Evening Report (VIP) -- December 11, 2013

December 11, 2013 08:52 AM

IGC: DEMAND WILL OUTPACE GROWTH IN GLOBAL GRAINS PRODUCTION... The International Grains Council (IGC), in releasing its global supply and demand projections through 2018-19, says growth in global demand will at least keep pace with growth in production to result in stocks-to-use ratios very similar to current levels.

Specifically, the report states, "While some area expansion is anticipated, particularly in the major exporters such as the CIS (Commonwealth of Independent States) and Brazil, the increase is largely driven by improving productivity. Firm demand growth is also expected and, while the absolute level of stocks is likely to rise, the ratio of stocks-to-use (for world total grains) is projected to fall slightly to 18% by the end of the 2018-19, from 20% forecast for 2013-14. The projections indicate a marked increase in trade volumes over the next five years, as increased demand is met by production growth in the key exporters, most notably in South America and the Black Sea region." Link to additional details.


WEEKLY ETHANOL PRODUCTION HIGHEST OF THE YEAR... The Energy Information Administration (EIA) reports ethanol production the week ended Dec. 6 of 944,000 barrels per day (bpd) rose 31,000 bpd from the previous week and was the highest of the year. In fact, that's the highest level since January 2012. The four-week average for ethanol production stood at 922,000 bpd for an annualized rate of 14.13 billion gallons. Expressed as a percentage of daily gasoline demand, daily ethanol production was 11.31% -- the highest rate of the year and highest since February 2012.

Meanwhile, ethanol stocks rose by 324,000 barrels from the previous week to 15.45 million barrels -- a seven-week high.


FDA: VOLUNTARY PLAN FASTEST WAY TO PHASE-OUT CERTAIN ANTIBIOTICS IN FOOD PRODUCTION... The Food and Drug Administration (FDA) announced this morning it is implementing a voluntary plan to phase out the use of certain antibiotics for enhanced food production. FDA said it is working to address the use of "medically important" antibiotics in food-producing animals for production uses, such as to enhance growth or improve feed efficiency. FDA says such drugs are important because they also are used to treat human diseases and might not work if the bacteria they target become resistant to the drugs' effects.

FDA explains the plan is voluntary because it's the fastest and more efficient way to make changes. FDA is working with associations that include drug companies, the feed and animal production industries, as well as veterinarians and consumer groups. Click here for more, including a Q&A fact sheet.

Washington consultant Jim Wiesemeyer says by law, drugs administered through feed have to be used in accordance with the label. "Once manufacturers voluntarily make these changes, medically important antimicrobial drugs can no longer be used for production purposes, and their continued use to treat, control or prevent disease in food animals will require an order or prescription from a licensed veterinarian," he adds.


IOWA FARMLAND VALUES SEE SMALLEST INCREASE SINCE 2009... LandOwner Editor Mike Walsten was in Ames, Iowa, today for the release of the annual Iowa Land Values Survey conducted by Iowa State University. He reports the survey found average farmland values in 2013 of $8,716 an acre, up 5.1% from last year, but the smallest percentage increase since 2009.

This year's single-digit rise is the ninth time in the past ten years that land values have increased, reports survey coordinator Dr. Mike Duffy. "Except for 2009, the 2013 increase is the first time values have increased less than by double digits since 2003. This is only the second time in the past ten years where some counties reported lower land values than the year before. In 2009, 85 counties reported lower values and in 2013 there were 14 counties that reported lower land values. Except for 2009 and 2013, since 2004 all county land values have increased each year," Duffy states. More details are available in Mike's column.


FINAL FARM BILL WILL LIKELY INCLUDE COOL LANGUAGE... Country-of-origin labeling (COOL) language will likely be in the final farm bill, but it is unclear as to in what form. Some are pushing for a "North American label," while others are pushing for repeal language. COOL proponents want no changes. Thus, this is another issue that could and likely will be put to a vote by all farm bill conferees.


HOUSE PLC TARGET PRICES LIKELY USED IN FARM BILL... The final farm bill target prices will likely be those used for the Price Loss Coverage Program in the House bill, so long as upcoming Congressional Budget Office (CBO) scoring doesn't show the need for additional refinements to lower farm bill costs.



CORN: Hedgers and cash-only marketers have 25% of 2013-crop production sold in the cash market. Though we aren't looking for a significant rally, we are hopeful corn futures can rally on year-end short-covering. Therefore, we are content to wait on a corrective price recovery to advance 2013-crop cash sales. Be prepared to use a correction to advance old-crop sales and to start 2014-crop sales.

BEANS: Hedgers have 100% of 2013-crop production sold in the cash market, while cash-only marketers are 75% sold on 2013-crop. Futures are working on a potential upside breakout from the extended, choppy trading range, though bulls' efforts are being countered by a lack of buying in the corn and wheat markets and the likelihood of record South American production. Hedgers should be prepared to reown a portion of 2013-crop sales in long futures or call options if an extended price rally seems likely. Hedgers and cash-only marketers should also be prepared to start 2014-crop sales on a strong push higher.

WHEAT: Hedgers are 75% sold in the cash market on 2013-crop production, while cash-only marketers are 50% sold. The technical picture has taken a decided turn in bears' favor this week, which opens additional downside price risk. Given plentiful global supplies, there's urgency to make sales on periods of price strength, but we don't want to sell on weakness.

COTTON: Hedgers and cash-only marketers have 50% of 2013-crop production sold in the cash market. Futures are flashing stronger signals a short-term low is in place. Be prepared to advance 2013-crop cash sales on an extended recovery.

CATTLE: Increased volatility at high price levels in live cattle futures is a potential topping signal. But tight supplies limit downside risk. Fed cattle producers should continue to carry all risk in the cash market unless there are indications of sharp, extended price pressure. The long-term price outlook for feeder cattle is higher. Therefore, feeder cattle buyers should be prepared to add long coverage on an extended corrective pullback.

HOGS: Profits were claimed on all 4th-qtr. hedge coverage. 50% of expected 1st-qtr. marketings are hedged in Feb. lean hog futures at $89.70. Stick with that coverage until there are signs a seasonal low is in place.

FEED: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80. We feel prices are ultimately headed higher, but we'll wait to see if futures can successfully break out above the contract highs before considering extending coverage. There's no urgency to add long corn coverage at this time.

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