Evening Report (VIP) -- January 31, 2013

January 31, 2013 09:25 AM

CATTLE INVENTORY REPORT NOT EXPECTED TO REFLECT HERD REBUILDING... Traders expect tomorrow afternoon's USDA Cattle Inventory Report to reflect a tightening supply situation and no herd rebuilding. Beef replacement heifers are seen coming in just below year-ago levels as drought across the Plains is keeping producers from expanding their herds.

If the average pre-report trade guesses are on target, the U.S. cattle inventory at 89.135 million head would be the smallest since 1952. The report will be released Friday at 2:00 p.m. CT.

Semiannual Cattle Inventory Report Expectations

Avg. trade guess


% of year-ago

All cattle & calves



Annual calf crop



Total Cows/heifers calved



beef cows/heifers calved



milk cows/heifers calved



Heifers 500 lbs. and over



Beef replacement heifers



Milk replacement heifers



Other heifers



Steers 500 pounds and over



Bulls 500 pounds and over



Calves under 500 pounds




EPA PROPOSES 2013 RENEWABLE FUEL STANDARDS... Missing its Nov. 30, 2012, deadline by a long shot, the Environmental Protection Agency (EPA) today released its proposed 2013 percentage standards for the four fuel categories that are part of its Renewable Fuel Standard program at the following volumes and standards:

  • Biomass-based diesel (1.28 billion gallons; 1.12%)
  • Advanced biofuels (2.75 billion gallons; 1.60%)
  • Cellulosic biofuels (14 million gallons; 0.008%)
  • Total renewable fuels (16.55 billion gallons; 9.63%)

EPA noted that it believes its approach in developing these standards was consistent with a January appeals court ruling (that the agency had overstepped its boundaries in setting the 8.65 million gallon 2012 mandate for cellulosic biofuels at a level that would drive growth) and that the 14-million gallon proposal is a "reasonable representation of expected production."

The proposal announced today will be open for a 45-day public comment period and EPA will consider feedback from a range of stakeholders before the proposal is finalized. Learn more.


EPA PROPOSES CHANGES TO BOOST CONFIDENCE IN RIN TRADING... EPA also proposed changes to make the RFS program more efficient and effective via a structured process for buyers of Renewable Identification Numbers (RINs) in order to verify their validity and increase confidence in RIN trading. Under the proposal, RINs would be verified through a new voluntary quality assurance program that also includes alternative compliance options that leverage existing industry practices and market forces. This proposal will be available for a 30-day public comment period. EPA will consider feedback from a range of stakeholders before the proposal is finalized. Get more details.


FROZEN SOILS PREVENT MIDWEST RAINS FROM EASING DROUGHT... According to the National Drought Monitor, 69.73% of the contiguous U.S. has some form of drought, which is a marginal improvement from 69.78% last week. This is still well above last year's drought coverage at this time of 58.20%.

In the Midwest, 67.2% of the region is under some form of drought, unchanged from last week. The Monitor notes that while some Midwest states received precip the past week, major precip deficits and frozen topsoil prevented rains from making any dent in the drought.

The situation is worse on the High Plains where just 4.79% of the region is drought-free. The drought footprint on the Plains was also little changed as the region saw unseasonable warmth and dryness continue. Dryness and above-normal temps was also the pattern for the South. This resulted in some minor shifts and slight deterioration in drought conditions across most of Texas and southwestern Oklahoma. Arkansas was little changed over the past week. Check out the maps.


RUSSIA U.S. MEAT IMPORT BAN BEGINS NEXT WEEK... Last week we reported that Russia was threatening to block U.S. and Canadian imports of chilled beef and pork due to the ongoing ractopamine dispute. Not surprisingly, Russia's top ag watchdog this week confirmed the country plans to move forward with this import ban on meat and meat products, according to the Russian news agency Interfax. It reports the country will ban imports of chilled meat as of Feb. 4 and will halt frozen meat imports on Feb. 11. U.S. beef exports to Russia totaled $254.5 million through November of 2012, and pork exports over this 11-month span totaled $267.8 million, according to the U.S. Meat Export Federation.


NEW FARM BILL TIMELINE... The farm bill timeline is dependent upon House and Senate Ag panels getting budget-saving instructions from their respective leaders and budget panels. This will likely be part of a forthcoming budget resolution/budget reconciliation process that will largely determine the timeline of the bill. Contacts signal farm bill markup will begin in April or early May, with a goal to finish the bill by the August congressional recess. A lot depends (as in the ill-fated farm bill of 2012) on House GOP leadership scheduling House floor debate. Senate Majority Leader Harry Reid (D-Nev.) has already put the farm bill among his top 10 initiatives for 2013.


LIKELY DIFFERENCES IN BUDGET CUTS... The Senate will likely have a lower budget-cutting number than the House via the farm bill process. Thus, this will have to be reconciled in a forthcoming conference. Key issues are how much funding cuts come via the food stamp program, where Senate Democratic leaders have already announced they will fight the much greater funding cuts pushed by House GOP leaders. In last year's farm bill marathon, the Senate proposed to cut food stamp funding by $4 billion, versus $16 billion pushed by House GOP leaders.

The eventual figure will not be decided by Ag panel members but by House and Democratic congressional leaders, along with White House input. The eventual farm bill budget cuts will likely be $28 billion to $35 billion over 10 years.


CROP INSURANCE IN FOCUS... The farm bill put together last year would actually increase funding for the very popular crop insurance program, but farm policy reformists and opponents have their sights on this program for the years ahead. Some want to eventually put a means test to the program and/or a payment cap. Those initiatives will be heatedly contested by farm-state and ag industry stakeholders, but a debate is coming. Crop insurance is second behind food and nutrition relative to farm bill baseline spending. The huge payouts made for 2011 crops and even larger (record) for 2012 crops will certainly keep this topic up front and center.

Another issue ahead is the merging of the farmer safety net relative to the farm bill proposals into the crop insurance arena ("shallow-loss"/revenue-assurance program initiatives and the cotton STAX program, for examples). Read more about more farm bill priorities.


AG POLICY ISSUES OVERVIEW... Most policy issues will be led by the coming debate over dealing with the deficit and long-term debt. As for energy policy, coming hearings on the Renewable Fuel Standard (RFS) will again be held, but there is virtually no chance that the RFS mandate will be eliminated for corn-based ethanol. Meanwhile, a topic that will definitely impact agribusinesses is the coming major debate on comprehensive tax reform. Despite hope to the contrary, that debate will not end this year, but the eventual results could have major implications for the business of agriculture. Comprehensive immigration reform will get a lot of attention but could be kicked into 2014.

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