Evening Report (VIP) -- February 21, 2014

February 21, 2014 08:47 AM

Cattle on Feed Report: Bearish compared to expectations... USDA's Cattle on Feed Report isn't bearish as it shows feedlot supplies continue to tighten compared to year-ago, the 17th straight month that's been the case. But with all three categories on the negative side of the average pre-report trade guesses, the report is bearish compared to expectations. The combination of much-heavier-than-expected Placements in January and slightly lighter-than-expected Marketings pushed the On Feed category above expectations. At 10,760 head, the Feb. 1 feedlot inventory is roughly 130,000 head more than anticipated.

Report details


Avg. Trade Guess


% of year-ago levels

On Feed












January calf placements not only topped the average pre-report estimate by a wide margin, but also came in nearly two percentage points above the top end of the guess range. Record fed cattle prices and cheaper feed costs gave cattle producers more incentive to move animals into the feedlot last month. With U.S. calf supplies very tight, the sharp increase over year-ago implies more calves moved into the U.S. from Canada and Mexico.

The bulk of the price pressure from this report is likely to be felt in deferred live cattle futures Monday as the Placements category was the most negative. We don't expect the report data to have a lasting impact on cattle futures, however.


Cold Storage Report: Beef stocks lower than anticipated, pork stocks top expectations... Tightening cattle supplies caused frozen beef stocks to drop more than anticipated last month. As of Jan. 31, beef stocks in storage totaled 429.304 million lbs., which was roughly 11.8 million lbs. less than expected. Beef stocks came in around 10 million lbs. lighter than the end of December and roughly 55.3 million lbs. less than year-ago.

Total pork stocks in storage at the end of January were greater than anticipated at 623.714 million pounds. That was roughly 15 million lbs. above the average pre-report guess. Pork stocks rose around 69.4 million lbs. from the end of December and were up roughly 17.3 million lbs. from year-ago. Heavy hog weights likely contributed to the greater-than-expected rise in pork stocks.

Total poultry stocks at 969.596 million lbs. came in roughly 32 million lbs. more than the previous month but around 61.3 million lbs. less than year-ago.



Highlights from USDA's grain and oilseed outlook… Economic Research Service Economist Mark Ash, in his presentation of the grains and oilseeds outlook for 2014 at USDA's Ag Outlook largely reiterated Chief Economist Joe Glauber's assertions Thursday, with the addition of a few more details. USDA expects grain and oilseed production to rise, with the result being lower prices. Click here for more.

He wrapped up his presentation with the following key points:

  • U.S. acreage will remain high
  • Corn and soybean yields will improve (better weather)
  • Modest gains in domestic use (steady, but unspectacular)
  • Export competition stays high
  • Prices will weaken (provided there are no major crop failures in the world)



Farm bill primer available online... Pro Farmer Washington consultants have put together a primer on the new farm bill, including some farmer safety net option examples. The document is available at this link.



Brazil seeks WTO guidance on farm bill... Brazil will ask the World Trade Organization
(WTO) whether the new U.S. farm bill resolves a dispute over cotton policy that dates back to
2009. This allows for more negotiations between the two sides before Brazil retaliates. Brazil isn’t convinced the new insurance-based farm program for U.S. cotton farmers fixes what Brazil and the WTO labeled as trade-distorting policy in the previous farm bill. Our trade sources think the new farm bill is WTO-compliant.

Chinese DDG imports surge in January... China’s dried distillers grain (DDG) imports, which it gets from the U.S., totaled 575,462 metric tons (MT) last month, up 500% from year-ago and the second highest monthly total ever. China also imported 641,843 MT of U.S. corn in January. This is the reason talk of Chinese rejections of U.S. corn and DDG shipments has calmed -- at least for now.



RINs signaling reversal on proposed RFS cut?... The recent price rise for ethanol renewable identification numbers (RINs) may be an indication the Environmental Protection Agency (EPA) is going to pull back on its proposal to cut the ethanol mandate in the Renewable Fuel Standard (RFS), according to University of Illinois ag economist Scott Irwin.

He studied the relationship between RIN prices and biodiesel RIN prices and concluded: "Once again, the RINs market may be providing an early warning signal about a change in EPA policy. The recent rise of D6 ethanol prices relative to D4 biodiesel prices indicates that RINs traders believe the odds of the EPA reversing the proposed write down of the renewable mandate for 2014 in final rulemaking have increased sharply. Interestingly, not much has been reported in the press that would support such a dramatic shift in expectations.. The recent track record of the RINs market in signaling changes in EPA policy is quite impressive and one should not easily dismiss the latest signals as a result."


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