Evening Report (VIP) -- August 9, 2013

August 9, 2013 09:54 AM
 

AUGUST CROP REPORTS OUT MONDAY... USDA will release its first survey-based estimates for the corn, soybean and cotton crops via the Crop Production Report at 11 a.m. CT on Monday. USDA will also update Supply & Demand tables for 2012-13 and 2013-14.

Crop Production

Avg.

Range

USDA July

USDA 2012

in billion bushels

Corn

14.005

13.485-14.348

13.950

10.780

Soybeans

3.336

3.226-3.420

3.420

3.015

Cotton (mil. bales)

13.69

13.25-14.20

13.50

17.315

Traders expect USDA's first survey-based corn crop estimate to come in at 14.005 billion bu., which would be 55 million bu. higher than the model-driven projection in July. The corn yield estimate is guessed at 157.7 bu. per acre compared to the July projection of 156.5 bu. per acre. For soybeans, the average pre-report guess pegs the crop at 3.336 billion bu. and the yield at 43.6 bu. per acre. In July, USDA projected the bean crop at 3.420 billion bu. and the yield at 44.5 bu. per acre. Cotton production is guessed at 13.69 million bales compared to the July projection of 13.50 million bales.

Wheat Production

Avg.

Range

USDA July

USDA 2012

in billion bushels

All wheat

2.106

1.942-2.150

2.114

2.269

All winter

1.543

1.510-1.554

1.543

1.645

Other spring

0.506

0.435-0.538

0.513

0.542

Durum

0.061

0.055-0.080

0.058

0.082

The all wheat crop estimate is expected to decline 8 million bu. from last month to 2.106 billion bushels. The spring wheat crop estimate is guessed down 7 million bu. from last month's first survey-based estimate at 506 million bushels.

2012-13 carryover

Avg.

Range

USDA July

2011-12

in billion bushels

Corn

0.724

0.537-0.819

0.729

0.989

Soybeans

0.123

0.109-0.135

0.125

0.169

Traders are anticipating modest downward revisions to USDA's old-crop corn and soybean carryover estimates this month. The average trade guess pegs corn carryover at 724 million bu. and bean carryover at 123 million bushels.

2013-14 carryover

Avg.

Range

USDA July

in billion bushels

Corn

1.970

1.498-2.431

1.959

Soybeans

0.263

0.131-0.306

0.295

Wheat

0.572

0.477-0.653

0.576

Cotton (mil. bales)

3.05

2.80-3.60

2.9

Traders are looking for USDA's new-crop corn ending stocks projection to rise 11 million bu. from last month to 1.970 billion bushels. New-crop soybean carryover is seen falling 32 million bu. from last month to 263 million bushels. Wheat ending stocks are guessed 4 million bu. lower than month-ago at 572 million bushels. And 2013-14 cotton carryover is expected to rise 150,000 bales from July to 3.05 million bales.

 

WHERE FED OFFICIALS STAND ON TAPERING... A series of Federal Reserve Bank presidents laid out their views this week on when they see the tapering of the Fed’s asset purchases unfolding. Here’s a look at where these officials stand:

  • Cleveland Fed President Sandra Pianalto (not a voter in 2013, but to be in 2014): Pianalto backs scaling back the asset purchases by the U.S. Federal Reserve if the U.S. jobs market continues to follow its current path. However, Pianalto is not a voter on the Federal Open Markets Committee (FOMC) nor did she give any timeline on when the tapering could start. It has been announced that Pianalto will retire in early 2014, with a replacement expected to be named soon thereafter.
  • Chicago Fed President Charles Evans (voter in 2013; alternate in 2014): Evans said he could not rule out the Fed starting the tapering of its asset purchase efforts as soon as the September FOMC meeting. However, he cautioned that just because the tapering begins, that does not mean the Fed will hike interest rates. Evans believes rates will stay static as long as inflation doesn’t become an issue.
  • Atlanta Fed President Dennis Lockhart (not a voter in 2013 or 2014, but scheduled to be in 2015): Lockhart told Market News International in an interview that he thinks the tapering start could unfold at any of the next three meetings. If second-half growth picks up and jobs growth is more in the 180,000 to 200,000 range, "I think with other fundamentals improving we probably are in a position to remove ... the extraordinary policy program over the medium term." But he cautioned if the economy keeps muddling along, it is not a foregone conclusion the tapering will indeed start.
  • Dallas Fed President Richard Fisher (not a voter in 2013, but is in 2014): Economic data is pointing to the Fed getting closer to taking action to taper their asset purchases, according to Fisher. He said that he urged his colleagues at last week’s FOMC meeting to "make our first move this fall" but also noted the Fed likely had to "gingerly" remove the stimulus efforts.
  • St. Louis Fed President James Bullard (voter in 2013): More economic data should come in for the second half of the year before the Fed makes its decision on tapering their $85 billion per month in asset purchases, Bullard said. He also urged caution over "taking policy action based on forecasts alone," admitting that he has been too optimistic about the economic recovery. "It is important to wait to see if better macro-economic outcomes materialize in the months and quarters ahead," Bullard said.

 

Get more detailed comments and perspective here.

 

HFCS LIKELY ON MEXICO'S HIT LIST... High fructose corn syrup (HFCS) was a hot topic at a sweetener event we attended this week in Napa Valley, California. A Mexican official made it clear that despite a big sugar crop there, the U.S. has stepped-up shipments of HFCS to Mexico, leaving Mexican sugar processors with little choice but to export their cane sugar to the United States. The flow of Mexican sugar north has plunged U.S. sugar prices to levels that threaten U.S. sugar loan forfeitures.

When the North American Free Trade Agreement (NAFTA) was debated, then-USDA Secretary Ann Veneman predicted Mexico would not ship sugar to the U.S. because Mexicans preferred sugar rather than HFCS in soda. Wrong... Mexican soda makers prefer the cheapest sweetener.

Now, Mexican cane growers are picketing bottlers in Mexico to use more sugar and less HFCS. It’s not surprising, but Mexican officials blame the abundance of "cheap" HFCS on U.S. ethanol policy (more corn plantings).

Mexico sources say prices on HFCS for shipment south are being set at very low levels. That’s led some to call for an anti-dumping investigation. If Mexico and Canada implement retaliatory moves against U.S. country-of-origin labeling (COOL), expect U.S. HFCS products to be on both countries’ retaliation lists.

 

INDIANA FARMLAND VALUE RISES 15% TO 19%... The value of Indiana farmland rose 14.7% to 19.1%, depending on soil productivity, for the year ending in June, according to the June 2013 Purdue Farmland Value Survey released today. The survey, conducted by Purdue extension agricultural economist and Kim Cook, research associate, also found statewide cash rents rose 9.4% to 10.9% annually.

According to the survey, the value of top-quality farmland posted the strongest increase -- up 19.1% to an average value of $9,177 an acre. Average-quality farmland rose 17.1% to a value of $7,446 an acre. Poor-quality ground increased 14.7% to an average value of $5,750 an acre. Top-quality farmland averages 193 bu. per acre while average-quality ground averages 160 bu. and poor-quality farmland averages 127 bu. per acre. Get more details.

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