Evening Report (VIP) -- January 30, 2013

January 30, 2013 08:56 AM

FSA TO BEGIN ISSUING MILC PAYOUTS NEXT WEEK... USDA's Farm Service Agency (FSA) today announced that USDA will begin issuing payments to dairy farmers in the Milk Income Loss Contract (MILC) for September 2012 marketings on Feb. 5. This follows USDA's announcement last week that dairy producers' MILC contract would automatically be extended through Sept. 30, 2013 as part of the 2008 farm bill extension.

MILC payments are triggered when Boston Class I milk price falls below $16.94 per hundredweight (cwt.), after adjustment for the cost of dairy feed rations. Following are the approximate payment rates:

  • September 2012: 59 cents per cwt.
  • October 2012: 2 cents per cwt.
  • November 2012: 0 cents per cwt.


Before the October MILC payment can be issued, dairy farmers must complete a new Average Adjusted Gross Income (AGI) form for 2013: CCC-933 Average Adjusted Gross Income (AGI) Certification and Consent to Disclosure of Tax Information. Learn more.


FED TO STICK WITH STIMULUS MEASURES... The Federal Open Market Committee (FOMC), at the conclusion of today's policy-setting meeting, said it will continue its stimulus measures due to "paused" economic activity. The group says weather-related disruptions and "other transitory factors" has impacted the economy.

As expected, the FOMC kept the target range for the federal funds rate at 0% to 0.25% and "currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2% longer-run goal, and longer-term inflation expectations continue to be well anchored." Click here for more.


U.S. ECONOMY CONTRACTS... The Bureau of Economic Analysis (BEA) reports that real gross domestic product (GDP) decreased at an annual rate of 0.1% in the fourth quarter of 2012. This was disappointing as it came in below expectations of slow growth of around 1% and is well-below an increase of 3.1% in the third quarter. "The downturn in real GDP in the fourth quarter primarily reflected downturns in private inventory investment, in federal government spending, in exports and in state and local government spending that were partly offset by an upturn in nonresidential fixed investment, a larger decrease in imports and an acceleration in PCE (personal consumption expenditures)," states the agency.


COOL FRONT TO TRIGGER SHOWERS IN ARGENTINA... Meteorologist Gail Martell of MartellCropProjections.com says a cool front is making its way through Buenos Aires, Argentina, today and is expected to trigger showers in southern areas of the province tonight. She expects up to 1 inch of scattered rain across the region. Cooler temps the next couple of days will also alleviate stress to the crops. However, southern Brazil will miss out on the best rains, with hot temps expected to continue. "The atmosphere over southern Brazil is extremely dry, the low humidity worsening moisture stress in corn and soybeans," she reports.

Meanwhile, Martell says excessive rains of up to 10 inches are in the forecast this week for Mato Grosso, Brazil, which will slow soybean harvest and raise quality concerns.


WEEKLY ETHANOL PRODUCTION HITS ANOTHER RECORD LOW... Ethanol production for the week ended Jan. 25 totaled 770,000 barrels per day (bpd), which was down 22,000 bpd from the week prior and is the lowest weekly production total since the Energy Information Administration began releasing this data in mid-2010. Ethanol stocks 2.3% on the week to 20.5 million barrels. Imports of ethanol also slowed notably to 9,000 bpd.



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. Also stay patient on 2013-crop sales, 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. With the short-term trend higher, hedgers and cash-only marketers should wait to get current with advised cash sales. Also, be patient on 2013-crop sales, but be prepared to make initial, light sales when the uptrend runs out of momentum.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. With futures remaining in the month-long choppy consolidation range, wait to get 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. Wait to get current on cash sales, but be prepared to increase 2012-crop sales and to make initial 2013-crop sales when the upside recovery stalls.

CATTLE: Monday's sharp gains signals near-term lows have been posted in live and feeder cattle futures. Fed cattle producers should continue to carry all risk in the cash market, but feeder cattle buyers should be prepared to establish long coverage.

HOGS: Hog producers should continue to carry risk in the cash market. Futures are responding to tighter market-ready supplies and pork prices remain competitive compared to beef. Unless traders get a strong fundamental reason to be active buyers or sellers, the near-term price pattern will likely remain 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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