Evening Report (VIP) -- January 8, 2014

January 8, 2014 09:19 AM
 

Barrage of USDA data coming Friday... In addition to its monthly Supply & Demand Report, USDA will release its Annual Crop Production Summary, Quarterly Grain Stocks Report and Winter Wheat Seedings Report Friday.

Lending pressure on old-crop corn and soybean futures this week is expectations USDA will raise the size of the 2013 corn and soybean crops. But as has been the case in recent years, the grain stocks data may prove to be the market mover on Friday. Traders expect the stocks data to imply near-record first-quarter 2013-14 corn and soybean use.

The winter wheat acreage data will set the tone for that market into spring. Traders expect the report to show HRW wheat acreage up from year-ago, while SRW and white wheat acreage are seen down from year-ago levels to result in all winter wheat acreage up roughly 600,000 acres from 43.1 million last year.

Annual Crop Production

Avg.

Range

USDA latest

2012

in billion bushels

Corn

14.053

13.897-14.255

13.989

10.780

Soybeans

3.270

3.217-3.308

3.258

3.034

 

 

2013-14 U.S. Carryover

Avg.

Range

USDA Dec.

2012-13

in billion bushels

Corn

1.844

1.654-2.019

1.792

0.824

Soybean

0.151

0.120-0.180

0.150

0.141

Wheat

0.559

0.460-0.585

0.575

0.718

 

 

2014 Winter Wheat Seedings

Avg.

Range

2013

in million acres

All winter

43.7

42.7-44.8

43.1

HRW

30.4

29.0-31.9

29.6

SRW

9.7

8.74-10.5

10.0

White

3.5

3.37-4.0

3.5

 

 

Dec. 1 Grain Stocks

Avg.

Range

Dec. 1, 2012

in billion bushels

Corn

10.77

10.323-11.25

8.03

Soybeans

2.17

2.006-2.266

1.97

Wheat

1.41

1.30-1.768

1.66

 

Ethanol production exceeds four-week average... The Energy Information Administration (EIA) reports ethanol production the week ended Jan. 3 rose 6,000 barrels per day (bpd) from the previous week to 919,000 bpd. This raised the four-week average to 922,000 bpd for an annualized rate of 14.13 billion gallons. Ethanol stocks climbed by 556,000 barrels from the previous week to 16.14 million barrels. Expressed as a percentage of daily gasoline demand, daily ethanol production was 11.11% -- the highest in four weeks.

 

Dairy policy battle escalates... Farm bill dairy policy issues reached a critical point on New Year's Eve, sources advise, with House Ag Chairman and farm bill conference leader Frank Lucas (R-Okla.) calling House Speaker John Boehner (R-Ohio) about the topic. Contacts familiar with the conversation say that Lucas in essence asked Boehner whether there was any "wiggle room" regarding helping Rep. Collin Peterson (D-Minn.), ranking member of the House Ag panel and the major lawmaker, pushing supply management language to be included in the dairy program title. Boehner said his view had not changed and "this was the one" farm bill issue he had commented on during several occasions.

Then on Jan. 3, Lucas called Boehner again, asking for a three-way telephone call with Peterson, during which Peterson reportedly said, "Well, John, we may have to see what happens if we just call this report up with supply management language included." Boehner, contacts informed, said if that were to happen, "I would not bring it (farm bill conference report) up for a House vote."

If the eventual dairy policy language is not to Peterson's liking, the question then is whether or not he would vote for the overall conference report because of just one issue, and, if so, how many other Democratic members would follow any such development. With most conservative Republicans expected to vote no on any coming farm bill conference report, the measure will need more than a few Democratic votes to win House approval.

Meanwhile, Sen. Patrick Leahy (D-Vt.) is reportedly working on various dairy policy options, and having them scored by the Congressional Budget Office (CBO), as a potential way around the dairy policy hurdle. Get more details.

 

"Dairy cliff" becoming a political issue... There are some signs dairy policy is becoming a steep election-year, political issue as both sides privately are wondering which party would be blamed the most for any farm bill conference report failure. If this does falter again, sky-high milk price talk will make front-page and cable news headlines as efforts would have to be made to again extend the 2008 Farm Bill. However, doing that with this Congress would be no easy task.

A coming Congressional Budget Office (CBO) baseline update in early February could show that if the 2008 Farm Bill is extended, corn producers would garner some $6 billion in taxpayer subsidies via an attractive Average Crop Revenue Election (ACRE) program for the 2014 crop safety net option. If so, that could limit the decline in corn plantings that some are forecasting. But that would also clearly show ACRE would skew plantings and would be noticed by several WTO member countries.

 

PF midweek marketing game plan update...

CORN: Hedgers and cash-only marketers have 25% of 2013-crop production sold in the cash market. We will be increasing old-crop sales ahead of Friday's USDA reports to protect against a bearish reaction. We are also looking to start 2014-crop sales.

BEANS: Hedgers are 100% sold on 2013-crop production in the cash market, while cash-only marketers are 75% sold on old-crop. Hedgers and cash-only marketers should be prepared to start 2014-crop sales as futures are breaking down technically.

WHEAT: Hedgers are 75% sold in the cash market on 2013-crop production, while cash-only marketers are 50% sold. We are looking to increase 2013-crop sales and to start 2014-crop sales to protect against additional downside risk. Each time there's a glimmer of hope a low is in the works, a fresh batch of price-negative news hits.

COTTON: Hedgers and cash-only marketers have 50% of 2013-crop production sold in the cash market. Be prepared to advance 2013-crop cash sales as the recent strong price recovery is showing signs of stalling.

CATTLE: Fed cattle producers should continue to carry all risk in the cash market as the price outlook is bullish. While a short-term top may be near, downside risk is limited by tight supplies. Feeder cattle buyers should wait on the next corrective pullback to establish long hedge coverage.

HOGS: 50% of 1st-qtr. production is hedged in Feb. lean hog futures at $89.70. Be prepared to claim profits on signs a seasonal low is place.

FEED: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80. Stay in touch to exit. There's no urgency to add long corn coverage at this time as the market is struggling to put in a low.

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