittemore told OPIS. Cantor reportedly made the comments during a July 25 meeting between himself and several petroleum industry executives. The July 25 Capitol Hill fly-in was held for oil industry executives to discuss the need to end the RFS.

PF perspective: You will hear a lot about "reforming" the RFS once lawmakers return from their long summer recess on Sept. 9. But even if the House Energy and Commerce Committee clears an RFS bill, it will not likely get traction in the Senate, nor be part of the thorny process ahead regarding the need to again hike the debt limit.

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