NWS 6-10 DAY SIGNALS EXTENDED PLANTING DELAYS ACROSS LARGE SECTION OF MIDWEST... The National Weather Service (NWS) forecast for May 28-June 1 calls for above-normal temps across the Plains and Midwest that will give planted crops a boost in development, but the precip forecast signals planting delays will be extended across the Upper Midwest. The forecast calls for above-normal precip across the Dakotas, Minnesota, Wisconsin, Michigan and much of Iowa, as well as the northern half of the eastern Corn Belt. Below-normal precip is expected across the Central and Southern Plains, with normal precip expected across Nebraska. Click here for related maps.
RECORD PORK STOCKS; BEEF STOCKS TIGHTER THAN EXPECTED... This afternoon's Cold Storage Report revealed pork stocks at the end of April were heavier than expected at 698.8 million lbs., which easily topped expectations of 658.5 million lbs. and were record-large for the month. Frozen pork stocks rose 8% from last month and are 6% higher than year-ago.
Total beef stocks came in tighter than expected at 510 million lbs. Traders expected beef stocks at 517.7 million pounds. Beef stocks declined marginally from the previous month and are down 2% from year-ago levels.
Total poultry stocks rose 11% from last month and are up 8% from year-ago levels at 1.130 billion pounds.
Combined total red meat and poultry stocks of 2.366 billion lbs. signal there are plentiful supplies available for the summer grilling season.
ETHANOL PRODUCTION CLIMBS... Old-crop corn futures were bolstered today by another increase in weekly ethanol production given the tight 2012-crop supply situation. The Energy Information Administration reports for the week ended May 17, ethanol production of 875,000 barrels per day (bpd) was the highest since late June 2012. The tally represents an 18,000-bpd increase from last week for an annualized production rate of 13.15 billion gallons. Meanwhile, ethanol stocks tightened by 247,000 barrels from the previous week to 16.2 million barrels as gasoline demand was the highest of the year.
UPDATE ON ARGENTINE PORT STRIKE... More than 50 ships are delayed in Argentina's main grain export hub at Rosario due to a now three-day labor dispute, according to industry sources. Port workers walked off the job Monday amid a dispute over wages. Without the port workers, ships are unable to enter or leave the export hub. Media reports signal negotiations on the matter are scheduled for Thursday.
The longer this dispute lingers, the more likely it becomes importers may shift some of their business to U.S.-origin supplies.
ACRE COMPARISON TOOL AIDS RISK-MANAGEMENT DECISIONS... This year, producers have the option to opt in or out of the Average Crop Revenue Election (ACRE) program as part of the extension of the 2008 Farm Bill. The University of Illinois' FarmDoc offers a handy ACRE Comparison Program spreadsheet that compares payments under ACRE and traditional commodity program options available in the 2008 farm bill. This makes it easy for farmers to "pencil out" what the best option is for their operations.
Enrollment in the ACRE program requires a 20% reduction in the level of direct payments, and operators have until June 3, 2013 to decide if they want to opt in or out of the program for the 2013 crop year. ACRE payments for 2013 are based on USDA's average crop prices for corn and soybeans from Sept. 1, 2013 to Aug. 30, 2014, and not on current price levels. But keep in mind, direct payments have been cut 8.5% as part of the sequester process.
BERNANKE GIVES NO CLEAR SIGNAL ON QUANTITATIVE EASING PLANS; FOMC MINUTES SIGNAL PHASE-OUT IS COMING... Federal Reserve Chairman Ben Bernanke provided no clear indication in testimony before the congressional Joint Economic Committee this morning of when the Fed may begin to unwind its quantitative easing, though he raised the possibility the Fed could at least slow its bond purchases. But minutes from the May 30-April 1 Federal Open Market Committee (FOMC) meeting gave a clearer picture of plans as "a number" of Fed officials are open to tapering asset purchases as early as the June meeting, though there’s still some disagreement on what economic conditions would warrant such action.
Despite a slight drop in the unemployment rate, Bernanke said overall, the job market remains weak and unemployment is still well above the long-term normal levels. Additionally, he said, "The loss of output and earnings associated with high unemployment also reduces government revenues and increases spending on income-support programs, thereby leading to larger budget deficits and higher levels of public debt than would otherwise occur."
Regarding interest rates, Bernanke said, "A premature tightening of monetary policy could lead interest rates to rise temporarily, but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further."
The U.S. dollar index rose to its highest level since July 2010 following Bernanke's testimony. Meanwhile, the FOMC minutes triggered a drop in the U.S. stock indices.
