Evening Report (VIP) -- February 14, 2013

February 14, 2013 08:47 AM

DROUGHT MONITOR REFLECTS MINOR IMPROVEMENT... According to the National Drought Monitor, 65.89% of the nation is covered by drought, which compares to 67.97% last week and 57.02% last year at this time. Just 40.21% of the Midwest is drought-free, which is a marginal improvement from last week. The monitor notes conditions in the upper Midwest and Northern Plains thanks to widespread snowfall in the eastern Dakotas and Minnesota. Southwest Missouri also saw some improvement in severe drought conditions.

Across the South, 35.59% of the region is drought-free, compared to 34.65% last week. Notably, all of Oklahoma is covered by drought, with nearly 40% in the grips of "exceptional" drought. Just 10.84% of Texas is drought-free, with nearly 8% covered by "exceptional" drought, which is unchanged from last week. All of Kansas is covered by some form of drought, with 36.16% of the state experiencing "exceptional" drought -- unchanged from last week. See the maps and get more details here.


ATTACHÉ PEGS CHINESE CORN, WHEAT CROP BELOW USDA... The U.S. ag attaché in China has left its estimate of the country's 2012-13 wheat crop at 108 MMT due to head blight, which may have infected as much as 20% of the crop. But it says wheat imports are expected to decline 400,000 MT to 2.5 MMT from last year due to more competitive domestic wheat prices. USDA currently pegs the Chinese wheat crop at 120.6 MMT.

The attaché pegs China's corn crop at 200 MT, which would be a 4.2% increase over last year thanks to above-average yields in the northeast and northern China plains. USDA currently estimates Chinese corn production at 208 MMT.

On the demand front, the attaché notes that "in the last few years, relatively high and rising corn prices indicate that domestic supplies are tight, and may not be offsetting increasing demand." The attach continues, "If U.S. corn prices are more competitive in the coming months, some feed mills believe that U.S. corn imports would rise in the second half of CY (calendar year) 2013. Get more details.


POLITICS BEHIND MEAT INSPECTOR FURLOUGH TALK... We have recently reported that USDA Secretary Tom Vilsack has indicated that meat inspectors may be furloughed for up to 15 days as part of the across-the-board spending cuts (sequester) slated to occur March 1, which would effectively halt meat exports. But there is a political angle to the coming sequester cuts, with Republicans and some meat industry officials disputing Vilsack's analysis of the situation.

President Obama has aggressively tried to get Congress to offer a plan to avoid the coming $85 billion in cuts. Seeking to pressure Republicans into negotiating an alternative to the cuts, House Democrats are warning the reductions would force "massive" unpaid furloughs for federal workers that would impact operations across government. House Democratic appropriators released a 38-page report on Tuesday detailing the size of the funding and personnel cuts that would result from sequester and the impacts for a wide range of agencies, services and states. Senate Appropriations Chairwoman Barbara Mikulski (D-Md.) will hold a hearing today that will also examine the consequences of the sequester on federal programs.

Senate Majority Leader Harry Reid of Nevada plans to unveil his $120 billion sequester replacement package today -- an evenly divided mix of spending cuts and tax hikes. On the Republican side, House Speaker John Boehner (R-Ohio) stood in front of a lectern Wednesday emblazoned with the Twitter slogan "#Obamaquester," while a digital clock loomed behind him ticking off the remaining 15-and-a-half days until the deadline. "The sequester is bad policy," Boehner said. "That’s why the president ought to be forthcoming with a plan to replace his own sequester." Get more details.

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