Evening Report (VIP) -- March 20, 2014

March 20, 2014 10:15 AM

Cattle on Feed to show Placements above year-ago... According to pre-report expectations, traders agree the Placements category will come in above year-ago levels, but the range of guesses (102.2% to 118.2% of year-ago) is wide. Therefore, this figure will likely hold the "read" on the report. According to the average of all guesses, traders look for On Feed to come in at 98.9%, Placements at 109.7% and Marketings at 97.0% of year-ago levels.

Report expectations

Avg. Trade Guess


% of year-ago levels

On Feed










Throughout 2014, the On Feed category should remain below year-ago levels due to tight supplies. But despite tight calf supplies, feedlots are thought to have placed animals at a more aggressive pace than last year due to ongoing drought in the Plains and record cash steer prices.


Obama announces new sanctions on Russia, threatens more... President Barack Obama today announced new sanctions targeting additional senior officials and influential businessmen in Russia as well as a bank that financially supports allies of Russia's President Vladimir Putin. Obama also said he has signed a new order that would permit him to sanction "key sectors of the Russian economy." The president said he would take these steps if Russia escalated the crisis in Ukraine, but he warned they would have repercussions to the global economy. These sanctions could be aimed against Russia's energy, metals and mining, financial services, engineering or defense sectors.

Meanwhile, Russia has made some retaliatory moves of its own. It issued visa bans on nine U.S. congressional and administration officials. The list includes House Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.).


Drought improvement expected across Midwest... The U.S. Drought Monitor reflects just over half of the contiguous U.S. is covered by some form of drought, which is a minor improvement from the previous week. But if the Seasonal Drought Outlook is accurate, that percentage will continue to decline. The National Weather Service's Climate Prediction Center (CPC) says the removal of drought is "likely" across the eastern portions of Nebraska, Kansas, Oklahoma and Texas, as well as in drought areas of the central Midwest.

The CPC says drought will linger but improve across central and western Nebraska and much of Kansas, but it says drought will "persist or intensify" across southwest Kansas, western Oklahoma and central and western Texas, as well as across the Southwest and much of the West, noting it used the current neutral state of ENSO in the forecast, with a gradual transition to a "borderline El Nino by the end of the period."

The CPC says its forecast guidance for this timeframe is "low to moderate" for the Plains and Midwest but three to six inches of rain are needed in the drier Texas Panhandle to end the current drought. The odds of drought improvement or removal rapidly diminish westward across the High Plains, according to CPC.

For the Midwest, the CPC says ongoing below-normal temps have resulted in what seems like a long winter and "from about central Iowa northward, soils are frozen down to 5 feet in some locations. Like last April, this frozen soil will take a while to thaw, especially given the cold temperature outlook for the next few weeks, which will delay planting in this region," it states. Click here for related maps.


Spring outlook provides little precip guidance... The National Weather Service's Climate Prediction Center (CPC) provided little precip guidance in its outlook for spring. It calls for equal chances of normal, below- or above-normal precip through June across the Corn Belt and Plains. But the 90-day outlook signals below-normal temps will maintain their hold on the Northern Plains and Upper Midwest -- raising concern about the start of spring planting... Meanwhile, above-normal temps will increase moisture needs across the South and West, including southern Kansas, Oklahoma and Texas, where winter wheat conditions slipped through the winter. Click here for the maps.

Meteorologist Gail Martell of MartellCropProjections.com says historically, the worst corn yields have occurred from very wet springs, not cold springs. "In 1978 and 1978, a bitter cold winter, similar to this year, was followed by cold spring temperatures," she says. "However, a favorable corn yield was obtained in both years. A soggy seed bed would be the worst-case scenario for spring corn planting because it would lead to a shallow root system."


'Minor to moderate' spring flood potential for Northern Plains/Midwest... The National Oceanic and Atmospheric Administration (NOAA), in its most recent flood outlook said the continuation of winter weather, above-average snowpack, frozen ground and thick ice coverage on streams and rivers will delay spring flooding into April in the upper Midwest. It says the risk of spring flooding is "minor" to "moderate" for the Northern Plains and much of the Midwest. Click here for more.


Crop insurance indemnities over $11.4 billion for 2013 crops... Crop insurance indemnities for 2013 crops have reached $11.434 billion for the week ended March 17, according to Risk Management Agency (RMA) data. The data reflect an increase in payouts of just over $100 million compared to the prior week, with the loss ratio edging up to 0.97. Despite continuing to rise, both total payouts and the loss ratio remain behind the 2012 crop year when indemnities were a record $17.431 billion. The loss ratio for 2012, at 1.57, was the highest since 2.19 registered for the 1993 crop year. Get more details.

Looking ahead, net acres insured are expected to rise significantly for 2015 crops as farmers will have two new farm bill, crop insurance related options -- the Stacked Income Protection Program (STAX) for cotton and the Supplemental Coverage Option (SCO) available to those participating in the Price Loss Coverage (PLC) commodity program.


Yellen's comments spook Dow, though the markets overreacted... Remarks by Fed Chairwoman Janet Yellen the Fed would end its asset purchase program in the fall of 2014 and that interest rates could rise perhaps six months after that program ends prompted a major swoon in the Dow Jones Industrial Average yesterday. But the market did not initially "hear" the portion of Yellen's response where she echoed the Fed's mantra that any moves on interest rates or the tapering of asset purchases will be dependent on the economic conditions. The selloff in the Dow may also be due to market participants interpreting "next fall," which she later clarified as fall 2014, as being fall 2015. This would have been later than most anticipated.

Yellen has now found out what happens when comments by a Fed Chair appear to stray from the position outlined in the FOMC statement. While attempting to caution that Fed moves in the future will be dictated by economic data, her putting what markets perceived as specific timelines down helped to foster the market drop. Veteran Fed watchers say the markets overreacted to Yellen's comments, but they also note she should have been more cautious with her comments on interest rate hike timing. Get more details about her comments and the market's reaction to them.


Rate of increase in value of Illinois farmland values flattens... Following trends seen in other Midwestern states, the value of Illinois farmland posted minor decreases in 2013, according to the annual survey conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers. According to the survey, excellent-quality land slipped 2% by the end of 2013 compared to the end of 2012. Survey respondents noted that while values slipped slightly, there was less land available for sale but very willing buyers. Good land was down 3%, average-quality land fell 4% and fair-quality land was down 7%. Recreational land is listed as steady to stronger across the state. In addition, the survey found cash rents have stabilized. Click here for more.

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