Evening Report (VIP) -- July 12, 2013

July 12, 2013 09:53 AM
 

NWS FORECAST: HOT AND WET... The National Weather Service forecast for July 18-22 calls for above-normal temps over most of the Corn Belt aside from extreme northwestern and far southwestern areas of the region. Above-normal precip is also forecast over the entire eastern Corn Belt, about half of Iowa, all of Minnesota and the extreme eastern Dakotas. Normal precip is expected over the rest of the region except below-normal precip is forecast for much of Kansas and far southern Nebraska. See the maps.

 

MID-JULY WEATHER WILL BE PIVOTAL FOR CROPS... We talked with two meteorologists this week and got two difference answers regarding the longer-term outlook for the Midwest.

Kyle Tapley, senior agricultural meteorologist at MDA Weather Systems, says while the forecast calls for above-normal temps for much of the Corn Belt by the weekend, he doesn’t see a threat of oppressive heat as corn pollinates. Longer-term models show a return to
mostly normal temps in August across the Corn Belt, with slightly below-normal precip for the central Corn Belt, which includes eastern Iowa, Illinois, Wisconsin and Indiana. But even with the forecast for below-normal precip for the central Belt, he says the area should be able to catch some timely rains.

"The one area of concern I have is in the southwestern Corn Belt, which includes Missouri, parts of Nebraska, Kansas, and southern Illinois," says Tapley in reference to the risk of warmer temps increasing the demands for timely moisture. Tapley says one of the big differences in this year’s weather pattern compared to last year is ridging has shifted farther west, allowing for more rains to enter the Corn Belt. While this has resulted in expansion and intensity of drought in areas of the western U.S., the movement of the ridge helped to erase drought for much of the Belt this growing season.

MDA Weather Systems currently pegs the U.S. corn yield at 155 bu. per acre and the U.S. soybean yield at 43 bu. per acre. Tapley says there is more upside potential than downside risk to the estimates based on the non-threatening extended weather outlook.

Meteorologist Gail Martell of MartellCropProjections.com says, so far, the 2013 growing season is mimicking 1995 closely. In that analog year, spring weather conditions were cool and rainy and corn planting was delayed -- much like this year. But then growing conditions suddenly changed in June 1995 when hot and dry conditions developed.

Martell says July rainfall and temps that year were near average, but rains fell short of compensating for June dryness. In August, conditions again turned hotter and drier. All of this resulted in the national corn yield finishing about 10% below trendline. Martell says an emerging La Niña signal was likely responsible in 1995 for the sudden change in the weather and she sees a similar cooling in the eastern equatorial Pacific this year.

"Midwest corn in 2013 shares many of the same problems as the 1995 crop," says Martell. "The one difference is that in 2013, relatively generous rainfall continued in June and corn conditions have held steady, albeit mediocre." "July weather has suddenly changed in the U.S.
heartland to become hot and dry west of the Mississippi River," notes Martell. "Hardly any rain has occurred for two to three weeks. Late-planted corn with shallow roots is showing signs of moisture stress. The weather stress may be linked to an emerging La Niña, though on a delayed timetable — one month later than 1995."

Martell says while the Climate Prediction Center expects ENSO-neutral conditions for the remainder of the growing season, strong dryness in the central U.S. is a classic symptom of La Niña. "The La Niña effect is less dry in the eastern Midwest," she adds. "Interestingly, corn has received plentiful rain in Ohio, Indiana, Michigan and eastern Illinois this month."

 

SMITHFIELD SAYS WAITING PERIOD ON TRANSACTION HAS EXPIRED... Smithfield Foods, Inc. announced today the required waiting period has expired under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR") in connection with the company's previously announced transaction with Shuanghui International Holdings Limited. In addition, Smithfield announced that it has received foreign antitrust or anticompetition approvals in Mexico and Poland. Smithfield expects the transaction to close in the second half of 2013.

