Evening Report (VIP) -- January 15, 2014

January 15, 2014 09:03 AM

Ethanol production declines notably from the previous week... According to data from the Energy Information Administration (EIA), ethanol production the week ended Jan. 10 of 868,000 barrels per day (bpd) was down 51,000 bpd from the previous week. This brings the four-week average to 907,000 bpd for an annualized rate of 13.9 billion gallons.

The Renewable Fuels Association says last week's widespread winter storm was the likely culprit behind the notable drop in production, as the weather interfered with key transportation routes and complicated normal plant operations.

Ethanol stocks declined by 60,000 barrels from the previous week to 16.08 million barrels and imports remained absent for the 15th consecutive week.



NOPA reports record soybean crush in December... The National Oilseed Processors Association reports soybean crush in December totaled 165.384 million bu., which was the largest monthly total on record, dating back through 2002. The tally supported soybean futures as it came in above the average trade guess of 163.9 million bu. and represents a 3.3% increase from November.

Meanwhile, soyoil stocks of 1.681 billion lbs. were much higher than the average trade guess of 1.555 billion lbs. and were up 13% from November.



Senate clears stopgap spending bill... As expected, the Senate easily approved a stopgap continuing resolution (CR) to fund the government through Sunday, allowing lawmakers three extra days to consider and pass and the president to sign a massive omnibus bill to fund the government for the remainder of Fiscal Year 2014. The president is expected to sign the stopgap bill to keep the government open after the current CR expires tonight at midnight. The major spending bill for FY 2014 is also expected to pass.



PF midweek marketing game plan update...

Corn: Hedgers have 60% of 2013-crop production sold in the cash market, while cash-only marketers are 50% priced on old-crop. Hedgers and cash-only marketers have 20% of expected 2014-crop production sold via cash forward contract for harvest delivery. While last Friday's price action signaled a low may be in place, choppy, sideways price action is more likely than a strong rally. We'll use price strength to advance old- and new-crop sales.

Soybeans: Hedgers are 100% sold on 2013-crop production in the cash market, while cash-only marketers are 75% sold on old-crop. Hedgers and cash-only marketers have 10% of expected 2014-crop production sold via cash forward contract for harvest delivery. Cash-only marketers must continue to hold some old-crop in the bin as gambling stocks, though a strong rally would be incentive for us to trim the amount we are willing to gamble with. A strong rally in November soybean futures would be incentive to increase 2014-crop sales.

Wheat: Hedgers are 100% sold in the cash market on 2013-crop production, while cash-only marketers are 75% sold. Wheat futures are struggling to find a bottom and we see little chance the market can rally without help from corn. Be prepared to aggressively sell periods of price strength when the opportunity arises.

Cotton: Hedgers and cash-only marketers have 50% of 2013-crop production sold in the cash market. The longer the pause period in futures, the greater the odds the price rally has run out of steam. Be prepared to advance old-crop sales. We are willing to give new-crop futures a chance to rally back to last fall's highs before making initial 2014-crop sales.

Cattle: Fed cattle producers should continue to carry all risk in the cash market as the price outlook is bullish and futures are trading below cash prices. With that said, there is an opportunity to lock in record prices, though we'd like to see some proof of a top before hedging and we aren't looking for a major down swing in price on a pullback due to tight supplies. Feeder cattle buyers should wait on the next corrective pullback to establish long hedge coverage.

Hogs: Profits have been claimed on the 1st-qtr. hedges. Seasonally, the market should be putting in a low. Carry all risk in the cash market unless there are indications a seasonal low will be significantly pushed back.

Feed: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80. Stay in touch to exit. There's no urgency to add long corn coverage as the upside is limited even if the market confirms a short-term low.

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