Evening Report (VIP) -- July 25, 2013

July 25, 2013 10:28 AM
 

TOUR: HRS CROP PROSPECTS IN LINE WITH YEAR-AGO... After sampling fields throughout North Dakota, northern South Dakota and western Minnesota the past three days, scouts on the annual Wheat Quality Council HRS tour calculated an average yield of 44.9 bu. per acre for hard red spring wheat. That matches tour results from last year, but is higher than the five-year average of 43.3 bu. per acre. Scouts also calculated a durum wheat yield of 41.7 bu. per acre, which was down from 42.4 bu. per acre last year.

 

 

DROUGHT EXPANDS ACROSS SOUTH, MIDWEST... According to the National Drought Monitor, 58.3% of the contiguous U.S. is covered by some form of drought for the week ended July 23, up from 54.39% last week but down from 80.75% from a year ago. The rise in the area covered by drought came as drought conditions expanded in the South, with 79.87% of the region now covered by some form of drought versus 73.47% the previous week and 82.71% a year ago. In addition, drought conditions expanded in the Midwest with 18.94% of the region covered by some form of drought versus 7.16% the previous week. But Midwest drought coverage is well below 85.91% a year earlier.

The week was warmer than normal and generally dry for the Midwest, the monitor reports, although storm systems brought above-normal rainfall to places, with 3 inches or more reported locally in Upper Michigan, Illinois and southern Iowa. Farther south, the monitor reports, "An upper-level low retrograding beneath the ridge brought below-normal temperatures and locally heavy rain to the southern Plains and reinforced the Southwest monsoon." But while heavy rains from the Midwest to the lower Mississippi Valley were helpful locally, they were not widespread and precip deficits have been building over the last 30 to 90 days.

Much of the Central and Northern Plains were drier than normal over the past week, leading to the addition of an abnormally dry spot in eastern North Dakota. The monitor also noted short topsoil moisture in Nebraska and Kansas and cited extension office reports indicating that "depending on crop emergence and crop planting times, some corn, soybean and other crops in eastern Nebraska were burning up while others were still viable ... rain is especially needed in the next 7-10 days. Crops were facing a similar predicament in Missouri and Iowa." Get more.

 

 

ERS LOWERS FOOD PRICE FORECAST FOR 2013... USDA's Economic Research Service (ERS) now forecasts food and food-at-home (grocery store) prices for 2013 will increase by 1.5% to 2.5%. This is down 1 point from both sides of its range from month-ago. This forecast signals prices will increase less than they did in 2012; inflation as a whole is expected to be lower than the historical average for both indexes.

"The drought has had less of an impact on retail food prices than initially forecast. The inflationary pressure due to the drought has been offset by several factors -- decreased exports of many U.S. agricultural products, a stronger U.S. dollar, low energy price inflation, and decreased prices for many commodities not affected by the drought," ERS explains.

Looking ahead to 2014, ERS expects normal food price inflation for the year. It anticipates the Consumer Price Index (CPI) for food, foot-at-home and food-away-from-home will increase 2.5% to 3.5% from 2013 levels. "Inflationary pressures are expected to be moderate, based on the outlook for commodity prices and animal inventories, as well as a continuation of export trends," ERS explains. But the agency cautions the forecast is based on normal weather conditions. Read more details.

 

 

LUCAS SIGNALS ODDS RISING FOR FARM BILL EXTENSION... House Majority Leader Eric Cantor (R-Va.) met with some other Republicans yesterday to discuss a nutrition bill that will be considered in September if an agreement on its particulars can be forged. GOP leaders are focusing on which policy changes they prefer and seeing the budget savings resulting from any such changes to the nutrition program rather than a specific savings number. But House Ag Chairman Frank Lucas (R-Okla.) is already turning pessimistic about an agreement, saying an extension of the 2008 Farm Bill would be necessary if the House does not pass a nutrition bill and get an official farm bill conference underway in September, a month which has only nine legislative days. Lucas says he is anticipating a possible extension of the current farm bill, though it is unclear how that might fare in the House.

But attempts at compromise are still underway. Lucas said in an interview on Wednesday that he and the majority leader’s office "are attempting to poll, to have discussions with various members -- both Republicans and Democrats -- to try and come up with what would be a consensus bill, how can you address the social nutrition title" in a way the a majority (218) of his House colleagues will vote for. "Right now that equation is not there, and discussions are still going on. My friends on the left don’t want to have any reforms and my friends on the right want dramatically more reforms than probably are achievable in this environment," Lucas says.

"But that said, my personal goal is by some point next week, if it’s quite clear that consensus cannot be achieved ... then I think we need to recognize that fact and move on conferencing the bill that the Senate’s passed and the House has passed and see what evolves from that. But right now [we're] still trying to achieve consensus," Lucas explains, though he says reaching consensus may be "impossible."

But Congress has time to conclude the two-step farm bill process because even though the current farm bill extension expires Sept. 30, any impacts would not be felt until late December. SNAP is permanent under separate legislation and could be funded via the appropriations process, and thus could continue without a farm bill. The federally subsidized crop insurance program also would continue without a farm bill or extension. The House leaves for August recess next week. Learn more about the farm bill state of affairs.

 

 

LUCAS DEFENDS HOUSE PUSH FOR NEW PERMANENT AG LAW... The House farm bill repeals the 1938 Act and 1949 Act as permanent legislation and replaces it with whatever can be passed in the new Title I language.

Ron Hays, of the Oklahoma Farm Report and Radio Oklahoma Network, spoke yesterday with Lucas. He asked Lucas about permanent law. Lucas said, "The old logic was if you had a '38 and a '49 law on the books that were so horrendous, so impossible to implement, that will force action. I would tell you in the new environment, my friends on the left and my friends on the right don’t care. They just don’t care. The White House doesn’t understand rural America, doesn’t understand production agriculture. That creates a situation where, in future years, if it’s like now and we get to this point we’re at now, somebody will simply include language in a CR (Continuing Resolution) to finish the appropriations year or some other legislation will just simply repeal it all and we’ll have nothing. I’m trying to craft good policy in a way that we can live with it, not just for the next five years, but [for] the next 10 or 15 years. I want to use that as permanent law to protect us from a day when we can't pass any farm legislation. At that point it becomes a defensive battle, protecting what we have, not trying to scare people by using the bad old policy from Franklin Roosevelt and Harry Truman's time to force something to happen. Because the group I’m now part of will just simply repeal a '38 and '49 law before it -- when it takes effect and we’ll have nothing. That’s what I’m afraid of."

 

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