Evening Report (VIP) -- February 26, 2013

February 26, 2013 08:39 AM


SEQUESTER MAY BE TIED TO MARCH 27 CR DEADLINE... It now appears that the across-the-board spending reductions (sequestration) slated to occur March 1 if Congress does not come up with an alternative approach (likely) will likely be attached to a new Continuing Resolution to replace the current stopgap measure that funds most of the U.S. government that expires March 27. Further, the March 1 "deadline" is a false one, because it will likely take until early April for substantial impacts to be felt.

But that isn't stopping President Obama and a few cabinet members (those heading Transportation and USDA), from playing the political game of dire warnings. Some say the Obama administration may ratchet up the pressure by front-loading the effects of the sequester during the month of March, to make sure there is enough pain that impacts the public and to pressure the GOP to negotiate by month’s end.

Meanwhile, Senate Democrats and Republicans are putting forward proposals that could be the foundation of a future deal to replace the automatic spending cuts likely to take effect Friday. Senate leaders this week will vote on several sequester replacement packages from both political parties that will likely have some ingredients for the eventual compromise package. Get more details.


BRAZIL UNIONS POSTPONE STRIKES UNTIL MARCH 15... After a series of mini-strikes at various Brazilian ports last week, union workers have agreed to halt further planned work stoppages through March 15. Brazil's Minister of Ports, Leonidas Cristino, has agreed to meet with workers about their concerns, but says the plan privatize ports will move forward. Union workers are concerned the government's plans to privatize Brazilian ports will lead to fewer jobs, lower wages and deteriorating working conditions.

Meanwhile, at the Port of Paranagua, 90 vessels waiting to load grain at the end of last week -- three times the number of last year's backlog at this time of year. And at the Port of Santos, there were 59 grain vessels waiting to load compared to 29 last year at this time.

South American crop consultant Dr. Michael Cordonnier says wait times are soaring and will get much worse if there are any labor strikes or even work slowdowns. "These long waiting times -- as much as 40 days -- have already pushed export business back to the U.S. at a time when Brazil should be the only export game in town," he said.


FARMERS BECOMING MORE IMPATIENT WITH ARGENTINE GOV'T... As we have been reporting, skyrocketing inflation has raised the level of public discontent with Argentine president Cristina Fernandez de Kirchner. Her administration is trying to keep a lid on the boiling pot of public discontent by instituting price freezes on food and consumer products. The government is also trying to intimidate farmers into selling any old-crop soybeans they have left and also trying to get farmers to sell new-crop grain. Dr. Cordonnier says the government wants farmers to sell their grain because it needs the revenue from export taxes.

"One of the ways they are trying to intimidate the farmers is by sending IRS agents to grain elevators and demanding to see lists of their clients. These agents are looking for any discrepancies as to how much a farmer may have sold compared to what he may have reported to the government," reports Dr. Cordonnier. "They have also been known to go to individual farms and inspect storage facilities also looking for discrepancies. It's all an attempt to intimidate the farmers into selling any grain they may have from the last crop and also to set the stage for selling of the new crop as well."

Dr. Cordonnier says there is speculation the government may resurrect the National Grain Board to destroy the current grain marketing system by forcing farmers to sell to the government at prices set by the government. "If the government institutes a National Grain Board, there would be immediate and massive protests by farmers because they realize that a National Grain Board would make an already bad situation even worse. I think it's safe to say the already bad relationship between the government and farmers in Argentina is going to get worse before it gets better," he says.


STATE CROP REPORTS REFLECT WELCOME PRECIP... State statisticians in Kansas, Texas, Oklahoma and Nebraska released updated weather and crop details yesterday afternoon, reflecting improved soil moisture conditions and crop condition ratings, but also stating timely precip will be needed to sustain crops. Full details are available at this link. Following are highlights:

Kansas: Welcomed precipitation in most areas slightly improved the condition of winter wheat during February. The wheat crop is rated 12% very poor, 24% poor, 41% fair, 22% good and 1% excellent.

Texas: Conditions in west, central and southern Texas continued to be dry and windy, and were still in need of additional moisture. Recent precipitation in the northern and southern plains regions of the state proved mostly adequate to sustain the current wheat crop conditions, but more moisture will be required in the near future. In the blacklands and east Texas, recent moisture provided a significant boost to the wheat crop. Non-irrigated small grains in south Texas continued to struggle due to dry conditions. The wheat crop is rated 17% very poor, 28% poor, 37% fair, 16% good and 2% excellent.

Oklahoma: Conditions of small grains improved over the past month due to the available moisture. The wheat crop is rated 19% very poor, 35% poor, 37% fair, 9% good and 0% excellent.

Nebraska: Snow accumulations were heaviest in the southwest and south-central districts with some areas exceeding 12 inches of snow. However, the panhandle received only limited amounts of precipitation for the month. Wheat conditions remained well below year-ago levels with most of the crop rated fair to poor. The wheat crop is rated 14% very poor, 36%, 38% fair, 12% good, and 0% excellent.


ROLLING FURLOUGH OF MEAT INSPECTORS MAY LIMIT IMPACT... Details continue to emerge about how the across-the-board spending cuts will play out in the meat industry. Reuters today reported that Representative Michael Conaway (R-Texas) says USDA will likely implement a rolling furlough of meat inspectors, with temporary layoffs being spread out across the country and over time to limit the impact of the layoffs so that "no plant would be shut down." Laws bar plants from shipping meat without an inspection seal.

Conaway did say that the administration has not yet responded to his request for a written explanation of the meat inspector furloughs, however. Meat inspectors must be given 30 days notice of a furlough. Thus, the impact of the furlough will not likely be felt for weeks if sequestration does occur.


USDA'S NEW DEFINITION OF 'RURAL' WORRIES LUCAS, PETERSON... Last Friday, USDA released a report on the various definitions of "rural" used in programs administered by the agency. In it, USDA proposed revising the definition of rural to any place with a population less than 50,000 people. The 2008 Farm Bill required USDA to complete this report by June 18, 2010 to assess how the various definitions have impacted rural development programs and to make recommendations on ways to better target funds. Late yesterday, Chairman Frank Lucas and Ranking Member Collin Peterson issued the following statement in response to the report:

"The report offers useful insights into issues such as how municipal entities are defined in various regions. But, we are disappointed in USDA's proposals to shift funding away from the most rural areas by inflating the definition across the board. This will result in smaller communities competing with larger and more urban areas for funding." Read the full release.


HOW WILL THE SEQUESTER IMPACT 2013 FARM PROGRAM PAYMENTS?... The looming sequester has given rise to questions about whether the across-the-board spending cuts slated to begin March 1 will reduce 2013 farm program payments for those who enrolled in the program ahead of that date. When Farm Service Agency (FSA) released Form CCC-509 Appendix, it included the following statement:

"Payments under the DCP (direct and countercyclical payment) and ACRE (average crop revenue election) programs may be reduced by a certain percentage due to a sequester order required by Congress and issued pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985. Should a payment reduction be required, FSA will provide notice about the required percent of payment reduction that applies to direct, countercyclical and ACRE payments."

Some believe that statement should "cover" FSA relative to this question and therefore means that all 2013 payments would be reduced equally if the sequester cuts take place, regardless of when the producer enrolled in the program. But others note that the issue still raises legal questions.

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