Evening Report (VIP) -- February 8, 2013

February 8, 2013 08:41 AM

PRO FARMER REACTION TO FEBRUARY REPORTS... USDA didn't make any shocking revisions to its balance sheets from last month, but the soybean market posted sharp losses today despite a tighter 2012-13 U.S. carryover projection. The Pro Farmer reaction to this morning's USDA Supply & Demand Reports is available at this link.



USDA EXPLAINS HIGHER BRAZILIAN SOYBEAN PEG... In this morning's USDA Supply & Demand Report, USDA raised its 2012-13 Brazilian soybean crop estimate by 1 MMT to a record 83.5 MMT -- up 17 MMT from last year's drought-reduced crop.

"Yield prospects for Brazil soybeans have improved due to good early-season conditions in the key states of Mato Grosso, Parana and Bahia. In late January 2013 analysts from the Foreign Agricultural Service traveled through Brazil’s main soybean producing state, Mato Grosso, and a key swing state, Bahia. Soybean crop conditions in both states were observed to be very good. Harvesting of the early soybean varieties has started in Mato Grosso, and soybean yields are reported by contacts in the region to be as good as last year. In Bahia contacts are expecting soybean yields to be significantly better compared to the drought induced lower yields of last year," says USDA. "Rains during the harvest of the early season varieties in Mato Grosso are causing some delays and may affect the quality of the early soybeans, but the rains are boosting yield potential for the medium and long-cycle soybeans. The main soybean harvest in Mato Grosso will commence in late February. Brazilian farmers enthusiastically reacted to high soybean prices this year and increased area 10% to a record 27.5 million hectares. Brazil is the world’s largest producer of soybeans, surpassing the United States this year when the United States suffered its worst drought in 50 years."



USDA LEAVES 2013 BEEF EXPORT FORECAST UNCHANGED... Traders in the cattle pit were disappointed that USDA left its 2013 beef export forecast unchanged from last month given the approval of Japan to import beef from animals under 30 months of age. Instead, USDA said trade restrictions by Russia are offset by gains to Japan and other markets.

Meanwhile, USDA lowered its 2013 pork export forecast due to trade restrictions imposed by Russia, although it said that is expected to be somewhat offset by higher exports to other markets. Meanwhile, USDA lowered its 2012 beef and pork export forecasts from last month due to slower-than-expected shipments in November. Cash cattle and cash hog price projections for 2013 were left unchanged from last month.



SEASONAL WORKER AND IMMIGRATION REFORM UPDATE... Pro Farmer Washington consultant Jim Wiesemeyer says the key to comprehensive immigration reform is seasonal workers. Why? The AFL-CIO.

Jim says, "Labor union leaders have always said seasonal workers displace American jobs. In reality, unions complain about these seasonal workers because very few of them are union members. Still, union officials are pushing for amnesty for 11 million illegal immigrants because they see a pool of potential new members."Jim adds, "When President Obama unveiled his immigration-reform ideas, he didn’t say much about seasonal workers... the labor union’s top guy was in the front row."



DIRECT PAYMENTS EYED AS BUDGET OFFSET, UNLIKELY TO OCCUR... President Obama and Democratic leaders are frantically trying to come up with budget offsets to avoid $85 billion in across-the-board/sequestration cuts come March 1. But guaranteeing Republican opposition, Democratic leaders want a "balanced" approach to the cuts, with half coming from tax/revenue increases -- a move roundly rejected by virtually all Republicans.

Included in some proposals for budget cuts is eliminating around $5 billion in direct payments for 2013 eligible crops -- a move considered highly unlikely to see reality due to Republican opposition and other opposition due to a lack of an adequate farmer safety net should direct payments be eliminated without a new farm bill in place.

But some Democratic senators, and a commodity group lobbyist, are reportedly pushing eliminating direct payments so producers would then be forced into the ACRE program. ACRE participation bombed relative to the 2008 Farm Bill, with less than 10% percent of base acres enrolled in the program. The "shallow-loss" revenue-type program in last year's failed farm bill proposals has been dubbed "the son of ACRE" by some farm bill analysts.

ACRE payments would not come for some time. Payments for 2013 crops would not start rolling to producers if they are triggered until October 2014 at the earliest, with some such as rice producers not likely to see any payment until February 2015 based on the way the program was operated for the 2009-2012 crops. ACRE payments will be made after the end of the marketing year for the respective commodity, but no sooner than October 1, as required by statute.


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