Evening Report (VIP) -- December 21, 2012

December 21, 2012 08:40 AM

CATTLE ON FEED REPORT: NEUTRAL TO MILDLY NEGATIVE... On the surface, USDA's Cattle on Feed numbers are friendly as feedlot inventories are 6% under year-ago, Placements last month were also 6% lighter than November 2011 and Marketings were just below year-ago. But compared to pre-report expectations, the data is slightly negative. Compared to Nov. 1, feedlot inventories are up 0.6%.

COF Report




% of year-ago levels

On Feed












A weight breakdown of November placements shows: lightweights down 14%, 6-weights down 10%, 7-weights down 0.5% and heavyweights down 10.5%. Clearly, the available supply of calves to place into feedlots has been diminished.

While the report data may put some light pressure on nearby cattle futures Monday, tightening supply numbers will limit any pressure on deferred live cattle futures.


PORK STOCKS RECORD LARGE, BUT NOT HAS BIG AS ANTICIPATED... USDA's Cold Storage Report showed record-large end-of-November pork stocks of 558.035 million lbs., but that was much lighter than the average pre-report guess of 589.3 million pounds. Pork stocks came in 7.5% under month-ago, but 12.7% above year-ago.

Beef stocks in storage at the end of November totaled 441.041 million lbs., which was 2.5% above October, but 0.6% under year-ago. Beef stocks were higher than the average pre-report trade guess of 428 million pounds.

Poultry stocks at the end November totaled 934.151 million lbs., down 15.7% from month-ago, but 10.2% above November 2011.


IMPLICATIONS FOR FARM BILL IN HOUSE PULLBACK OF 'PLAN B'... Without a big deal between the White House and congressional Republicans and Democrats, there is no budget savings number and therefore the farm bill process continues in its murky category and the farm bill becomes a lengthy process in 2013. One veteran farm bill observer says that also means " an eventual extension of the 2008 Farm Bill on some must-pass measure to avoid agriculture's fiscal cliff relative to dairy policy and a move to permanent law."

While Feb. 27, 2013, is reportedly the date for a House Ag Committee markup of a new farm bill in the new Congress, that timeline is iffy should Congress and the White House not deliver on a fiscal cliff package that some say may not occur until the end of the first quarter 2013. If so, that would suggest a short-term extension of existing tax rates and a short-term blockage of sequestration (across-the-board) cuts to defense and domestic spending programs that very few lawmakers want to see take place.

While the current focus is riveted on House Republicans pulling back on their ill-fated "Plan B," the real driver of the fiscal cliff issue in the weeks ahead is the dreaded sequestration cuts that White House and congressional leaders want to avoid. Veteran observers say a few days are needed to let the latest congressional dust to settle and when lawmakers return on Dec. 27, the hope is for more substantial and meaningful negotiations on the lingering issues.


FISCAL CLIFF STATUS AHEAD OF THE HOLIDAYS... Republicans say President Obama was not serious about cutting spending. In fact, he wanted to spend additional money on infrastructure and unemployment benefits. To pass anything in the House, these observers say, something different must come from the White House regarding entitlement spending reductions -- at least on a one-to-one ratio with revenue and perhaps a deal tilted more toward spending cuts. Republicans made a strategic mistake by limiting the vote on taxes.

President Obama, meanwhile, is likely concerned that the House action unless something changes will make it very difficult to push through his second-term agenda in the years to come, including other contentious and important issues like immigration and tax reform.

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