Evening Report (VIP) -- March 18, 2014

March 18, 2014 10:13 AM
 

Brazil soybean exports off to a better start than year-ago... Brazil has improved in getting soybeans shipped this year, though lines and wait times remain lengthy, according to South American Crop Consultant Dr. Michael Cordonnier. SA Commodities reports that as of late last week, 104 vessels were waiting at the ports of Santos, Paranagua, Rio Grande and Sao Francisco do Sul, which is an improvement from a 131-vessel lineup last year. But while the lines are shorter, wait times remain lengthy. Cordonnier elaborates that the average wait time to load soybeans or soymeal is 53 days at the Port of Paranagua and 21 days at the Port of Santos.

He says two major factors propelled early soybean exports from Brazil: "reduced volumes of corn exports and dryer weather." As a result, Brazil was able to export a monthly record 2.8 MMT of soybeans in February. Cordonnier says that during the month of March, soybean exports could surpass 5.5 MMT.

Another contributor to better bean exports this year is improvements at the Port of Rio Grande in southern Brazil. The port added five berths for loading beans and it is planning to add two more by 2017. This helped the port surpass the Port of Paranagua last year as the second largest soybean exporting port in Brazil, Cordonnier notes.

 

Cordonnier lowers Brazil soybean crop estimate... Cordonnier lopped another 1 MMT off his 2013-14 soybean production estimate, bringing it to 86.0 MMT. He has a neutral bias going forward. Cordonnier says Conab's "surprising" large cut to its bean crop estimate (to 85.4 MMT) forced him to reevaluate his crop peg, though he feels the agency was overly pessimistic. "It is unclear how safrinha soybean production entered into Conab's latest soybean estimate and it is possible that Conab's estimate may increase once the safrinha soybeans are fully accounted for," Cordonnier explained.

He also noted, "lower-than-expected yields are being reported in many areas of Brazil" due to hot, dry conditions earlier in the season in some areas and wet weather during harvest in parts of Mato Grosso. Cordonnier noted his estimate could decline further if dry weather persists in northeast Brazil, especially in Bahia.

Cordonnier also referenced Conab in his decision to leave his 2013-14 Brazilian corn crop estimate unchanged at 68.5 MMT. Conab lowered its full-season corn crop estimate but raised its safrinha crop peg. Cordonnier believes safrinha corn plantings will not be as large as Conab indicated. Plus, he notes that much of the safrinha corn crop was planted after the ideal planting window closed; therefore, the crop will need an extended rainy season to realize Conab's yield projections. He sees this as unlikely. Cordonnier has a neutral bias toward his corn crop estimate going forward.

 

Cordonnier leaves Argentine soybean and corn crop pegs unchanged... Cordonnier left his Argentine soybean production estimate unchanged at 54.0 MMT this week as he says weather has improved this month and the bean crop responds well to favorable late-season conditions. Some areas of Argentina have seen excessive rain, but Cordonnier notes that the near-term forecast is dryer, which would minimize losses. He has a neutral bias toward the Argentine bean crop going forward. Soybean harvest is just getting started in the country; if the weather cooperates, harvest will pick up at month's end, according to Cordonnier.

Corn harvest efforts in Argentina have been slowed by wet conditions in central Argentina, according to Cordonnier. Harvest is estimated at 4% complete versus 12% last year at this time. Meanwhile, late-planted corn in Argentina is in good condition thanks to ideal weather in February and March. Cordonnier left his Argentine corn crop peg at 23.0 MMT with a neutral bias. But he did note "improved weather in northern Argentina could eventually result in a slightly higher estimate, whereas continued wet weather in central Argentina might result in a slight trimming of the corn yield."

 

Brazil soybean production estimates continue to fall... Abiove, Brazil's crushing association, slashed its soybean production forecast by 2.5 MMT today to 86.1 MMT, which brings the estimate in line with other forecasts for the country. USDA's latest crop peg for the region is higher than most at 88.5 MMT. The association also trimmed its soybean export forecast by 500,000 MT to 44 MMT, citing a slight decline Chinese demand. However, both the export and production figure, if realized, would be an increase from last year.

 

Farm bill Q&As: Crop Insurance... USDA's Risk Management Agency (RMA) provided the following is a list of question and answers for crop-insurance provisions in the Agricultural Act of 2014. For more details, click here.

  • What exactly is the Supplemental Coverage Option (SCO)? SCO is a county level revenue or yield-based optional endorsement that covers a portion of losses not covered by the deductible of the same crop’s underlying policy. Indemnities will be payable once a 14% loss has occurred in the county, and individual payments will depend upon coverage levels selected by producers. The premium subsidy is 65%. Producers may not enroll a crop in both SCO and Agricultural Risk Coverage (ARC), which is offered by the Farm Service Agency (FSA). However, producers may participate in both SCO and Price Loss Coverage, another program administered by FSA.
  • What if I decide I want to enroll into the ARC program after I've selected SCO coverage for winter wheat? Producers who enroll their winter wheat in SCO may elect to withdraw from SCO prior to their acreage reporting date without any penalty. This allows producers additional time to make an informed decision related to whether to enroll in the Agriculture Risk Coverage (ARC) or the Price Loss Coverage (PLC) program. If they choose ARC, they will not be charged a crop insurance premium so long as they withdraw from SCO prior to their acreage reporting date.
  • Will I be able to purchase SCO for the 2015 crop year? It depends. RMA is making every effort to offer SCO to as many producers as possible. SCO will be available for corn, grain sorghum, rice, soybeans, spring wheat and winter wheat in selected counties for the 2015 crop year. Program details and eligible counties will be made available in the early summer of 2014.
  • Is there anything available for Whole Farm policy coverage? Approval of a new whole farm policy is currently undergoing the process to attain the FCIC board approval. Pending approval, producers might be able to enroll in the spring of 2015. It would be a pilot program limited to certain geographic regions.
  • What exactly is the Stacked Income Protection Plan for Producers of Upland Cotton (STAX)? STAX protects against county-wide revenue losses and can supplement a producer’s underlying cotton policy or be purchased as a standalone policy. Producers can elect coverage of up to 20% of expected county revenue, depending on the coverage level of their individual cotton insurance policy. STAX payments begin when county revenue falls below 90% of its expected level. The premium subsidy for this coverage is 80%. Any acres covered by a STAX policy may not be covered by a SCO optional endorsement.
  • Will I be able to purchase STAX for the 2015 crop year? It depends. RMA is making every effort to offer STAX to as many producers as possible. STAX will be available in selected counties for the 2015 crop year. Program details and eligible counties will be made available in the summer of 2014.
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