Evening Report (VIP) -- December 3, 2013

December 3, 2013 08:47 AM

CONSULTANT RAISES ARGENTINE SOYBEAN PEG, LOWERS CORN... Crop consultant Dr. Michael Cordonnier has raised his estimate of the Argentine soybean crop by 1 MMT to 56 MMT due to higher acreage. The larger soybean acreage peg came at the expense of the corn crop, as he lowered his crop peg by 1 MMT to 24 MMT.

"Even though I increased the 2013-14 Argentine soybean estimate... I still maintain a neutral to higher bias going forward," he explains. "If the soybean acreage increases and the summer weather cooperates, the Argentine soybean estimate might move 2 MMT to 3 MMT higher before it is all said and done."

Dr. Cordonnier recognizes that weather is a wildcard for the growing season, but says there are two reasons for the reduction in his corn crop peg. "First of all, I lowered the corn acreage by 200,000 hectares to 3.3 million hectares. Secondly, I am concerned about so much of the corn being planted extra late... Generally, corn that is planted extra late will have a lower yield potential compared to corn planted on time," he says.


CONSULTANT LEAVES BRAZILIAN CROP PEGS UNCHANGED... Dr. Cordonnier has left his Brazilian crop estimates unchanged from last week and says he has a neutral bias toward the soybean crop. He currently pegs Brazilian soybean production at 90 MMT and corn production at 68.5 MMT.

He says since he started the season with a soybean crop estimate above most in the market, there isn't as much upside potential for the estimate. "On the other hand, I do not see many problems for the crop either, at least for the time being," he adds.

Meanwhile, Dr. Cordonnier says safrinha corn acreage remains uncertain. "The safrinha corn acreage is expected to decline, but the question is by how much," he says. "Corn prices in Mato Grosso are not quite as dire as they were several weeks ago, but they still remain below the cost of production. In lieu of some of the safrinha corn, farmers are expected to plant more cotton, soybeans, dry beans, grain sorghum, etc.," Cordonnier continues.


USDA & EPA PARTNERSHIP TO SUPPORT WATER QUALITY TRADING... USDA and the Environmental Protection Agency (EPA) today announced an expanded partnership to support water quality trading and other market-based approaches that benefit the environment and economy.

The press release on the partnership explains, "Water quality trading provides a cost-effective approach for regulated entities to comply with EPA Clean Water Act requirements, including water quality-based effluent limits in National Pollutant Discharge Elimination System permits. Trading would allow regulated entities to purchase and use pollutant reduction credits generated by other sources in a watershed."

The departments are collaborating to identify opportunities where they can work together to improve water quality trading across the country and accelerate its implementation.


HOUSE WORKING ON SHORT-TERM EXTENSION OF DAIRY PROGRAMS... The House of Representatives next week will likely offer language, perhaps as stand-alone legislation, that would include a short-term extension of current dairy policy in an effort to avoid any moves by USDA Secretary Tom Vilsack to implement so-called "permanent legislation" which would eventually result in a significant increase in milk prices.

Vilsack recently has noted that he "must follow the law" if there is no new farm bill in place by Jan. 1, 2014. But others say Vilsack could delay any implementation of permanent legislation to give Congress time in early 2014 to complete the lingering farm bill. Sources say they believe Vilsack is using the threat of permanent legislation implementation as leverage on Congress to complete work on a new farm bill.


PRINCIPALS KEY TO FARM BILL FATE... The four principals of the farm bill process will meet Wednesday in Washington with the goal of reaching an overall farm bill agreement. If they cannot come to an agreement by the end of next week, sources say congressional leaders from both parties and in both chambers will specify a date in 2014 for the principals to reach an accord. If they fail to reach an agreement, their work will be done for them, similar to what occurred before. Congressional leaders do not want another 2008 Farm Bill extension and thus want the principals to come to an accord.

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