Evening Report (VIP) -- December 31, 2012

December 31, 2012 08:22 AM

HAPPY NEW YEAR FROM PRO FARMER... In a year that was highlighted with wild price swings, drought and political deadlock, we can look back on 2012 as a historic year for agriculture. Everyone at Pro Farmer wishes you a Happy New Year and prosperity in 2013. Markets and government offices are closed Tuesday, Jan. 1, for New Year's Day. Livestock markets will reopen at 9:05 a.m. CT and grain markets will resume trade at 9:30 a.m. CT on Wednesday, Jan. 2, 2013.



FISCAL CLIFF DEAL NEAR... The agreement is expected to extend Bush-era income tax rates on individual income up to $400,000 and on family income up to $450,000. It will also reportedly adjust the estate tax rate to 40%, up from 35%, but maintain the exemption for all inheritances below $5.12 million. As a concession to liberals, the emerging package would extend refundable tax credits for a period of five years, according to The New York Times. The biggest remaining obstacle is $109 billion in automatic cuts to domestic discretionary and defense spending due to take effect in 2013. Stay up to date on the deal by heading to "Inside Washington Today with Jim Wiesemeyer" on profarmer.com.



STORM WEATHER EASES MIDWEST DROUGHT... Meteorologist Gail Martell of MartellCropProjections.com says December has become suddenly stormy for the nation's heartland, which is helping to ease drought conditions. Southern and eastern Corn Belt locations are in line for more near-term precip, with much of Nebraska, the Dakotas, Minnesota and Iowa to miss out on this week's precip event. Martell says fluctuating weather more closely resembles ENSO-neutral conditions. Click here for related maps.



ECONOMIST SEES HIGHER HOG PRICES IN 2013 DESPITE BEARISH H&P REPORT... University of Missouri ag economist Ron Plain says despite a bearish Hogs & Pigs Report that points to a slight increase in hog slaughter for 2013, he sees slightly higher hog prices in the year ahead due to a tight supply of competing meats.

Plain says based on the market hog inventory and the expectation of a slow decline in live hog imports, he forecasts 2013 first-quarter hog slaughter to be up 0.2% from year-ago. "With this level of pork production, we expect 51% to 52% lean hogs to average in the low $60s live and Iowa-Minnesota negotiated sales to average close to $81 per cwt. on a carcass weight basis," he says.

For the second quarter of 2013, Plain expects hog slaughter to be up 0.6% on a daily basis with 51% to 52% lean hogs averaging close to $67 per cwt. live and Iowa hogs averaging around $90 per cwt. on a carcass basis.

"With the number of litters farrowed expected to be unchanged this winter and pigs per litter increasing by 1% or so, the winter pig crop is likely to be 1% above a year earlier," says Plains. "We are forecasting third-quarter 2013 daily slaughter to be up 0.3% compared to a year ago. Look for carcass prices of barrows and gilts to average in the high $80s per cwt."

"The forecast 1.9% decrease in spring farrowings should be offset by an increase in litter size to yield a spring pig crop that is down about 0.7% compared to a year-earlier," adds Plain. "We are forecasting fourth-quarter 2013 hog slaughter to be down 0.2% on a daily basis."



RESTAURANT PERFORMANCE INDEX IMPROVES, BUT STILL SIGNALS CONTRACTION... The National Restaurant Association's (NRA) comprehensive index of restaurant activity -- the Restaurant Performance Index (RPI) -- improved in November, but remained below the key 100-point threshold that indicates expansion in the industry for the second straight month. The index improved 0.5 to stand at 99.9 in November.

Given that restaurants are a large component of red meat demand in the U.S., the slight uptick in the RPI is positive for the livestock markets. However, the index must return above the 100-point level to signal improved consumer confidence. Click here for more.


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