Evening Report (VIP) -- February 7, 2013

February 7, 2013 08:49 AM

TRADERS PREPARING FOR USDA REPORTS... Traders will wrap up their position squaring tomorrow morning ahead of the 11 a.m. CT release of the February Supply & Demand Report. Since USDA will not update supply estimates (aside from any changes to imports), pre-report estimates reflect traders' expectations of the demand side of the equation.

Traders look for USDA to raise corn carryover by around 13 million bu. from last month to a still-tight 615 million bu.; soybean carryover to drop by around 6 million bu. from last month to 129 million bu.; and for wheat carryover to be around 12 million bu. higher than last month at 728 million bushels.

2012-13 carryover





in billion bushels
















Traders will also be eyeing the global updates and expect little change to global corn and soybean carryover from last month, while global wheat carryover is projected to be down around 1 MMT from the previous month.


ENSO-NEUTRAL CONDITIONS LIKELY INTO SPRING... The National Oceanic and Atmospheric Administration (NOAA) says although below-average sea surface temperatures (SST) prevailed across the eastern half of the equatorial Pacific during January, ENSO-neutral conditions continued and are expected to linger into spring. However, it says there is less confidence in the forecast beyond the spring, as model skill is generally low between April and June.


SOME DROUGHT IMPROVEMENTS FOR IOWA AND UPPER MIDWEST... NOAA also released its Seasonal Drought Outlook this morning, which reflects a slight shift across Iowa compared to last month regarding the area that is expected to see drought improvement. Today's update isn't as promising for drought improvement, but it still suggests some improvement in drought is likely across central Iowa while drought will likely linger across western Iowa. Drought improvement is expected across Minnesota and North Dakota. Meanwhile, drought is expected to persist for most of South Dakota southward to Texas. Click here for a related map.


DROUGHT MONITOR REFLECTS ADDITIONAL DROUGHT IMPROVEMENT ACROSS THE EASTERN CORN BELT... According to the National Drought Monitor, 40.2% of the Midwest is now drought-free, compared to 32.8% last week. With most of the eastern Corn Belt now drought-free, focus is on mending the drought in the western Corn Belt. No change was made to the drought in Iowa.

Across the South, 34.65% is now drought-free, which compares to 31.46% last week. "The areas from eastern Oklahoma through Arkansas saw significant improvements in Extreme (D3), Severe (D2), Moderate Drought (D1) and Abnormal Dryness this week with the passing of the January 29-30 storm. In southern Texas and the Oklahoma Panhandle, areas of Exceptional (D4), Extreme (D3), Severe (D2), and Moderate Drought (D1) expanded, as did Abnormal Dryness (D0). In South Texas, this was largely due to dry conditions compounded by above-normal temperatures and wind," states the monitor. Click here for related maps.


FARM BILL UNCERTAINTY ABOUNDS... Washington Consultant Jim Wiesemeyer notes that recent talks with key farm bill players and stakeholders reveal there is a lot of uncertainty regarding the farm bill. For instance, no one seems to be able to nail down a timeline for a new farm bill and no one knows which legislative vehicle (if any) the farm bill will be attached to. The legislation could be a stand-alone bill tied to prior instructions for budget savings. The coming debt limit hike bill this summer could include an assumption of farm bill budget cuts to be determined by the ag panels. And some farm bill watchers say another one-year extension of the 2008 Farm Bill extension at the end of 2013 cannot be ruled out if other legislative efforts falter. Learn more.


CHALLENGES TO CBO BASELINE PROJECTIONS... CBO projections released earlier this week are being questioned in several areas, including their corn planted acreage assumptions for 2014 forward. For example, CBO projects 8 million fewer corn acres planted in 2014 and the baseline shows a continued lower-than-expected corn planting projection for most of the 10-year baseline. CBO's updated projections also show a $700-million boost in ACRE payouts from the prior baseline -- likely fitting with their price projections -- but this estimate is nevertheless being challenged by some industry analysts. Another CBO projection notable is that it sees a 34% decline in the dairy spending baseline. This emphasizes that those pushing for a controversial dairy policy change that includes supply management language will face both budget problems and growing resistance in the House outside the Ag Panel.


AG PANEL SHIFTS PRESENT FOOD STAMP CUT CHALLENGES... There will eventually be 12 new Democratic members on the House Ag Committee. Ranking member Collin Peterson (D-Minn.) may have a harder time bringing along urban members to agree with the same (if not higher) cuts in food stamp funding ahead. Should the House farm bill be debated and voted on by the full chamber, some sources predict a big push for even larger food stamp funding cuts than what the House Ag Committee approved last year.

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