Evening Report (VIP) -- January 2, 2014

January 2, 2014 08:55 AM

2013 LEFT ITS MARK ON MONTHLY CONTINUATION CHARTS... Last year may be a memory, but 2013 made its mark on the monthly continuation charts. Following is an overview:

Corn: A wide $3.35 1/2 trading range was seen on the monthly continuation chart in 2013, with the front-month ending just off yearly lows. Key will be if funds lighten their short exposure to the market or continue to build on their near-record short position in early 2014.

Soybeans: Futures posted a $3.72 1/4 trading range on the monthly continuation chart in 2013 and ended in the lower one-third of the yearly range. The longer-term uptrend is intact, but is being challenged.

Wheat: SRW futures posted a $2.00 3/4 trading range in 2013 and ended just off the yearly low. The March contract is pivoting around the $6.00 level to start the year, which is near the lower end of the three-year trading range.

Cotton: Futures posted a 20.21-cent trading range on the monthly continuation chart in 2013 -- the narrowest since 2006. The top and bottom of last year’s trading range mark resistance and support, respectively.

Live Cattle: Futures posted a $16.80 trading range and an all-time high finish on the monthly continuation chart to close out the year. Bulls hold the technical advantage, raising the likelihood 2014 will mark the fifth straight year a new high is made.

Feeder Cattle: Futures posted a wide $36.55 trading range on the monthly continuation chart in 2013 and closed out the year by posting an all-time high finish. Like live cattle, feeders are poised to make 2014 the fifth straight year a new high is made.

Lean Hogs: Futures posted a $25.55 range on the monthly continuation chart and finished mid-range for the year.


SOUTH AMERICAN WEATHER 'UNEVEN'... Crop consultant Dr. Michael Cordonnier says while much of the attention recently has shifted to rains moving into dry areas of Argentina, he notes the weather across Brazil has been "uneven." He says rainy conditions are being seen across central Brazil, with some areas of Mato Grosso seeing near-daily rains. However, drier conditions in southern Brazil -- especially Parana, Mato Grosso do Sul and Sao Paulo -- are raising some crop concerns.

"If this is the peak of the rainy season, it's occurring a couple of weeks earlier than normal. At this point, it's impossible to say when the rainy season will end, but at least one meteorologist is predicting an early end to the rains," says Dr. Cordonnier, who says an early end to the rainy season would result in lower corn yields.

Dr. Cordonnier says much of the Brazilian soybean crop is flowering and setting pods and the most advanced crops are in their final stage of pod filling. He reports crop conditions are very good, as dryness is not yet a major concern for southern areas. He left his Brazilian bean crop estimate unchanged at 90 MMT and crop production at 68.5 MMT.

Dr. Cordonnier left his Argentine soybean crop peg unchanged at 56 MMT and says he has a neutral bias going forward, although says there is a possibility some late planted corn might be switched to soybeans. He left his Argentine corn estimate unchanged at 24 MMT, but says it could move lower. "We are not quite at the point where the corn yields could start to be impacted by the dry weather, but we could reach that point if these conditions persist into the first week of January," he says. "The first thing that could happen to the corn crop is a reduction in acreage due to the delayed planting and dry conditions."


NEW RULE COULD SPEED TRAFFIC AT PORT OF PARANAGUA... Dr. Cordonnier reports authorities at the Port of Paranagua in southern Brazil instituted a new program today that gives loading priority to vessels that will load from fewer exporters at the Public Corridor. "There are three berths in the Public Corridor and one of the three berths will be designated as the "express line" where vessels will load from three or fewer grain terminals. The goal of the new rule is to speed up loading at the port and reduce the waiting times for vessels," he says.


SOUTHERN PLAINS STILL DRY... According to the National Drought Monitor, drought covers 51.76% of the contiguous U.S., which is down from 53.65% the week prior, 60.43% three months ago and 72.78% a year ago. No changes were made in the northern and central Plains and the Midwest, since soils are frozen. But on the Southern Plains, light to moderate precip led to a one-category improvement in southern Texas and the removal of extreme drought near Corpus Christi. Nevertheless, the south saw a fractional increase in terms of drought coverage to 44.15%. However, this is still much better than three months ago when 73.8% of the region was dealing with some form of drought. See the maps.


U.S. CROP INSURANCE INDEMNITIES NEAR $7.9 BILLION FOR 2013 CROPS... U.S. crop insurance indemnities reached $7.859 billion as of Dec. 30, 2013, up more than $300 million from the prior week but still well behind the pace seen at this point for 2012 crops, according to Risk Management Agency (RMA) data. At this point a year ago, indemnities for 2012 crop losses had totaled $10.026 billion, which at that point was still behind the prior record payout mark of $10.861 billion that had been registered for 2011 crop losses. Payouts for 2012 crop losses eventually climbed to a record $17.427 billion.

So far, only corn and wheat have indemnity levels over $1 billion, with corn at $2.854 billion and wheat at $2.2 billion.

The loss ratio for the overall program stands at 0.67 for 2013 losses, with that ratio (total indemnities paid out against total premiums paid in) at 1.0 or greater for cotton (1.12), rice (1.82), sorghum (1.05), flue-cured tobacco (1.43) and wheat (1.12).

The level of net acres insured remains at a record mark of 295.620 million which is above the 2012 level of 283.094 million net acres insured and the 2011 level of 265.912 million net acres insured. The level of net acres insured has been at 250 million or above since the 2007 crop year. Get more details.


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