Evening Report (VIP) -- March 15, 2013

March 15, 2013 09:54 AM

METEOROLOGISTS GENERALLY AGREE SPRING PLANTING DELAYS AHEAD... We talked to five meteorologists this week to get their spring and summer (if they were willing to go out that far) weather forecasts. They are in general agreement there will be spring planting delays based on the recent active weather pattern. Following are details:

World Weather, Inc. Meteorologist Drew Lerner says frequent rains will continue through the first half of April across the central and eastern Corn Belt, but drier- than-usual conditions will continue in South Dakota and Nebraska. By late spring, he expects above-normal precip across the bulk of the Corn Belt and Plains and a return to a more normal weather pattern this summer. But the problem with a "normal" summer weather pattern is subsoil moisture is currently lacking in Nebraska, South Dakota, western Iowa and southwest Minnesota. "We will see crop moisture stress, but it’s not because of a stressful weather forecast, it’s because last year’s drought depleted soil moisture," says Lerner, who says he expects slightly below-trendline yields.

Kyle Tapley, senior agricultural meteorologist at MDA Weather Systems, says the recent weather pattern is a dramatic shift from last year at this time, leading to expectations the Midwest planting season will not start early. But while his forecast is for above-normal precip across most of the Corn Belt through April, he says conditions will change in May, leading to an improved planting pace. "As we move closer to summer, we think it will be warmer across the eastern half of the country and drier in the western Corn Belt where the drought is already in place," says Tapley. "Drought across that region seems to feed on itself. What we’ve found in analog years following a major drought is conditions not as extreme as the previous year, but trending drier, especially across the Plains and western Midwest."

Meteorologist Gail Martell of MartellCropProjections.com says while the Climate Prediction Center (CPC) forecasts ENSO-neutral conditions will linger into summer, she sees an emerging wet El Niño effect for the heartland. "We’ve seen this pattern for several weeks, so whether it continues or not is what we don’t know and is key for crops this spring and summer," she says."Right now the El Niño signal is bouncing back and forth, but still building. But we don’t need a full-fledged El Niño to get El Niño-type weather. As long as the El Niño pattern continues, we can expect cooler- and wetter-than-normal weather from spring into summer," she says.

Iowa State University Climatologist Elwynn Taylor says there are some hopeful clues for improved soil moisture based on recent weather trends, but he doesn’t expect western Corn Belt soil moisture to be fully replenished by planting time. He says 2012 was the first year of a 25-year cycle of volatile weather, which features more variability between excellent and disastrous years. The big question then is "what follows a major drought?" He says the years preceding and following the last five major droughts (including 1988) saw below-average precip. "When you have this low of precip, it doesn’t seem to go back to normal in one year," he says. Based on this observation, Taylor says we should expect better rainfall than last year, but for the drought in the western Corn Belt to remain in place in some form. As a result, he says 147 bu. per acre is a good starting point for a national average corn yield estimate.

Freese-Notis Meteorologist Dan Hicks says based on his firm’s spring forecast — below-normal temps across the bulk of the Corn Belt, above-normal precip from eastern Kansas into Missouri and southeast Iowa through much of the Ohio Valley and for normal precip further north and east — most of the Midwest will have sufficient moisture to get crops started. Hicks says there is a consistent trend for an increase in corn yields following an extreme drought, which leads to the assumptions conditions will be closer to normal this summer. "The big question is will there be enough summer moisture if rainfall is slightly below normal for a period because of the lingering drought in the western Corn Belt," he says.



HURDLES AHEAD FOR U.S. CORN EXPORTS... Corn industry sources signal South American corn has made significant inroads in several Asian markets, especially South Korea. Reason: Their plants have recalibrated equipment to better utilize South American corn and they like the price. U.S. trade missions are on their way to Asia in an attempt to boost trade in these countries.

Also, news that Japan plans to import a record 1.07 MMT of feed wheat in 2013-14 (April-March) -- an increase of 20% -- could further curb demand for U.S. corn.

PF PERSPECTIVE: "Short crop, long tail" may be a catchy phrase, but it refers to demand destruction caused by prices spiking (in this case sharply for corn due to the 2012 drought) and slowing demand for an extended period of time. Due to high prices and tight U.S. supplies, end-users are looking for alternatives and it takes time and lower prices to rebuild demand.



JAPAN ASKS TO JOIN TPP NEGOTIATIONS... Today, Japanese Prime Minister Shinzo Abe made a request to joint Trans-Pacific Partnership negotiations between the U.S. and other TPP countries. Japan is currently the fourth largest market for U.S. food and ag products, accounting for $13.5 billion in U.S. exports in 2012. The National Pork Producers Council today urged the involved countries to quickly accept Japan's proposal as Japan is the top value export market for U.S. pork. In 2012 it accounted for nearly $2 billion in sales. A former Japanese government advisor on farm policy has said Japan may sacrifice tariffs on beef and wheat imports as the country joins the talks. The elimination of the 38.5% tariff on beef and the 252% tariff on wheat could represent major export opportunities for the United States.



SUGAR POLICY UNDER FOCUS... USDA is reportedly considering buying 400,000 MT of sugar in order to boost prices to keep processors from defaulting on government loans, according to a Wall Street Journal article Tuesday that quotes a USDA sugar career analyst. The sugar would then be sold to U.S. ethanol producers, likely at a loss of $80 million. But USDA contacts have stressed no final decision has been made and that several other options are under consideration.

The potential for some (and potentially a large number of) sugar loan forfeitures is real, especially with current sugar price levels and the feeling among many in the sugar industry that the free-fall is not complete.

From a farm policy standpoint, the sugar loan forfeiture issue comes at a bad time for sugar policy proponents who have argued for years about their "no net cost program." But sugar policy proponents note that any option announced to avoid sugar loan forfeitures would be minuscule compared with the around $4.8 billion paid out this year via direct payments to corn, soybean, wheat, cotton and rice growers. Click here for more details.

PF PERSPECTIVE: There is a legitimate need to have a sugar program safety net -- especially for times when prices plummet. Sugar users have a legitimate reason for wanting a more balanced policy, but many say their arguments would be better directed at what largely causes the U.S. sugar program -- other countries' use of subsidies and so-called "dump" prices.



PF VIDEO: WEATHER CONTRIBUTES TO PRICE VOLATILITY FOR NEW-CROP CONTRACTS... Pro Farmer Senior Market Analyst Brian Grete and News Editor Julianne Johnston discuss price volatility for new-crop corn and soybean contracts associated with weather on AgDay. Click here to view the video clip.


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