Evening Report (VIP) -- March 26, 2013

March 26, 2013 09:41 AM
 

TRADERS PREPARE FOR KEY USDA REPORTS... USDA's much anticipated Prospective Plantings Report will be released Thursday at 11 a.m. CT. USDA will also issue its Quarterly Grain Stocks Report that day. The report data will provide some potential market-moving data for both old- and new-crop futures, as the Quarterly Grain Stocks Report will give a snapshot of usage for corn, beans and wheat, while the Prospective Plantings Report will turn more attention to 2013-crop prospects.

Prospective Plantings
Avg.
Range
2012
in million acres

Corn

97.3
96.8-98.0
97.2

Soybeans

78.5
77.5-80.0
77.2

All wheat

56.4
56.0-57.2
55.7

Spring wheat

12.5
11.9-13.8
12.3

Durum

2.1
2.0-2.3
2.1

Cotton

10.08
9.0-11.0
12.32

 

Surprisingly, traders are looking for corn planted acreage to be in line with year-ago levels, with soybeans seen gaining around 1.3 million more planted acres than last year. We say we're surprised by this expectation as traders have been talking about an increase in corn acres through winter. The pre-report expectations signal traders expect a return to a more normal crop rotation as some producers have been disappointed by corn-on-corn acres.

Grain Stocks

Avg.
Range

Dec. 1, 2012

Mar. 1, 2012

in billion bushels

Corn

5.030

4.916-5.248

8.030

6.023

Soybeans

0.947

0.912-1.059

1.966

1.374

Wheat

1.167

1.010-1.238

1.660

1.199

 

USDA's Quarterly Grain Stocks Report will reflect first-half corn and soybean use, giving an account of "what's left" of drought-impacted 2012 crops for the remainder of 2012-13.

 

 

CONSULTANT SEES HIGHER CORN AND SOYBEAN ACRES... Crop consultant Dr. Cordonnier says he expects 2013 planted corn acres to be 98.5 million and planted soybean acres of 78.7 million. Given recent weather, Dr. Cordonnier puts odds of a "normal" planting season at 50-50. And if the weather pattern doesn't moderate by April 10, then some spring planting may occur outside the normal planting window.

 

 

BRAZIL'S EXPORT SEASON COULD EXTEND INTO DECEMBER... South American crop consultant Dr. Michael Cordonnier says based on the inability of Brazilian ports to handle this year's record crop, the country's shipping season could extend much longer than normal and possibly last into December or longer. He says according to Brazil's Exterior Commerce Secretary, from the first of the year through mid-March, 4.1 MMT of soybeans were exported from Brazil compared to 4.9 MMT last year. "There are no more berths this year compared to last year at the two main ports in Brazil -- Paranagua and Santos -- so there is a limited ability to increase the export pace," he says.

"Additionally, Brazil could also produce a record large corn crop this year and corn exports could compete for space at the Brazilian ports which could extend the soybean export season even further," adds Dr. Cordonnier. "Certainly, the U.S. is going to face export competition from Brazil this fall for both soybeans and corn."

 

 

WILD TEMP SWINGS PUT HRW WHEAT TO THE TEST... The Texas state crop report says both warm temps and frost were seen last week, while precip was lacking. Frost/freeze damage is a concern as the wheat crop is jointing and some is heading. Damage from the freeze event to Kansas wheat will be more isolated as just 5% was jointed as of Sunday, while 41% of the Oklahoma crop was jointed. Click here for state-by-state crop and weather comments. USDA's national weekly crop condition and progress reports begin on Monday, April 1.

 

 

RECORD-LARGE CROP INSURANCE INDEMNITIES DON'T INCLUDE GRIP PAYOUTS... In "First Thing Today" we reported indemnities for 2012 crops topped $16 billion as of March 25 according to Risk Management Agency data. Meanwhile, Group Risk Income Protection (GRIP) payouts have yet to be made. These indemnities could be substantial for corn in Illinois and Indiana, where 37% and 27% of GRIP policies for 2012 were sold, respectively.

GRIP is billed as a risk-management tool to insure against widespread loss of revenue from the insured crop in a county. Its primary intended use is for producers whose yields are highly correlated with those of other producers in the county and who wish to insure that the combination of yield and price result in a particular level of revenue.

Unlike the Group Risk Plan (GRP), it is not necessary to have a decline in yield to be indemnified, so long as the combination of price and yield results in a county revenue that is less than the trigger revenue. It is possible for producers to receive reduced revenue from the acreage that they insure and still not receive a payment under this plan. GRIP coverage can be enhanced if the producer selects the Harvest Revenue Option (HRO, also identified as GRIPH), which provides upside harvest price protection when the final county yield is less than the expected county yield and the harvest price is greater than the expected price. Learn more.

 

 

PF MIDWEEK MARKETING GAME PLAN UPDATE...

CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Use the recent price recovery to get current with recommended 2012-crop cash sales. But given tight supplies, we're willing to hold onto remaining old-crop supplies for cash-only marketers for now. For 2013-crop, be prepared to make cash forward contract sales and/or add hedge coverage ahead of USDA's reports Thursday.

BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Get current with advised old-crop sales as there is risk of near-term price pressure as the export season is winding down. But given tight supplies, cash-only marketers should continue to hold some old-crop soybeans in the bin. Be prepared to start 2013-crop marketings with cash sales and/or hedges ahead of USDA's reports on Thursday.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Use the price recovery to get current with advised old-crop sales. Be prepared to make 2013-crop sales when the corrective rebound runs out of steam.

COTTON: Hedgers are 100% sold on 2012-crop in the cash market, with cash-only marketers 85% sold on old-crop. Get current with recommended old-crop sales. Hedgers and cash-only marketers have 25% of expected 2013-crop production sold via cash forward contract for harvest delivery. Be prepared to make additional new-crop sales if December cotton futures signal a major market top is in place.

CATTLE: Demand concerns are making it difficult for live cattle futures to put in a low. But the downside is also limited by tightening supplies. Fed cattle producers should continue to carry all risk in the cash market. The sharp price break will eventually present an opportunity for feeder cattle buyers to cover a portion of upcoming needs, but we'll wait on signs of a bottom before advising long coverage.

HOGS: Lean hog futures are showing some indications a low may have finally been posted. But demand concerns continue to hang over the market. Once futures definitively put in a low, we expect a strong price recovery as the downside was overdone. Continue to carry all risk in the cash market.

FEED: 25% of 2nd-qtr. corn needs are hedged in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs are hedged in long July soybean meal futures at $388.00. Be prepared to take profits at any time.

 

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