Evening Report (VIP) -- February 28, 2014

February 28, 2014 08:59 AM

Spring CRC prices established... Based on our calculations of closing prices for new-crop futures during February, 2014 crop revenue coverage (CRC) insurance prices will be: $4.62 for corn ($5.65 in 2013); $11.36 for beans ($12.87 last year); and $6.51 for spring wheat ($8.44 last year). Obviously, this year's CRC prices are well below year-ago. Because there will be lower premiums, some producers may increase their coverage level.


China continues to reject U.S. corn... China has rejected 887,000 MT of U.S. corn due to the presence of Syngenta's Viptera corn (MIR 162) since last November, according to new Chinese customs data released today. While this is up substantially from the 602,000 MT of rejections previously reported, it is no longer "news" as the market has known about ongoing Chinese rejections even though they haven't been officially reported by Chinese customs officials. Therefore, the corn market largely brushed off this "news" today.


Chinese crush margins turn red... Falling demand for soybean meal due to bird flu has pushed Chinese crush margins below breakeven. It is also causing supplies to back up at ports. There are reports a northern Chinese port stopped unloading beans after running out of storage capacity. This is sparking some concerns China may cancel soybean shipments. But the risk of major cancellations of U.S. soybean buys appears limited for the time being since Chinese importers are growing increasingly worried about timely shipment of Brazilian beans.


Vilsack: Farm program signup could run into 2015... Farmers can start signing up for the 2014 farm bill’s new price loss and revenue protection programs this fall, Agriculture Secretary Tom Vilsack told attendees at the Commodity Classic today. Signup could extend into early 2015 to give USDA time to provide producers with enough information for them to decide which program is best for them, Vilsack said. Farmers must choose between Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC). This means farmers will have an even longer time to enroll in the program and will have even more information to consider when they make their choices, including the June Acreage Report, potentially several survey-based estimates of U.S. production of crops like corn and soybeans and several months of the Supply & Demand projections for the 2014-15 marketing year

Vilsack is eying this summer to roll out regulations on a new requirement that farmers must meet minimum conservation standards in order to buy federally subsidized crop insurance. USDA is aiming to implement the requirement by the start of the 2016 harvest year, he said.

A new definition of "actively engaged," which will determine who in a farm operation qualifies for program subsidies probably won’t be ready until the end of 2014, Vilsack said. The issue was a contentious one during farm bill negotiations with supporters calling for a tighter definition to limit the number of off-farm partners eligible for payments, and opponents saying a more limited definition would harm large operations with multiple partners and participants. Negotiators punted the decision to USDA.



What you need to know on 4Q 2013 GDP... U.S. fourth quarter GDP was revised 0.8 percentage point lower from last month to 2.4%. This is also well below 4.1% growth in the third quarter. This downside revision weighed heavily on the U.S. dollar index today, which lifted commodities. On an annual basis, GDP for 2013 held steady with month-ago at a 1.9% rise. The figure included a slowdown in inventory investment as GDP less inventory investment (final sales of domestic product) rose 2.3%, almost as much as the 2.5% growth in the third quarter. While overall consumer spending was revised down from the initial estimate, it was still a positive contributor. Business investment was revised higher, but downward revisions for the fourth quarter were noted in the following areas:

  • Consumer spending on both goods and services with the revisions being fairly widespread.
  • Inventory investment, led by wholesale trade industries.
  • Exports, mainly non-automotive capital goods and consumer goods.
  • State and local government spending, mainly investment in structures.

Wintry weather may have been a culprit in the data for the fourth quarter, and if that is the case, the sluggish readings could continue as we move into 2014 as conditions have not been all that positive yet. Still, as evidenced by comments from Fed Chair Janet Yellen Thursday, she (and presumably the other members of the Fed) are not yet convinced wintry weather is the main factor. But as the January-February period has continued to see harsh conditions, a sluggish first quarter 2014 reading cannot be ruled out. Concern would come, however, if sluggish growth continues beyond the first quarter of this year. Get more details and charts.


Continued unrest in Ukraine keeps export concerns in focus... Turmoil has heightened in Ukraine as protesters ousted the nation's president and armed men took control of two airports in Crimea, an area of Ukraine with an ethnic Russian majority. Last week, we reported that the unrest has raised concerns about a possible slowdown in grain exports from this No. 3 global exporter of grain if credit access tightens and trade relations suffer. Recent developments have stirred rather than quelled such fears. So far, however, shipments of corn and wheat have not been directly impacted.


Markets focused on old-crop soybean fundamentals... A near-perfect-storm of news caused old-crop futures to surge to new contract highs this week. Traders added weather premium into the market as rains in southern Brazil came too late to "save" the drought-stricken crop and excessive rains in Mato Grosso halted harvest, caused transportation issues as well as crop quality concerns. Meanwhile, China remains the top buyer of old-crop U.S. soybeans. Chip Flory and Brian Grete discuss these factors on AgDay TV. Click here.

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