Evening Report (VIP) -- January 18, 2013

January 18, 2013 08:38 AM

CROP TOUR NEWSLETTER AVAILABLE... The January edition of the Pro Farmer Crop Tour newsletter includes an update on the South American crop situation and weather conditions in the United States. Click here for the newsletter.



MARKETS CLOSED MONDAY... Markets and government offices are closed on Monday in observance of Martin Luther King Jr. Day. There will be no Pro Farmer updates on Monday, but we'll be back on Tuesday starting with "First Thing Today."



INFORMA UPDATES ACREAGE PEGS... Sources familiar with Informa Economics say the firm has updated its 2013 acreage prospects based on survey date collected in January. The firm reportedly pegs planted corn acreage at 99.303 million, which if realized, would be up 2.148 million from 2012; planted soybean acreage at 78.777 million, which if realized, would be up 1.579 million from 2012; planted cotton acreage at 10.04 million, which if realized, would be down 2.037 million from 2012; and spring wheat acreage at 12.484 million, which if realized, would be just 195,000 acres above 2012.



ECONOMIST: PROFITS AHEAD FOR STRUGLING PORK INDUSTRY... Purdue University ag economist Chris Hurt says due to high feed costs, pork producers have been dealing with negative margins for several months, but they could be on the verge of turning profits. But even with profits on the horizon, he warns producers should be cautious about expanding herds as drought conditions in the western Corn Belt and Central and Southern Plains could trim grain production in 2013 and result in rising feed costs.

"For the immediate future, losses will continue in the first quarter of 2013 and are expected to average about $15 per head," Hurt said. "The return to profitability is expected to come in late April or early May when the spring hog price rally is underway and as meal prices edge lower with the South American soybean harvest. Profits are projected at about $10 per head for the second and third quarters before returning to breakeven in the fall of 2013 and winter of 2014."



FARM COUNTRY CONCERNS... Washington Consultant Jim Wiesemeyer has received the following questions and comments from farmers and others during a recent spate of speeches throughout the United States and Mexico:

  • Planting decisions: More and more farmers are leaving corn and soybean planting decisions to the last minute. Some say they will wait until March 15 to see crop insurance program details before deciding what to seed.
  • Crop insurance perspective: Several Midwest farmers note, "This is the first time in decades that I received a crop insurance indemnity payment. If I add up all of the premiums I have paid over that timeframe, the government is still way ahead, so even though my insurance buy up is subsidized, it still rankles me to hear I am subsidized..." Meanwhile, South American farmers look with envy at crop insurance program options for U.S. farmers.
  • The trend for less corn-on-corn ground in the U.S. continues.
  • Biggest U.S. farmer concern: Lack of soil moisture.
  • Farmer FAQs: Do you trust USDA reports on production and grain stocks, and demand projections? Is the renewable fuels program mandate for corn safe, and what will happen when it comes up for review? What happens if the U.S. has another below-trend corn yield?"
  • Some cutbacks in U.S. cotton acreage ahead may never come back. One Georgia farmer said, "I've gone to way more corn and soybean plantings, and I sold my last cotton picker and I won't buy another new one. I like growing corn. Don't tell the Midwest guys, but it's a lot easier to plant, and a lot cheaper!"
  • Several big hog producers have indicated expansion plans this year in their area, in part on expectations China will step-up imports of pork.
  • The cost of moving away from hog gestation crates is huge, with some farmers saying it means 25% less space for them to raise hogs. Some say they will change who they sell their animals to if their buyer asks them to change their production pattern.
  • Direct payments for 2013 crops: There are still doubts as to whether direct payments will be made on 2013 crops, despite a recent pledge by House Ag Chairman Frank Lucas (R-Okla.) that they will, indeed, be part of the 2013 safety net. All farmers, however, know that the days of direct payments are numbered.
  • Is the Supplemental Revenue Assistance Payments Program (SURE) program available for 2013? Answer: No.
  • Shallow thinking: Some farmers admit that the discussion about a "shallow loss coverage" -- the first 10% to 11% of loss -- may not be the best thing for agriculture to be undertaking in the current budget-cutting climate in Washington.
  • The business/equipment depreciation language in the recent fiscal cliff package brought this remark from one farmer: "I sure wish I would have known that was going to be in the package because I would have bought some more equipment in 2012."
  • Rural lenders say they are feeling very positive about their balance sheets and their farmer borrowers, noting many land purchases have involved little to no financing. That's in no small part due to the solid financial position farmers are in but also that they have kept debt down and the lenders themselves have limited exposure on farmland purchases.
  • Argentine taxes: "The government takes about a 70% bite out of my operations for taxes," says one Argentine farmer.
  • Cost of DDGs: An Ohio hog producer notes, "The cost of DDGs has increased so much that I can't use it now, so I went to alternatives.
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