SIGNUP DATE INCONSEQUENTIAL IF SEQUESTER TRIMS DCP/ACRE PAYOUTS... Government sources have indicated USDA's legal opinion is that producers who sign up before or after March 1 for the 2013 Direct and Countercyclical Payment (DCP) and Average Crop Revenue Election (ACRE) programs will be treated the same in the event that sequester cuts force a reduction in payments.
This question arose after Farm Service Agency (FSA) issued a statement with its release of Form CCC-509 Appendix that DCP and ACRE program payments "may be reduced by a certain percentage due to a sequester order." FSA also said it would provide notice about any payment reduction for these programs.
OBAMA REJECTS GIVING AGENCIES FLEXIBILITY IMPLEMENTING SEQUESTER... President Obama rejected the idea that giving agencies flexibility in implementing spending cuts would make them less damaging. "The problem is when you're cutting $85 billion in seven months, which represents over a 10% cut in the defense budget in seven months, there's no smart way to do that," the president said. Instead of cutting out the government spending that is not needed, such as wasteful programs, special interest tax loopholes, and tax breaks, the sequester uses a "meat cleaver approach" that would gut critical investments such as education, national security, and medical research, the president said.
BERNANKE URGES CONGRESS TO DEAL WITH SEQUESTER... Federal Reserve Chairman Ben Bernanke told a Senate panel on Tuesday that Congress is placing a "significant" burden on the economy with the sequester, and he delivered much the same message in testimony today. He urged lawmakers to replace the cuts with more measured, long-term deficit reduction. Bernanke noted a Congressional Budget Office (CBO) estimate that the sequester would reduce economic growth by 0.6% this year, and result in the loss of 750,000 jobs by the fourth quarter and said those calculations are similar to those of the Fed.
He said providing flexibility for administering the cuts, as Republicans propose, might improve the policy ramifications, but the economy would still suffer. Bernanke warned that the lower spending forced by the sequester will threaten an already challenged economic expansion. "Given the still moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant," Bernanke told the Senate Banking Committee. "Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions," he continued. Get more sequester updates at this link.
ETHANOL PRODUCTION CHALLENGES YEARLY HIGH... The Energy Information Administration reports U.S. ethanol production rose 1.8% last week to its highest level since early January while ethanol stocks declined. Ethanol production of 812,000 barrels per day (bpd) rose 15,000 bpd from the previous week and was the highest since the week ended Jan. 4, as idled plants come back online. But production is still well below 896,000 bpd a year earlier. Ethanol stocks fell 121,000 barrels to 19.37 million barrels last week.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. With old-crop futures at levels that have attracted buying in the past, wait for an overdue corrective bounce to get current with recommended sales levels. For 2013-crop, we are too light on coverage as no sales/hedges have been advised. Be prepared to make initial cash sales if Dec. corn futures post an overdue bounce or to enter defensive hedges if the contract shows an inability to bounce as attitudes are negative and we feel there's more downside price risk into spring.
BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Use periods of price strength to get current with advised sales. Like corn, we are behind on 2013-crop marketings. As a result, be prepared to make initial cash sales on a rebound to $13.50 in Nov. soybean futures or to add defensive hedges if the contract violates support at the November lows, which would open the door for the next leg lower in prices.
WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. There's more near-term downside risk as HRW crop concerns have eased amid increased precip in the Plains, but wait on an overdue bounce to get current with advised sales. We haven't advised new-crop sales yet as we still have HRW crop concerns, but we are going to take a more defensive stance and add hedge coverage if the market can't bounce soon.
COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold in the cash market. Be prepared to increase 2012-crop sales on signs of a market top. The broadening pattern in old-crop futures suggests topping action may be in the works. Be prepared to make initial 2013-crop sales when old-crop sales are increased.
CATTLE: The cattle market is finally starting to signal prices dropped far enough to attract some fresh demand. Fed cattle producers should continue to carry all risk in the cash market. Cash feeder cattle prices continue to slide and feeder cattle futures aren't showing signs of bottoming yet, but when they do, feeder cattle buyers should be ready to add long hedges.
HOGS: Hog producers should continue to carry risk in the cash market as the downside is heavily overdone. With that said, there could be more near-term price pressure as traders remain concerned with demand.
FEED: Profits have been claimed on 1st-qtr. feed coverage in March corn and March soybean meal futures. Maintain coverage on 25% of 2nd-qtr. corn needs in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs in long July soybean meal futures at $388.00.