Evening Report (VIP) -- March 6, 2014

March 6, 2014 08:52 AM
 

Still no major soybean sales cancellations... This morning's USDA Weekly Export Sales Report confirmed China has not yet made any significant soybean sales cancellations. In fact, the report showed sales of 772,700 MT for 2013-14, which included sales of 469,100 MT for unknown destinations and decreases of 268,300 MT for China (already known by the market). Weekly soybean exports neared 1.2 MMT, with China accepting 645,000 MT of beans the week ended Feb. 27.

With 26 weeks left in the marketing year, USDA reports total soybean bookings are running 27% ahead of year-ago and total commitments as a percent of total exports are at an astonishing 107%. Also impressive and possibly the most telling figure from USDA's weekly export performance indicator data is that accumulated exports as a percent of total exports stand at 90%.

USDA reports that there are still 2.342 MMT (86 million bu.) of outstanding sales to China that have not yet been shipped. Meanwhile, accumulated exports for China are at nearly 25.5 MMT, up from 20.2 MMT this time last year. Click here for a summary of the Weekly Export Sales Report.

 

NOAA: 50% odds of El Niño developing by summer/fall... The National Oceanic Administration (NOAA) says ENSO-neutral conditions continued during February, but adds there is about a 50% chance of El Niño developing during the summer or fall. NOAA says ENSO-neutral conditions are expected to continue during spring, but with all models predicting warming in the tropical Pacific, there is "considerable uncertainty" as to whether El Niño will develop during the summer or fall.

The consensus forecast is for ENSO-neutral to continue through the Northern Hemisphere spring 2014, with about a 50% chance of El Niño developing during the summer or fall, states NOAA.

It's been documented that odds of trendline or above yields are more likely when El Niño is present. As a result, the timing of an El Niño event will be key and forecasters will be watching for those El Niño "signals."

 

Drought monitor shows slight improvement... According to the National Drought Monitor, 53.5% of the contiguous U.S. is impacted by some form of drought, which is down from 54% last week. Slight improvement was reported across all the drought regions of the country, with the most notable improvement across the South, which saw a 2% reduction in the area covered by drought. Click here for more.

 

Fuel standards latest blow to ethanol... The Environmental Protection Agency's (EPA) Tier 3 gasoline standards are one more obstacle the ethanol industry faces for expanding the biofuel's U.S. market. EPA’s final rule would limit the amount of ethanol in gasoline the agency certifies to 10%. EPA had earlier proposed making the test fuel E15, and the agency's initial proposal would have permitted car manufacturers to seek approval for higher fuel blends like E30. EPA explains the "shift in in-use fuel is not materializing as quickly as expected, and E10 continues to be almost universal today." Paring back the test fuel ethanol content to E10 will relieve pressure on automakers to equip their cars to run on the higher blend.

The decision by EPA on the Tier 3 fuels comes as the agency is in the process of finalizing its Renewable Fuels Standard (RFS) levels for 2014. EPA proposed reducing the overall RFS level for total renewable fuels to a range of 15 billion to 15.52 billion gallons versus the mandated level of 18.15 billion gallons. The mandate would have included 14.4 billion gallons of corn-based ethanol, but EPA's plan would reduce that to a range of 12.7 billion to 13.2 billion gallons. There has been some talk EPA may revise its 2014 RFS proposal. Washington sources indicate that any change to the corn ethanol mandate would be minor -- perhaps to 13.5 billion gallons. Get more details and reactions here.

 

Attaché trims Paraguay soybean crop, leaves Argentine unchanged... The U.S. ag attaché in Paraguay has lowered its estimate of the country's soybean crop to 8.1 MMT, 1.2 MMT lower than USDA's current estimate. The report says while above-average yields were reported at the start of harvest, stress from extreme heat to later-planted soybeans is now apparent. It says yields from the last quarter of the harvested crop will be "well below average."

The attaché expects Paraguayan soybean area to increase by 3% in 2014-15 and production to reach a record 8.7 MMT.

Meanwhile, the attaché in Argentina has left the estimate of the country's soybean crop unchanged at 54 MMT. It says rains during February "put the brakes on some of the damage" done by the dry weather and high temperatures during December and January. "However, there are still areas in western and southern parts of the Buenos Aires province where the majority of the second-crop soybean crop is planted that are still suffering from dry conditions. Some of the second-crop soybeans planted in these areas will not recover, while some were never planted to begin with. The onset of excessive moisture could cause problems with weeds, fungus and insects," states the attaché.

Also today, the Buenos Aires Grain Exchange raised its peg of the Argentine soybean crop by 1.5 MMT to 54.5 MMT.

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