Evening Report (VIP) -- May 23, 2013

May 23, 2013 09:57 AM
 

 

DROUGHT MONITOR REFLECTS SLIGHT IMPROVEMENT IN MOST AREAS... The National Drought Monitor reflects modest drought improvement overall for the contiguous U.S., with 39% of the country drought-free, compared to 38.27% last week. While drought across the Northern and Central Plains, as well as the Midwest, continues to shrink, drought across the Southern Plains increased in intensify.

For the Plains, the monitor notes: "The gradient between improving conditions and worsening drought continued to sharpen. A winter-like storm delivered widespread, heavy precipitation (locally 4 inches or more) to the north-central U.S., including the Dakotas and parts of Montana and Nebraska. Significant rain also fell across the southeastern Plains, including central and eastern Oklahoma and northeastern Texas. In contrast, little or no precipitation fell across the southern High Plains. As a result, there were major reductions in drought coverage and intensity on the northern and southeastern Plains, but an increase in the aerial coverage of exceptional drought and other drought categories on the southern High Plains." Click here for related maps.

Meanwhile for the Midwest, the monitor shows 80.68% of the area is now drought-free, which is a two-percentage-point improvement from last week. But 100% of Nebraska remains covered by some form of drought. Click here for related Midwest maps.

 

FOOT AND MOUTH DISEASE DETECTED IN TAIWAN... The World Organization for Animal Health reports The Council of Agriculture in Taiwan has notified it of the first case of foot and mouth disease (FMD) of 2013 in a swine herd in Baozhong Township. So far mortality of the herd has been limited and it has been quarantined.

 

ARGENTINE PORT STRIKE SETTLED... Old-crop soybean futures rallied sharply on reports this morning the Argentine port worker strike at Rosario, the country's largest grain export hub, would extend into next week. But around noon CT, Bloomberg reported the strike had been settled and port workers would return to work. July soybean futures ended 5 1/4 cents higher for the day, but that was 47 1/4 cents off today's high.

 

NOAA EXPECTS ACTIVE HURRICANE SEASON... NOAA's Climate Prediction Center is forecasting an "active or extremely active" Atlantic hurricane season this year. They give 70% odds of 13 to 20 named storms (winds of 39 mph or higher), of which 7 to 11 could become hurricanes (winds of 74 mph or higher), including 3 to 6 major hurricanes (Category 3, 4 or 5; winds of 111 mph or higher). NOAA says climate factors behind the forecast include: A continuation of the atmospheric climate pattern, which includes a strong west African monsoon that is responsible for the ongoing era of high activity for Atlantic hurricanes that began in 1995; warmer-than-average water temperatures in the tropical Atlantic Ocean and Caribbean Sea; and El Niño is not expected to develop and suppress hurricane formation.

 

PERFORMANCE INDICATORS SUGGEST ONLY MINOR REVISIONS NEEDED TO EXPORT PROJECTIONS... Following is a snapshot of how exports are stacking up to USDA's forecasts. We compare how USDA's export forecast is performing against USDA's Weekly Export Performance Indicator. The following data suggests only minor revisions are needed to USDA's current export projections for 2012-13.

Wheat: With just two reporting weeks left in 2012-13 marketing year, total wheat bookings are running 3% behind year-ago. USDA projects wheat exports at 1.025 billion bu., which is down 2.4% from the previous year. Total commitments (sales plus shipments) are at 97% of USDA's export forecast, which is below the five-year average of 104% and last year's pace of 105% at this time. USDA fine tune its final 2012-13 export figure in upcoming Supply & Demand Reports based on how exports shape up the final weeks of the marketing year.

Corn: With 15 weeks left in the 2012-13 marketing year, total corn bookings are running 55% below year-ago. USDA projects exports of just 750 million bu., which is down a whopping 51.4% from the previous marketing year. USDA reports total bookings as a percent of total exports are at 90%, compared to 100% last year at this time and a five-year average of 94%. USDA is unlikely to make further changes to its export projection in next month's update.

Soybeans: With 15 weeks left in the 2012-13 marketing year, total soybean bookings are running 2% above year-ago. USDA projects exports of 1.35 billion bu., which represents a 0.9% drop from the previous marketing year. USDA reports total bookings as a percent of total exports are at 100%, compared to the five-year average of 99% and last year's pace of 98% at this time. This data suggests USDA's export projection may be a bit too low, but needs only minor revisions.

Click here for a summary of the latest weekly export sales report.

 

SENATE FARM BILL CROP INSURANCE AMENDMENT UPDATES... The Senate voted on a number of farm bill amendments today that deal with crop insurance. An amendment by Senator Bernie Sanders (I-Vt.) to ensure states are allowed to require labeling of foods with GMO ingredients was soundly defeated by a vote of 71-27. The Senate also rejected an amendment by Sens. John McCain (R-Ariz.) and Dianne Feinstein (D-Calif.) to eliminate federal subsidies for tobacco crop insurance. An amendment by Senator Kay Hagan (D-N.C.) that targets fraud and abuse in the crop insurance program passed by a landslide 94-0 vote.

Votes on an amendment by Sens. Dick Durbin (D-Ill.) and Tom Coburn (R-Okla.) to reduce premium subsidies by 15 percentage points for farmers making more than $750,000 annually are scheduled for this afternoon. We will have an update in "First Thing Today."

Also of note, Senate Majority Leader Harry Reid (D-Nev.) today said the managers of the Senate farm bill hope to come up with a "finite list of amendments" by the end of the day.

 

USDA ISSUES COOL FINAL RULE... USDA today released the final rule for the U.S. Country of Origin Labeling (COOL) program to bring it into compliance with a WTO ruling that found the law violated U.S. trade law commitments. The final rule keeps key provisions of the proposed rule intact. USDA details, "origin designations for muscle cut covered commodities derived from animals slaughtered in the United States are required to specify the production steps of birth, raising, and slaughter of the animal from which the meat is derived that took place in each country listed on the origin designation. In addition, this rule eliminates the allowance for commingling of muscle cut covered commodities of different origins."

The only change from the proposed rule, USDA said, came on its estimates of costs for implementing the final rule. It believes that the current extent of commingling likely falls closer to the lower end than the higher end of the estimates, so it lowered the upper end of its estimated implementation costs a range of $53.1 million to $137.8 million.

The final rule goes into effect today, but USDA's Ag Marketing Service (AMS), which will be responsible for compliance on the rule, says it recognizes "it may not be feasible for all of the affected entities to achieve 100% compliance immediately." Therefore, AMS will conduct a six-month industry education period, during which time less-specific labels will be allowed until they are used up. Also, retailers may continue to use the older labels as long as retailers provide the more specific information via other means (e.g., signage).

Canadian Ag Minister Gerry Ritz said recently the country's view was that the proposed rule from USDA did not bring the U.S. into WTO compliance. Given that USDA said the final rule did not change except for the cost estimates to comply and that would suggest the Canadians and Mexicans may well now pursue the option of retaliation. Get more details.

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