Evening Report (VIP) -- February 4, 2014

February 4, 2014 08:55 AM
 

Senate passes farm bill, sends to White House for signature... The Senate today passed the 2014 Farm Bill by a vote of 68-32, following House passage last week. President Barack Obama has indicated he will sign the measure when it reaches his desk. For details on the bill, see "2014 Farm Bill Key Features and Lessons."

 

 

Stats Canada stocks report provides no major surprises... Pro Farmer Canada Editor Mike Jubinville says this morning's Statistics Canada grain stocks report confirmed what traders already knew -- record 2013 crops led to a sharp increase in grain stocks from year-ago.

Jubinville says, "As of December 31, overall stocks of principal field crops were up nearly 30% from the same date in 2012. Again, not a surprise given increased crop production (record- large) in 2013, especially on the Prairies, resulted in the overall growth in stocks. On-farm stocks grew significantly, while commercial stocks were down. For canola and corn for grain, total stocks reached record levels as of December 31."

While all wheat inventories were up 37.7% from year-ago levels, stocks of 28.381 MMT came in below the average trade guess, helping to lift wheat futures today. But Jubinville says the report is not likely to have much -- if any -- lasting impact on the market, especially since stocks are still well above year-ago levels. Click here for full report.

 

Consultant leaves South American crop pegs unchanged, but... Crop consultant Dr. Michael Cordonnier left his South American crop estimates unchanged, but says he has a neutral to lower bias toward the Brazilian bean crop due to irregular rains and hot conditions in southern Brazil over the past month.

Dr. Cordonnier says farmers in Mato Grosso have around 12% of their soybean crop harvested, with harvest in Parana around 5% complete. Nationwide, soybean harvest is around 6% complete, which is equal to year-ago and the five-year average. Early yield results have been strong. But rains have been disappointing for filling beans in southern areas such as Rio Grande do Sul. "The expected good yields in Mato Grosso will partially compensate for yield losses elsewhere, but it's possible my Brazilian soybean estimate might be lowered in the coming weeks due to the hot and dry conditions in southern Brazil," he says.

 

Dr. Cordonnier 2013-14 Soybean Estimates

Est.
Maximum
Minimum
2012-13

in million metric tons

Brazil
90.0
92.0
86.0
82.0
Argentina
53.5
56.0
50.0
49.5
Paraguay
9.5
10.0
9.0
9.3
Bolivia
2.5
2.7
2.2
2.6
Uruguay
3.2
3.5
2.8
3.0
Total
158.7
164.2
150.0
146.4

Dr. Cordonnier 2013-14
Corn Estimates

Est.
Maximum
Minimum
2012-13

in million metric tons

Brazil
68.5
72.0
66.0
81.0
Argentina
22.5
25.0
20.0
26.5
Paraguay
2.5
2.8
2.1
3.0
Bolivia
0.7
0.8
0.6
0.7
Uruguay
0.4
0.5
0.3
0.4
Total
94.6
101.1
89.0
111.6

 

Dr. Cordonnier left his Brazilian corn estimate unchanged at 68.5 MMT and says full-season corn is the crop most at risk due to the dry conditions in southern Brazil. He also left his Argentine crop pegs unchanged at 53.5 MMT for soybeans and 22.5 MMT for corn, and says he has a neutral bias toward both crops after recent rains.

Also today, Informa Economics updated its South American crop estimates. Informa raised its Brazilian soybean forecast by 1 MMT to 89.7 MMT and lowered its Brazilian corn crop forecast by 1 MMT to 66.55 MMT. Informa lowered its Argentine soybean crop by 500,000 MT to 57 MMT and lowered its Argentine corn forecast by 2.4 MMT to 22.6 MMT.

 

 

Martell: Forecast unfavorable for filling crops in Brazil... Meteorologist Gail Martell of MartellCropProjections.com says drought is intensifying in Brazil due to a stable ridge of high pressure. She says the seven-day forecast calls for drier-than-normal conditions along the East Coast of the country, which will block moisture attempts inland. Meanwhile, she says recent rains in crop areas of Argentina provided much-needed moisture and near-term forecasts call for more showers and no excessive heat.

 

 

CBO: Federal budget deficit to decline through 2015, then rise... The federal budget deficit will total $514 billion in fiscal year 2014, according to the Congressional Budget Office's (CBO) outlook for 2014 to 2024. This equates to roughly 3% of U.S. gross domestic product (GDP), which is near the average percentage of GDP for the past 40 years. This figure is also substantially below the $1.4 trillion budget deficit in 2009; the federal budget deficit has declined notably in recent years and is expected to continue its slide in 2015. Assuming a continuation of current laws governing federal taxes and spending remain unchanged, CBO projects the deficit will decrease in 2015 to $478 billion, or 2.6% of GDP.

Thereafter, however, CBO expects an increase in deficits -- both as a dollar amount and relative to the nation's economic output. CBO's outlook for the next 10 years calls for increases in deficits to outpace advances in economic output. Spending is expected to rise due to "the aging of the population, the expansion of federal subsidies for health insurance, rising health care costs per beneficiary and mounting interest costs on federal debt."

Large budget deficits in recent years have "substantially" increased federal debt, according to CBO. Therefore, the amount of federal debt is now historically high relative to the size of the economy. CBO projects the federal debt held by the public will equal 74% of GDP at the end of 2014 and 79% of GDP at the end of the projection period in 2024. This could have "serious negative consequences," according to CBO. Get more details.

CBO projects the economy will grow at a "solid" clip through 2017, with real GDP expected to rise 3% between the fourth quarter of 2013 and the corresponding quarter of 2014, with similar growth expected over the next several years. However, CBO expects the unemployment rate will remain above 6% until late 2016.

Past 2017, CBO projects economic growth will diminish to a pace well below the norm of the past several decades, largely due to slower growth in the labor force due to an aging population. Inflation is expected to remain at or below 2% over the next decade. Learn more.

 

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