Evening Report (VIP) -- December 10, 2013

December 10, 2013 08:41 AM
 

MARKETS HAVE NEGATIVE REACTION AFTER USDA'S REPORT DATA... After moving higher immediately following the release of the 11:00 a.m. CT USDA Supply & Demand Report, corn, soybean and wheat futures turned lower. Wheat futures led losses on the day. Click here for Pro Farmer's report reaction.

 

 

USDA RAISES BEEF AND PORK PRODUCTION FORECASTS... In this morning's S&D Report, USDA raised its beef and pork production forecasts for 2013 and 2014, but stayed with trends that show beef production contracting by nearly 5% in the year ahead while pork production is expected to climb by 3% in 2014. USDA says expectations for higher cattle and hog carcass weights were largely behind the increases in 2014 production forecasts compared to last month.

Due to slightly weaker demand in Asia, USDA lowered its 2013 and 2014 pork export forecasts, although it still sees pork exports improving by 4% in the year ahead. The beef export forecast was raised for 2013 and 2014, although tighter supplies are expected to lead to a 7.7% reduction in exports in 2014 compared to this year.

USDA pegs the average cash steer price in 2013 at $125.82 and slightly increased its 2014 projection from last month to $132.50. Its pegs the average cash hog price in 2013 at $64.40 and sees prices averaging $61 in 2014.

 

 

FIRST CASES OF RUST FOUND IN COMMERCIAL FIELDS IN BRAZIL... South American crop consultant Dr. Michael Cordonnier says the first cases of soybean rust in commercial soybean fields in Mato Grosso and Goias were confirmed late last week, which is earlier than normal. He reports a total of 19 cases have been confirmed in Brazil, and until last week, they were in volunteer soybeans.

The technical director of the Mato Grosso Soybean and Corn Producers Association, Nary Ribas, says the situation is nothing to be alarmed about, although he urged farmers to monitor fields. Agronomists are hopeful new fungicides available this growing season will help control the disease.

Meanwhile, Dr. Cordonnier says corn earworms have been detected across all of Brazil's grain belt but so far producers have been successful in controlling the pest.

 

 

SOUTH AMERICAN CROP ESTIMATES UNCHANGED... Dr. Cordonnier says more than 90% of the Brazilian soybean crop has been planted and the only main area left to plant is the double-cropped area in Rio Grande do Sul, where producers are waiting for the remaining wheat to be harvested. He currently pegs the crop at 90 MMT and says he has a neutral bias toward crop size. He pegs the Brazilian corn crop at 68.5 MMT and says the full-season crop is doing well.

Dr. Cordonnier also left his Argentine crop pegs unchanged at 56 MMT for soybeans and 24 MMT for corn. He says the soybean crop is about 60% planted but only 50% of the corn crop has been planted. While roughly half of the corn crop will be planted late, he's not going to get too concerned about late-planted corn at this time, although some of the acres will be switched to soybeans if delays persist.

 

 

ABARES: OUTLOOK PROMISING FOR LIVESTOCK EXPORTS... The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) says the outlook for farm exports in 2013-14 is promising, led by expected increases for beef and veal, wine and dairy products. ABARES expects farm exports to reach a record $38 billion, which if realized, would be up 8% from the five-year average.

Livestock and livestock product export values are expected to increase by nearly 12% in 2013-14 to $16.7 billion, while grain and oilseed export values are forecast to decline by 7.4% to around $21.3 billion. Wheat export earnings are expected to be down 6% in 2013-14.

 

 

POSSIBLE PROBLEMS WITH A 2008 FARM BILL EXTENSION... Some lawmakers on both parties and chambers have already said they would insist on eliminating direct payments if there is another extension of the 2008 Farm Bill. But some farm-state lawmakers quickly respond they could not support any such development, and would thus not vote for any such extension. This is giving momentum to efforts to finalize new farm bill details. Farm-state lawmakers also note that if direct payments are eliminated in any extension of existing farm law, that in itself is a new farm bill, so they may as well settle on other new farm bill details.

Another problem that might arise if there is another extension of the 2008 Farm Bill is that some say this could mean there may never be a new farm bill because the politics and budget-cutting era will keep getting worse. Others say that any full extension would bring in far more farmer participation in the Average Crop Revenue Election (ACRE) program, and because that is based on actual plantings, the payout for some 2014 crops could be huge -- especially for corn and soybeans.

 

 

CAN A NEW FARM BILL BE IMPLEMENTED FOR 2014 CROPS?... Title I programs (ARC, PLC) could be implemented in time for 2014 crops, but that would not be the case for some crop insurance-related programs, like the Supplemental Crop Coverage (SCO) and the cotton stacked income protection plan (STAX) programs. These would not be implemented until 2015. If the cotton STAX program can't be implemented until 2015, cotton growers will likely be given a reduced direct payment as per the language in the House farm bill. But the exact level of the payment and whether this will occur for one or two years is unknown.

 

 

TITLE I SAFETY NET PAYMENT CALCULATION HANGUP RESOLVED... The battle over how payments for the Title I safety-net will be calculated is finally over. The odds favor some type of base acre approach -- either existing base acres or some other choices. But whether plantings or some base acreage concept is used, the same system will be used for both the Ag Risk Coverage (ARC) and Price Loss Coverage (PLC) Title I programs in the interests of equity.

Addressing talk about moving to a rolling five-year average of planted acres for determining program payments, Washington Consultant Jim Wiesemeyer says this would be a "bad idea," as it would lead to farmers in part planting to build base and would encourage farmers to plant higher-value crops. World Trade Organization (WTO) members would have a field day challenging such developments, and they would likely win, Jim explains. Read more from him.

 

 

MEANS TEST REDUCTION VIA CROP INSURANCE UNLIKELY... Some sources say farm-state lawmakers will likely "give" on conservation compliance linkage to crop insurance, and thus will likely insist on not invoking any other restrictions on crop insurance enrollees. Senator Chuck Grassley's (R-Iowa) efforts regarding payment limits and altering the definition of actively engaged may well be one of the last farm bill item decided. Grassley’s total payment limit of $125,000 is probably OK with conferees, but the underlying pay limits probably have to change. Actively engaged rules proposed by Grassley probably cannot happen because they would cause an enormous shift in how farmers operate, forcing most if not all farmers into cash rent, which would be too radical a change.

 

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