Evening Report (VIP) -- December 19, 2013

December 19, 2013 08:30 AM

COF REPORT: MORE OF THE SAME EXPECTED... Traders preparing for Friday's 2:00 p.m. CT release of USDA's Cattle on Feed Report expect it to show more of the same -- tightening feedlot supplies. Meanwhile, the Placements pace is expected to show a modest rise from year-ago after a sharp surge in October. The report is expected to show On Feed at 95.4%, Placements at 100.9% and Marketings at 94.6% of year-ago levels.

This report is expected to continue a long string of feedlot numbers coming in below year-ago. If realized, December would be the 16th straight month of tightening feedlot supplies compared to year-ago and would represent the lowest Dec. 1 inventory since 1996.

Report expectations

Avg. Trade Guess


% of year-ago levels

On Feed










ARGENTINA RAISES WHEAT CROP ESTIMATE... Argentina's ag ministry now forecasts the country's 2013-14 wheat crop at 9 MMT versus 8.5 MMT previously. The increase was in part due to an increase in wheat acreage from month-ago. The higher crop forecast comes as Argentine exporters are awaiting the government's go-ahead to ship 1.6 MMT of 2013-2014 wheat that has already been sold. The ministry also increased its 2013-14 soybean planted area to 20.8 million hectares (51.4 million acres), up 100,000 hectares from last month. Corn planted acreage was unchanged at 5.7 million hectares (14.1 million acres).

A Pro Farmer Member from Argentina sent us an update from his country. He believes Argentina will have a 10 MMT wheat crop, at the least. He says, "The government will open exports once it has absolute confirmation there is this amount of wheat or more. So, in my opinion, sooner or later we will export 2 MMT to 4 MMT of wheat. The corn crop is okay, but suffering a bit from very high temps and wind. But there is a good quantity of moisture in the ground. Soybeans are also okay. These very high temps will affect the crop, but it is too early to determine any damage."


NWS SEES LITTLE CHANGE TO DROUGHT AREAS... The National Weather Service's Climate Prediction Center (CPC) outlook for January through March calls for above-normal temps across the South, including Oklahoma and Texas, which raises moisture needs this spring. The precip forecast calls for "equal chances" of normal, below- or above-normal precip across the Plains and Midwest for this period. As a result, the agency expects much of the current drought area outlined by the Drought Monitor (see next item) to remain intact through the winter.

As a result of recent weather and the extended forecast, the CPC says it expects drought to persist across much of Iowa and southern Minnesota, but for some improvement to the drought in central Illinois. Drought is also expected to persist across the HRW Wheat Belt, as well as the Southwest.

The HRW wheat crop went into dormancy in much better shape than last year, which reduces traders' concern about the crop due to drought. But if dry conditions persist this spring, stress on the crop will again be apparent. The lingering drought in areas of the western Corn Belt is also a concern, although traders still have "better-than-expected" 2013-crop yields on their minds. Click here for related maps.


DROUGHT MONITOR SHOWS SLIGHT INCREASE IN COVERAGE... According to the National Drought Monitor, drought covers 56.60% of the contiguous U.S., which is up slightly from last week's 55.49% and down sharply from 73.79% a year ago. The slight increase in percentage is due to rising drought issues in the Southern Plains and Pacific Northwest.

The monitor notes modest improvements made to the Midwest, Central Plains and Northern Plains, while another week of cool and dry conditions in the Southern Plains resulted in increased drought coverage across parts of southern Texas and Western Oklahoma. Click here for more.


FARMERS AGAIN DOMINATED IOWA FARMLAND MARKET IN 2013... Farmers accounted for 77% of all purchases of Iowa farmland in 2013, according to the Iowa Land Value Survey conducted by Dr. Mike Duffy of Iowa State University. That figure compares to 78% reported in the previous survey. The survey indicates investors represented 18% of all sales while new farmers accounted for 3% and other purchasers (school districts and other government entities) were 2%.

By crop reporting districts, sales to existing farmers ranged from 80% in the west-central district to 68% in the south-central district. Sales to investors were highest in the south-central district at 27% and lowest at 12% in the southeast district.


BANKER INDEX NOTES DROP IN FARMLAND INDEX... An indicator of farmland price trends marked a sharp drop in November, reports Dr. Ernie Goss, economics professor at Creighton University who conducts the monthly Rural Mainstreet Index survey. The monthly farmland index, which ranges between 0 and 100 with 50.0 representing growth neutral, showed a sharp drop to 47.0 in November. This is the index's lowest level since December 2009, and down from November's 54.3. "This is the first time in four years that the farmland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices," observes Goss.

Farm equipment sales remained below growth neutral for the sixth straight month, the monthly survey found. The December index sank to a weak 44.3, the lowest reading since August 2012 and down from 47.3 in November. "Over the past year, grain prices have declined by roughly 35%. This has significantly reduced farmers' willingness to purchase agriculture equipment," says Goss.

The monthly survey conducted by Goss found the rural mainstreet economy climbed in the 10-state region included in the survey. The Rural Mainstreet Index (RMI) rose to 56.1 from November's moderate 54.3.

"The overall index for the Rural Mainstreet Economy continues to indicate the areas of the nation highly dependent on agriculture and energy continue to expand at a healthy pace. This month we asked bankers to name the biggest threat to the rural economy for 2014. Approximately 80.6% named lower agriculture prices to be the greatest economic threat in the next year while 10.6% said the Affordable Care Act was the biggest economic challenge for 2014," states Goss.


MINNESOTA PROPANE PIPELINE REVERSAL WILL IMPACT GROWERS... The Cochin Pipeline, which transits 40% of Minnesota's propane supply is set to end LP runs through that state by March 2014. The pipeline's operator, Kinder Morgan, reports it has received approval to conduct upgrades on over 1,500 valves and pumps on the line in preparation for the transit of dilutant to Canadian tar-sands operations.

The switch to dilutant sendouts will mean a shift to propane deliveries by rail and truck, which threatens to add to the cost of transport. Authorities close to the project advise increasing on-farm propane storage and to expect higher LP prices ahead, particularly in periods of high demand. Click here for more from Pro Farmer's Inputs Monitor.

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