Evening Report (VIP) -- January 23, 2013

January 23, 2013 08:58 AM

CONSULTANT RELEASES INITIAL 2013 U.S. CROP ESTIMATES... Crop consultant Dr. Michael Cordonnier says the two big questions concerning the 2013 U.S. corn crop are, first, what factors could impact corn acreage, and secondly, what yield should be used as a starting point? Regarding acreage, Dr. Cordonnier says crop insurance could give producers confidence to plant more corn despite ongoing drought conditions, although corn-on-corn has been a disappointing proposition for three straight years.

USDA's trendline corn yield for 2013 will likely be in the range of 164 bu. per acre, but Dr. Cordonnier is taking a more cautious approach by starting with a yield of 153 bu. per acre. He projects planted corn acreage at 98.5 million.

Dr. Cordonnier is starting with a 2013 soybean acreage projection of 78.7 million and a yield of 43 bu. per acre (near trendline). "Soybean acreage should increase (compared to last year) due to reduced cotton acreage and the possibility that some farmers in the drier areas of the western Corn Belt may opt to plant less corn and more soybeans," he says.

Regarding soybean yields, Dr. Cordonnier says, "Soybeans require much less water than corn and the crop can survive quite nicely if the limited rainfall comes in well-timed increments. Therefore, even if the 2013 growing season starts off drier than normal, it's not a sure thing that it will result in significantly lower soybean yields."



FARM BILL MEETINGS BETWEEN PETERSON AND BOEHNER... Rep. Collin Peterson (D-Minn.), the House Agriculture Committee’s ranking Democrat, revealed today that he's met with House Speaker John Boehner (R-Ohio) to discuss the farm bill and said he feels they could eventually agree on a path forward on the legislation. Peterson later told reporters that he needs to resolve Boehner's concerns about the farm bill's dairy provisions. Peterson's talks with Boehner took place on the House floor, he said, but he noted the two plan to meet after the House recess.



USTR MAKES IT OFFICIAL; STEPPING DOWN IN LATE FEBRUARY... Ambassador Ron Kirk announced he plans to step down from the role of U.S. Trade Representative (USTR) after nearly four years of service. He plans to depart from the position in late February. Two names mentioned as possible successors: USTR deputy Michael Punke and White House trade adviser Mike Froman. Washington consultant Jim Wiesemeyer says, "Key for trade policy is not really who becomes USTR, but Obama himself. How hard he will push for new agreements like the Trans-Pacific Partnership and one with the EU. That is the key. Click here for more.



NOAA SEES RIVER LEVELS FALLING... The National Oceanic and Atmospheric Administration (NOAA) has released data regarding the water level in the Mississippi River. River levels have continued to decline through the winter, and while some reports have recent rains improving the situation at certain points along the river, the NOAA report projects water levels to continue to fall. Click here for more.




CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Continue to let the corrective rally unfold, but be prepared to get current on signs the rally has stalled. Tough resistance for March corn futures is in the $7.65 to $7.75 range. Stay patient on 2013-crop sales for now, but be ready to make initial new-crop sales when the price recovery stalls.

BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Hedgers and cash-only marketers should wait to get current with advised cash sales until the corrective rebound shows signs of stalling. Stay patient on 2013-crop sales for now, but be prepared to make initial, light sales when short-term momentum stalls.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. With futures signaling a short-term low is in place, let the recovery rally play out before getting current with advised old-crop sales. Be prepared to make initial 2013-crop sales on an extended price recovery. We don't want to get too aggressive with old- or new-crop sales at this stage given U.S. and global crop concerns.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold in the cash market. Futures are attempting an upside breakout from the extended, sideways range. Be prepared to increase 2012-crop sales and to make initial 2013-crop sales if this breakout attempt fails.

CATTLE: The downside was overdone on the sharp price break in the cattle market. Fed cattle producers should continue to carry all risk in the cash market. Feeder cattle buyers should be prepared to use the sharp price break to establish long coverage.

HOGS: Hog producers should continue to carry risk in the cash market. Buyers continue to show up on price breaks, but the upside is limited. Unless traders get a strong fundamental reason to be active buyers or sellers, the near-term price pattern is likely to be choppy.

FEED: Get current with advised feed coverage, but there's no urgency to add coverage at this time. 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30, and 25% of 2nd-qtr. protein needs are covered in long July soybean meal futures at $388.00.


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