Evening Report (VIP) -- March 6, 2013

March 6, 2013 08:53 AM
 

MILD FINE TUNING EXPECTED IN MARCH S&D REPORT... Traders don't expect USDA to make any dramatic changes to the demand side of its balance sheets in Friday's Supply & Demand Report, which will be released at 11:00 a.m. CT. But pre-report preparations suggest they are guarding against a bearish surprise.

2012-13 carryover

Avg.

Range

USDA Feb.

2011-12

in billion bushels

Corn

0.649

0.627-0.750

0.632

0.989

Soybeans

0.122

0.107-0.131

0.125

0.169

Wheat

0.713

0.671-0.754

0.691

0.743

 

Due to recent lackluster export demand, traders expect USDA to trim corn and wheat usage slightly from last month. As a result, traders look for USDA to raise 2012-13 corn carryover by around 17 million bu. from last month to 649 million bu. and for wheat carryover to climb by around 22 million bu. to 713 million bushels. Meanwhile, 2012-13 soybean carryover is expected to tighten by around 3 million bu. To 122 million bu. due to the U.S. soybean export season lasting a longer than anticpated.

Meanwhile, traders look for USDA to tighten its global 2012-13 corn carryover projection slightly to 117.87 MMT (131.01 MMT in 2011-12), for global soybean carryover to tighten slightly to 59.58 MMT (55.25 MMT last season) and for global wheat carryover to decline modestly to 176.69 MMT (196.54 MMT in 2011-12).

 

 

ATTACHE TRIMS BRAZILIAN CROP ESTIMATE, NOTES SHIPPING DELAYS... The U.S. ag attache in Brazil lowered its forecast of the country's soybean crop to 82.5 MMT, which is 1 MMT below USDA's current projection but would still represent a record crop. The attache says the reduction comes due to dry conditions during pod fill in Bahia and Mato Grosso do Sul.

The attache also notes shipping delays at Brazil's "deficient" ports. It reports "loading wait times reaching 50 days at the second largest grain port located in the state of Parana and could reach 60-day wait times over the next few months mirroring the longest wait times of past years."

The attache expects Brazil's 2012-13 soybean exports to reach a record 39 MMT but says labor strikes by port workers, currently suspended until March 15, are adversely affecting the rate of exports of the record soybean crop. Click here for more.

 

 

WEEKLY ETHANOL PRODUCTION DECLINES SLIGHTLY... The Energy Information Administration reports ethanol production the week ended March 1 of 805,000 barrels per day (bpd), which is down 7,000 bpd from the previous week -- reversing a trend of four consecutive weeks of increased production. However, ethanol output was still above the four-week average of 801,000 bpd. U.S. ethanol stocks declined marginally last week to 19.4 million barrels -- the lowest since the week ended Nov. 30.

 

 

POET BIDS FOR WHEAT AS CORN SUPPLIES SHRINK... In a rare move, POET Biorefining is bidding for SRW wheat in Indiana due to tight corn supplies. May corn futures ended the day at a 4 3/4-cent premium to May Chicago wheat futures. The discount structure wheat now holds to the corn market makes wheat a more attractive alternative feedstock. History suggests corn will not remain at a premium to wheat for a lengthy amount of time, but the supply situation is anything but "usual." According to POET's website, its Portland, Indiana, ethanol facility is bidding $7.39 for corn for immediate delivery and $6.79 for wheat.

 

 

HOUSE PASSES BILL TO FUND GOVERNMENT PAST MARCH 27... The 267-151 vote in the House sends the measure to the Senate where a bipartisan coalition hopes to expand on the package next week and give other Cabinet departments the same relief the House bill promised to the Pentagon. Fifty-three Democrats voted for the measure, while 14 Republicans voted against it. Democratic appropriators raised several objections to the House CR, including that it didn't provide a requested $75 million increase for the Women, Infants and Children nutrition program even as it increased spending on farm operating and ownership loans. Democrats also cited the bill's failure to provide the Commodity Futures Trading Commission an additional $103 million to implement Dodd-Frank regulations. Democratic lawmakers opposed to the bill complained that it locks in the $85 billion sequester, highlighting potential obstacles the bill will have in the Senate. Senate Democrats have indicated they will produce their own CR bill.

 

 

PF MIDWEEK MARKETING GAME PLAN UPDATE...

CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Given tight supplies, wait to get current with recommended old-crop sales levels. For 2013-crop, we are too light on coverage as no sales/hedges have been advised. Be prepared to make initial cash sales if Dec. corn futures rebound to the $6.00 level or to enter defensive hedges if the contract shows an inability to bounce as attitudes are negative and we feel there's more near-term price risk.

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 when the current rally shows signs of running out of steam. We are wanting to start 2013-crop marketings, but new-crop futures are showing just enough resiliency to keep us from starting new-crop marketings yet. But be prepared to make initial cash sales on a rebound to $13.50 in Nov. soybean futures or to add defensive hedges if the contract violates support at the November lows as that would open the door for the next leg lower in prices.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. There's more near-term downside risk as HRW crop concerns have eased amid increased precip in the Plains. But we're hoping to get an overdue bounce before starting 2013-crop marketings as the market is oversold. Be prepared to hedge/sell a corrective bounce.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold in the cash market. We'll wait on signs the current rally has run out of steam before advising increased old-crop sales and initial new-crop sales/hedges.

CATTLE: Demand concerns continue to hang over the cattle market. Because tightening supplies limit downside risk, fed cattle producers should continue to carry all risk in the cash market. Feeder cattle buyers should be ready to add long hedges on strong signs of a low.

HOGS: Attitudes are bearish amid demand concerns, which could lead to more near-term price pressure. But don't chase the market lower with hedge coverage as the downside is heavily overdone. And eventual upside correction will likely be overdone to the upside.

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.

 

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