EXPORT PERFORMANCE FIGURES SUGGEST USDA'S SOYBEAN EXPORT PROJECTION TOO LOW, CORN TOO HIGH... Following is a snapshot of how exports are stacking up to USDA's export forecasts.
Wheat: With just over half of the 2012-13 marketing year complete, total wheat bookings are running 9% behind year ago. In the December Supply & Demand Report, USDA lowered its wheat export forecast by 50 million bu. to be even with last year at 1.05 billion bushels. Total commitments (sales plus shipments) are at 60% of USDA's export forecast, which is below the five-year average of 77% and last year's pace of 70% at this time. While there is still time for the export pace to improve, it needs to happen soon.
Corn: With one-quarter of the 2012-13 marketing year complete, total corn bookings are running 46% below year-ago. USDA left its export projection unchanged in its December Supply & Demand Report at 1.15 billion bu., which is 25.5% below the previous marketing year. USDA reports total bookings as a percent of total exports are at 43%, which compares to 62% last year at this time and a five-year average of 53%. These figures suggest USDA's current export projection is too high and that current high prices are curbing export demand.
Soybeans: With one-quarter of the 2012-13 marketing year complete, total soybean bookings are running 32% above year-ago. Surprisingly, USDA left its export projection unchanged in its December Supply & Demand Report at 1.345 billion bu., which represents a 1.2% drop from the previous marketing year. Furthermore, USDA reports total bookings as a percent of total exports are at 81%, which is above the five-year average of 68% and last year's pace of 61% at this time. USDA apparently expects an even more dramatic slowdown than normal in exports once South American supplies become available, although the export performance data suggests USDA's forecast is (way) too low.
DROUGHT MONITOR: PLAINS DROUGHT IMPROVEMENT OUTSIDE OF WHEAT BELT... According to the National Drought Monitor, 81.68% of the South is covered by drought, which is a slight improvement from 84.02% last week. But drought improvement did not occur in hard red winter wheat areas, as the only drought improvement as along the Texas coastline.
"Across the Northern Plains, generally 0.5 to 1.0 inch (of rain) fell from portions of the Dakotas eastward across southern Minnesota and western Wisconsin, but any improvement seemed insufficient to make any changes to the Drought Monitor in those areas. Through the remainder of the Plains, little or no precipitation fell. As a result, one-category deterioration was assessed in parts of Texas, eastern Kansas and small parts of adjacent areas. The continuing dryness has negatively impacted the winter wheat crop," it states. Click here for related maps.
MAJOR DIFFERENCES REMAIN: FARM BILL SAFETY NET OFFERS... Significant differences remain between the new House and Senate safety net proposals, specifically regarding how to blend revenue assurance and target/reference price safety nets. Watch for these to be resolved quickly, however, once fiscal cliff negotiations provide more concrete guidance as to the timeline and extent of needed cuts.
What is clear is the Senate's Ag Risk Coverage proposal is a money hog. Budget assumptions show most of the spending would go to that program as opposed to a target proposal that under the Senate counterproposal is simply a return to the counter-cyclical program (CCP), with increased target prices for only some commodities (designed to make sure the ARC is picked by the vast majority of corn and soybean growers). Also, Senate aides and lawmakers continue to insist that any target/CCP proposal be based on base acres and not planted, but they insist that ARC payouts be based on planted acres.
The new House farm bill safety net proposal appears to be more balanced. It includes the House price loss coverage and the Senate revenue programs (area-wide and on-farm options) except the revenue band is reduced from 89% to 79%, to 87% to 77%. In the new offer, the House adds the on-farm revenue of the Senate bill (it is not in the House bill) and increases the revenue band from 85% to 75%, to 87% to 77%. Under this compromise, price loss coverage and revenue coverage spend a nearly identical amount of the baseline.
But the Senate counteroffer reportedly notes a split of $13 billion between price and revenue programs is inequitable and doesn't work because of the interaction with Supplemental Coverage Option (SCO).