The $7.1-billion transaction still must be approved by Smithfield’s shareholders and the Committee on Foreign Investment in the United States. The committee consists of high-level officials from government agencies. It reviews national-security implications of foreign deals. The deal is expected to be given the green light.

 

RAINS SLOW SAFRINHA CORN HARVEST AND WHEAT PLANTING... South American crop consultant Dr. Michael Cordonnier says the safrinha corn harvest and wheat planting in the southern Brazilian state of Parana have been delayed due to very wet conditions. During June, the area saw nearly double the normal rainfall, which is very unsual as this is typically the start of the dry season.

"The most immediate concern is the harvesting of the safrinha corn crop. Most of the corn is mature and is waiting for the weather to dry out enough to resume harvesting. The longer it stays wet, the greater the chances of having poor quality grain due to moldy corn and corn germinating in the ear," says Dr. Cordonnier.

Farmers in the state are also in the final stages of planting their winter wheat crop. "The biggest risk for the wheat from the wet weather is the possibility of increased disease pressures. Many farmers have not been able to apply preventative fungicide applications due to the wet weather and if diseases get established in the fields, it makes it much more difficult to prevent yield losses," adds Dr. Cordonnier.

 

HOUSE FARM BILL REVEALS POWER SHIFTS... Getting a farm bill finally through the House of Representatives exposed a lot of things that have changed in Washington and, perhaps more importantly, what has not changed in some farm organizations and groups. It was muscle-type pressure on wayward Republicans, including six Committee chairmen who voted against the bill in late June. This time saw Majority Leader Eric Cantor (R-Va.) returning to his former role as Whip to help get most of the 62 Republicans who voted against the bill in June to alter their position. Having Speaker John Boehner (R-Ohio) and Cantor clearly up front and center on pushing the bill meant they scored a victory on the bill's approval.

Mike Sommers, Boehner's chief of staff, earlier this week told a teleconference of farm group lobbyists what they needed to hear: support this bill or there would be no other chance to avoid another extension. Most but not all of those lobbyists answered that call for support. Meanwhile, House Ag Chairman Frank Lucas (R-Okla.) is also in the winner's circle, as lawmakers and others truly felt sorry for the very accommodating lawmaker when the bill went down to defeat in June, only to see Lucas help GOP leadership pick up the pieces.

The House farm bill was approved despite active opposition from the American Farm Bureau Federation and the National Farmers Union. This is vivid proof of the growing lack of clout of farm group lobbyists. Some commodity groups actively supported the House farm bill, some with reservations, and those included cotton, rice, peanuts and fresh produce. The National Corn Growers Association (NCGA), which clearly favors the Senate farm bill over the House, version endorsed the House bill at the last minute as a means to get a conference panel started.

 

FARM BILL OUTLOOK: WHAT'S NEXT?... No one with any credibility knows what the final step will look like for the farm bill end zone. For example, it could be some time before conferees, especially in the House, are officially announced, or when a conference officially begins. In sensitive bills, when conferees are announced usually means that most of the issues have been addressed in closed-door sessions and mostly by staffers.

The issue of food stamp funding remains a key. The Senate-passed bill includes SNAP/food stamp cuts of $4 billion. The House farm bill excluded the nutrition title. An issue in the House is when and how a separate nutrition spending bill will surface. While some say within a week or two, veteran observers do not see any floor action until after the August recess.

The final decision on that topic will be decided by House and Senate leaders beyond the Ag panel, with consultation with the White House. If no agreement can be reached, then the issue will be whether Senate farm bill conferees and House GOP conservatives would go along with a farm program-only conference report, and whether there would be enough votes to clear any such report. Another option could be to link whatever farm bill conference report emerges with another must-pass conference report, perhaps an expected short-term hike in the debt-limit ceiling. Get more details on the likely farm bill outcome and other issues.

 

WHAT'S NEEDED TO RALLY NEW-CROP CORN... Pro Farmer Senior Market Analyst Brian Grete discusses the increase in new-crop corn demand and weather's impact on prices in this week's Pro Farmer Profit Briefing clip on AgDay TV. Click here to view the clip.

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