MANY AMENDMENTS TO SENATE FARM BILL, MANY ON CROP INSURANCE... So far, 139 amendments covering a wide scope have been filed for Senate farm bill debate, but many of these amendments will never be called up for debate. Some of the more controversial ones will either be defeated or determined non-germane. For instance, Senator Dianne Feinstein (D-Calif.) will offer an amendment to set uniform national standards for housing laying hens. While Senate Ag Chairwoman Debbie Stabenow (D-Mich.) supports the measure, she has said it would be considered non-germane on the floor. There could, of course, be some surprise votes on the Senate floor.
A number of amendments focus on crop insurance. Sen. Tom Coburn (R-Okla.) has filed an amendment to reduce premium subsidies for high-earning farmers, with the cut contingent on a USDA study of its impact on the insurance program. Sen. Jeff Flake (R-Ariz.) has proposed at several amendments targeting the crop insurance program, including one that would allow USDA to achieve "significant savings" by renegotiating the Standard Reinsurance Agreement (SRA). Another would prohibit harvest-price coverage. Sen. Mark Begich (D-Alaska) has proposed to require public disclosure of the names of policyholders and the assistance they receive. Sen. Kay Hagan (D-N.C.) will offer an amendment that would target fraud and abuse in the crop insurance program. She also said she would offer an amendment that would require USDA to explain federal crop insurance policies in "plain language" that farmers can understand without the need of an attorney.
Following are some other amendment topics (see Inside Washington Today for more):
- Renewable Fuel Standard (RFS): Sen. James Inhofe (R-Okla.) has proposed to allow states to opt out of the RFS. A Sen. Bob Corker (R-Tenn.) amendment would require the annual advanced and renewable fuel targets to be lowered commensurate with reductions in the cellulosic mandate.
- Biotech crops: Sen. Bernie Sanders, a Vermont independent, wants to ensures states are allowed to require labeling of foods with GMO ingredients. Sen. Barbara Boxer (D-Calif.) has proposed to require a report on GMO labeling in other countries. Another Boxer amendment is a sense-of-the-Senate statement supporting GMO labeling.
- Livestock, dairy and meat industry concentration: Sen. Chuck Grassley (R-Iowa) wants a special counsel at USDA to address market competition issues. Sen. Jon Tester (D-Mont.) has proposed to require USDA to report annually on consolidation in meat, grains and dairy. An amendment by Sen. Jay Rockefeller (D-W.Va.) would protect livestock and poultry growers from retaliation by packers and contractors.
- Ban on EPA discharge permits. Sen. Kay Hagan (D-N.C.) is planning to file an amendment that would bar the Environmental Protection Agency from requiring Clean Water Act discharge permits for pesticide spraying near or on waters that are already registered for use under FIFRA.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Cash-only marketers should be prepared to trim old-crop stocks if basis sharply weakens and/or futures violate support at the April low. Otherwise, continue to hold old-crop inventories as gambling stocks in case there's a supply squeeze this summer. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. Be prepared to advance new-crop sales on a corrective price recovery. For now, the contract is respecting support at the summer 2012 lows.
BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers now 90% priced on 2012-crop. With futures moving back to the top of the extended, choppy range and basis weakening, cash-only marketers should get current with old-crop sales advice, but hold the remaining 10% as gambling stocks for now. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in November soybean futures at $12.19. Stick with the hedge for now. We'll consider an exit if the last reaction high is taken out.
WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. The end of the 2012-13 marketing year is just over a week away, so remaining unpriced bushels will be sold soon. For 2013-crop, we're willing to wait out a corrective rebound before making sales.
COTTON: Hedgers are 100% sold on 2012-crop in the cash market, with cash-only marketers 85% sold on old-crop. For 2013-crop, hedgers and cash-only marketers have 50% of expected production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton at 83.87 cents. Stick with the hedge for now as new-crop futures are struggling to find sustained buying interest and that price is near the top of the range for USDA's 2013-14 price projection.
CATTLE: With futures well below the cash market, we aren't willing to hedge in a hole. But with that said, traders will remain comfortable with futures at a discount to the cash market until demand concerns ease, even with tight market-ready supplies and record Choice boxed beef prices. Feeder cattle buyers should also continue to carry risk in the cash market until there are clear indications of a low.
HOGS: Summer-month lean hog futures continue to work on a potential upside breakout from the extended, choppy range. With futures gradually strengthening and market-ready hog supplies expected to tighten into mid-summer, continue to carry all risk in the cash market.
FEED: Continue to carry all corn-for-feed and soybean meal risk in the cash market. Corn futures are giving no indication of sustained price strength and soybean meal futures are at levels that have slowed buying interest in the past.