Evening Report (VIP) -- June 5, 2013

June 5, 2013 09:29 AM

ETHANOL PRODUCTION AND STOCKS RISE... The Energy Information Administration reports ethanol production the week ended May 31 improved 22,000 barrels per day (bpd) from the previous week to 885,000 bpd -- the highest monthly average in nearly a year. Ethanol stocks increased 400,000 barrels from the previous week to 16.4 million barrels -- the first increase in stocks in six weeks.



INFORMA TRIMS WINTER WHEAT CROP... Sources familiar with Informa Economics say the group has lowered its U.S. winter wheat production estimate by 35 million bu. from last month to 1.494 billion bu., which if realized, would still be up 8 million bu. from last month's forecast by USDA. The firm expects USDA to peg HRW wheat at 778 million bu. (9.6 million higher than USDA's May peg), SRW wheat at 505 million bu. (4.4 million bu. higher than USDA's May peg) and winter white production at 211 million bu. (5.6 million bu. lower than USDA's May peg).



BEEF EXPORTS TO JAPAN SURGE IN APRIL... The U.S. Meat Export Federation (USMEF) says based on data from USDA, beef and pork exports were sluggish in April, but Japan regained its ranking as the No. 1 market for U.S. beef for the first time since 2003.

Beef exports to Japan in April of 21,486 MT were more than double the year-ago tally and year-to-date exports of 59,969 MMT are up nearly 50% from last year. USMEF President and CEO Philip Seng says while the boost is encouraging, he cautioned that Japan has a safeguard in place that will increase tariffs if beef import volumes rise too quickly. "This safeguard, which was utilized by Japan in 2003 under similar circumstances, remains an important consideration for U.S. exporters and Japanese importers," notes the group.

April beef export volume of 86,433 MT was down 9% from year-ago and export value was down 7% to $434.8 million. Year-to-date beef exports are 2% higher in terms of value despite a 5% drop in volume. April pork exports of 174,073 MT were down 5% from last year and were valued at $475.1 million, which is down 7% from year-ago. Year-to-date pork exports are down 10% from last year in terms of both volume and value.



MONSANTO SAYS TESTS CONFIRM COMMERCIAL WHEAT SEED GMO-FREE... Monsanto Co. today said broad testing of its commercial wheat seed in Oregon and Washington confirms it is free of GMO material. Specifically, the company said its investigation used its "CP4" test to examine 30,000 samples of 50 varieties, representing 60% of white wheat acres in Oregon and Washington. It said it found no presence of its Roundup Ready herbicide-tolerant trait, which Monsanto refers to as CP4.



U.S. CROP INSURANCE INDEMNITIES EDGE PAST $17.3 BILLION... Indemnities paid on 2012 crops have reached $17.316 billion under the federal crop insurance program as of June 3, according to Risk Management Agency data. The pace of increase has clearly slowed in recent weeks as remainders of 2012-crop data trickle into the system. The slow rise in payouts has kept the overall loss ratio for the program at 1.56 for three weeks in a row. The 2012 crop year is the first since 2002 where the loss ratio has been over 1.0 for the program.

In 2012, the prior record payout year, indemnities rose just under 1% from this point a year ago to the current level of $10.855 billion. If that holds true this year, indemnities for 2012 crops are not likely to rise much more -- only around $121 million, which would take total indemnities to $17.437 billion.

As for 2013 crops, USDA reports that 90.772 million net acres are insured, actually behind the year-ago pace for 2012 crops which stood at 91.984 million acres. Get more details.




CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. We are holding remaining old-crop supplies as gambling stocks in case new-crop supply concerns build. If July corn futures push above tough resistance in the $6.70 to $6.76 area, we look for a rally to at least $7.20 that would be a selling opportunity. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. Given the new-crop uncertainty, we feel there will be a better selling opportunity on a weather rally at some point during the growing season.

BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers now 90% priced on 2012-crop. Cash-only marketers should hold the remaining 10% as gambling stocks. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. The technical picture is bullish, so cash-only marketers should hold off on making additional new-crop sales unless November futures close below $13.00 and fall back into the long-term downtrend. Hedgers should stick with the 50% hedge in November soybean futures at $12.19 for now, but we'll cut our losses on an extended price pullback.

WHEAT: Hedgers and cash-only marketers are 100% sold on old-crop. For 2013-crop, the upside is limited for wheat futures with harvest approaching, but we're willing to wait out an overdue corrective rebound before making sales.

COTTON: Hedgers are 100% sold on 2012-crop in the cash market, with cash-only marketers 85% sold on old-crop. For 2013-crop, hedgers and cash-only marketers have 50% of expected production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton at 83.87 cents. Stick with the hedge for now as the trend in December futures remains down.

CATTLE: With live cattle futures remaining well below the cash market, we aren't interested in hedges for fed cattle producers. But the upside is limited by ongoing demand concerns. Feeder cattle buyers should also continue to carry risk in the cash market until there are clear indications of a low.

HOGS: Continue to carry all risk in the cash market as the technical picture continues to strengthen and market-ready hog supplies will tighten into mid-summer. The only real question mark is on demand and that should be helped by pork's relative cheapness to beef.

FEED: Continue to carry all feed risk in the cash market. Soymeal futures are rallying, but we don't want to chase the market higher at current price levels. For corn, a breakout above tough resistance at $6.76 in July futures would be a signal to extend coverage beyond hand-to-mouth.


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