CORDONNIER: ROAD CONDITIONS 'WORST EVER' IN MATO GROSSO... Pro Farmer South American crop consultant Dr. Michael Cordonnier is currently in Brazil and reports after driving hundreds of kilometers on the only asphalt highway through central Mato Grosso (BR-613), road conditions are the worst he's ever seen. He says some stretches of the road are "pothole after pothole" and traffic is slowed by heavy truck traffic in both directions, making it impossible to pass. Additionally, he says some of the highways have been converted to toll roads, further slowing down traffic and raising the cost transportation.
While Brazil is spending "like crazy" on infrastructure right now, according to Dr. Cordonnier, the money isn't going into road maintenance or improvements. Instead, Brazil is preparing for the 2016 Summer Olympics and for the World Cup to be held in June and July of 2014.
Also, laws that limit truck drivers in Brazil to eight hours of driving at a time that were designed to improve safety, are having unintended consequences. "The trucks are parked anywhere they can find space... parked at gas stations, along the side of the road, on city streets -- any place where there was enough room," says Dr. Cordonnier. "The unintended consequence is that drivers are now driving faster in order to make up for the time lost while resting. They are also taking extra risks like passing when they should not, all in order to make up lost time."
Bottom line according to Dr. Cordonnier: "Freight rates have increased significantly. It can now cost up to USD $120 per ton to transport soybeans to a port. In some parts of Mato Grosso, transportation can cost 25% to 27% of the price of soybeans. We were following some trucks yesterday that were dribbling soybeans out the back because the trucks were designed to haul dry goods and not soybeans. It was a constant dribble and you could hear the soybeans hitting our car... I am sure that truck is going to lose hundreds of pounds of soybeans during the five days or so it will take to get to the port. What a waste."
CORDONNIER RAISES BRAZILIAN CORN ESTIMATE... Dr. Cordonnier said he has never seen "this much safrinha corn planted in the state of Mato Grosso" and as a result he raised his Brazilian corn estimate by 2 MMT to 72 MMT. "I don't know where they are going to put it all when it comes time to harvest," he adds.
But he warns, "If the rainy season ends by late March or early April, then it would be very difficult for Brazil to produce 72 MMT of corn. If the rainy season in Mato Grosso is extended through May, then Brazil could produce maybe 76 MMT to 78 MMT of corn."
Dr. Cordonnier left his Brazilian soybean estimate unchanged at 82 MMT. He says a disappointing soybean crop in Mato Grosso is being offset by a "very good" crop in Rio Grande do Sul, which has received timely rains during pod-fill.
CORDONNIER LEAVES ARGENTINE ESTIMATES UNCHANGED... Dr. Cordonnier says weekend rains across Argentine helped fill pods and were good enough to minimize the downside for the crop. As a result, he left his soybean estimate unchanged at 50 MMT. Meanwhile, he says about 7% of the Argentine corn crop has been harvested and yields have been variable, ranging from 77 bu. per acre to 154 bu. per acre. He also left his Argentine corn estimate unchanged at 24 MMT.
SCORING OF FARM BILL PROPOSALS A 'GAME CHANGER'... Washington consultant Jim Wiesemeyer says last week's Congressional Budget Office (CBO) analysis of how the February CBO baseline affects scoring for last year's farm bill proposals by the Senate and House Ag Committees appears to be a "game changer" that will force many changes in the months ahead. It could also lead to a quicker end-zone for the farm bill, but one that is "far different" than its stakeholders envisioned in 2012. Congressional sources signal CBO's February baseline could be the one that lawmakers will use to score updated farm bill proposals rather than waiting on the March baseline -- primarily due to the Obama administration's failure to release its Fiscal Year 2014 budget proposals.
The 2013 version of the farm bill could be far different than the outdated and now too expensive 2012 version. Jim advises a combined revenue assurance and Supplemental Coverage Option (SCO) in Title I is too expensive and the dairy program has to be significantly changed to fit within budget constraints. Specifically, the Senate's proposed Ag Risk Coverage/shallow loss payments proposal could be in jeopardy.
"It is now clear that it was the proposed policy changes and their interaction that have been exposed to be wanting by CBO's updated scoring. It is also why some farm-state lawmakers and farm and commodity group lobbyists wanted to rush the farm bill's conclusion last year," says Jim. "The updated scoring is also why some of those lobbyists are either contemplating or changing their farm bill proposals and lobbying efforts. It also underscores the role Mother Nature can play as the price scenarios envisaged in the February CBO update are certainly higher than those projected a year ago which resulted in a more favorable baseline for the farm bills to be scored against. As always, there are still plenty of question marks with the out-year projections as there are with any long-run outlook scenario. But for now, these are the numbers farm-state lawmakers and commodity organizations have to work with." Click here for additional details.
CME TO REDUCE GRAIN TRADING HOURS APRIL 8... As we alerted you to in "First Thing Today," CME Group today announced in response to customer feedback and pending CFTC review, it will reduce Chicago Board of Trade (CBOT) grain and oilseed and the Kansas City Board of Trade (KCBT) markets from the current, continuous 21-hour schedule for trade beginning Monday, April 8.
Electronic (GLOBEX) and floor trading hours for CBOT corn, soybeans, wheat, soybean meal, soybean oil, rough rice, oats and KCBT wheat futures and options, plus all related CBOT and KCBT calendar spread options and inter-commodity spread options, will be amended as follows:
- Sunday to Friday, electronic trading from 7:00 p.m. to 7:45 a.m. CT
- Monday to Friday, break in electronic trading from 7:45 a.m. to 8:30 a.m. CT
- Monday to Friday, floor and CME Globex trading from 8:30 a.m. to 1:15 p.m. CT
Daily settlements will be based on market activity "at or around" 1:15 p.m. CT each day.
Mini-sized contracts of corn, soybeans and wheat will trade on CME Globex and on the floor until 1:45 p.m. CT.
DOW SETS NEW HIGH… The Dow Jones Industrial Average reached a new high of 14,286.37 and also posted a record-high close of 14,253.77, topping the previous high and high close that were each set in October 2007. The S&P 500 moved to its highest level since November 2007, but remains short of its record high.
A number of things could calm the rally, as the euro-zone debt crisis continues to linger and Congress remains at an impasse on its budget issues. But the Dow has already rallied 9% since the start of the year and the strong start is often a signal there's more room to the upside ahead.