Evening Report (VIP) -- November 22, 2013

November 22, 2013 09:10 AM
 

CATTLE ON FEED REPORT: NEUTRAL... Traders did a very good job anticipating what USDA's monthly Cattle on Feed Report would show as all three categories were in line with the average pre-report trade guesses. As of Nov. 1, the feedlot inventory was 647,000 head below year-ago.

Report details

USDA

Avg. Trade Guess

Range

% of year-ago levels

On Feed

94
94.2

92.0-95.5

Placements

110

110.0

99.1-118.1

Marketings

101

101.5

99.6-103.2

 

Placements during October increased 214,000 head from year-ago amid the drop in feed prices and a positive outlook for the cash cattle market into next year. A weight breakdown shows: lightweight placements up 5.9%; 6-weight placements up 15.6%, 7-weight placements up 17.2%; and heavyweight placements up 3.6%. Of the top 11 beef cattle production states, only Oklahoma (down 3%) and Idaho (down 10%) placed fewer cattle on feed last month compared to year-ago.

With the report virtually as expected, there should be very little price response Monday. That will keep focus on the boxed beef and cash cattle markets.

 

 

COLD STORAGE REPORT: NEUTRAL...USDA's monthly Cold Storage Report showed pork stocks just above the average pre-report guess, while beef stocks came in just slightly lower than expected. As a result, the report data gets a neutral read.

Pork stocks as of Oct. 31 totaled 566.7 million lbs., which was 1.6 million lbs. greater than the average guess, but 1.1 million lbs. less than September and 36.8 million lbs. below year-ago.

Total beef stocks at the end of October were 443.6 million pounds. That was 4.7 million lbs. less than traders anticipated and 1.6 million lbs. less than the previous month, but around 13.3 million lbs. more than last year.

Total poultry stocks at 1.141 billion lbs. came in around 67 million lbs. less than September, but roughly 33 million lbs. more than year-ago.

 

 

PF LAND SURVEY: PLENTY OF WILLING BUYERS... Despite the sharp drop in grain and soybean prices and forecasts for tightening profit margins well past next year, a large portion of Pro Farmer Members say they will be in the market to buy farmland next year. Our third annual online survey conducted mid-month found 49% of Members answering "yes" to the question, Are you in the market to buy farmland within the next year? That is down, but not sharply, from last year’s 55% and is just shy of the 50% mark reported in our 2011 survey. On the flip side, only 6% say they will be in the market to sell farmland compared to 7.5% last year and 7% in 2011. Click here for more survey results.

 

 

MORE ON SENATE RULE CHANGE... As reported in "First Thing Today," the Senate approved a rules change Thursday that allows nominations to proceed with a simple majority, down from the three-fifths threshold that had long applied when opponents filibustered. The change would apply to all executive-branch and most judicial nominations, but not to nominations to the Supreme Court or to legislation. The issue that brought on the change is a trio of nominees for the U.S. Court of Appeals-D.C. Circuit, which is considered the second-highest court after the Supreme Court. Of note, the judges that President Obama can now appoint to the D.C. Circuit Court will help decide several high-profile energy and environment cases.

PF Perspective: An already weak and dysfunctional Congress became more so thanks to this rule change. It may not have much initial impact, but an already acid-toned atmosphere in the Senate could get worse. As for legislative impacts, an already feeble attempt to get a farm bill passed could have received still another hurdle. And a regulatory president just got a tonic for his weak administration; expect a cascade of regulations and other orders to pour forth from the White House/administration. That includes regulations dealing with climate change, energy and financial regulatory matters. To be fair, some say those are overdue; others say elections have consequences and are gearing up for 2014 and 2016. Get more details.

 

 

MAJOR AG IMPACTS IN SENATE TAX REFORM...It’s early in the tax reform timeline and this is a bill that will be significantly more difficult completing the lingering farm bill. Still, Senate Finance Chairman Max Baucus (D-Mont.) has already released draft proposals, which, if in the final package, would definitely impact agriculture. Baucus’ plan would permanently increase Section 179 expensing to $1 million and expand the definition of qualifying expenses. Without a change, that type of expensing, now set at $500,000, would fall to $25,000 in 2014.

Baucus also proposed expanding use of the cash method of accounting, making it available to all businesses with annual average gross receipts of $10 million or less. But the plan would also end Section 1031 exchanges in the taxable year that would start after Dec. 31, 2014. So, if you want to do a 1031 exchange, you better do it in 2014 if this looks like it will have a chance at becoming law. But as we have long cautioned, making assumptions or business decisions based on an expectation of Congress acting may not be the best business practice.

 

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