Evening Report (VIP) -- November 27, 2012

November 27, 2012 08:46 AM

CONSULTANT LOWERS BRAZILIAN CORN ESTIMATE... South American crop consultant Dr. Michael Cordonnier lowered his estimate of Brazil's corn crop by 1 MMT to 71 MMT. He says dry weather is impacting the full-season crop and the possibility of delayed planting of the safrinha (second season) corn crop also raises yield concerns.

Dr. Cordonnier says recent rains for the full-season crop in Parana and Rio Grande do Sul did not fully recharge soil moisture and if drier weather returns during December, it would negatively impact yields as the crop will be pollinating. Regarding the safrinha crop, he says there is a high probability a significant portion will be planted at the end of the normal planting window due to delays in soybean plantings.

Meanwhile, Dr. Cordonnier left his Brazilian soybean estimate unchanged at 80 MMT, saying he currently has a neutral bias toward the crop. But he says if December turns out to be drier-than-normal in southern production regions, the estimate will likely be headed lower.



CONSULTANT LEAVES ARGENTINE CROP ESTIMATES UNCHANGED... Dr. Cordonnier left his Argentine soybean crop estimate unchanged at 22.5 MMT. He has a neutral bias toward the soybean crop, and says even if corn planting delays mean more acres are switched to soybeans, weather conditions need to be better than normal later in the season to make up for the delayed start.

For corn, Dr. Cordonnier left his estimate unchanged at 22.5 MMT. While half of the crop still needs to be planted, a recent pickup in the planting pace increases the chances of the crop getting fully seeded. "If the weather cooperates over the next several weeks and there is not a repeat of the excessive moisture that slowed the early corn planting, then farmers in Argentina may have the opportunity to plant all their intended corn acres," he says.



USDA LOWERS 2012 NET FARM INCOME FORECAST... USDA's Economic Research Service (ERS) says U.S. net farm income is forecast to decline by almost $4 billion from its all-time high in 2011 to $114 billion and net cash income is expected to decline almost $2 billion to $132.8 billion. Both of these figures are lower than what ERS forecast in August. The largest increases in farm income would come from federal and private insurance indemnity payments, ERS says. So far, crop insurers have paid $6.3 billion on losses this year.

While net farm income is forecast lower, farm equity is projected to achieve a new record high in 2012 as expected growth in farm assets exceeds the expected increase in farm debt. "Solid gains in the projected annual value of U.S. agricultural production will be more than offset by increases in purchased inputs and payments to stakeholders. In particular, feed expenses are forecast to increase almost $10 billion in 2012," states ERS. Click here for more.



PDO WEAKENS, BUT STILL IN NEGATIVE PHASE... Today we asked meteorologist Gail Martell of MartellCropProjections.com to provide an update on the status of the Pacific Decadal Oscillation (PDO), as it -- along with La Nina -- played a role in the summer's dry weather pattern across the Plains and Midwest. She says the PDO has weakened significantly, but still remains in a slightly negative phase, which contributes to "La Nina-like" weather in the central United States.

"The Southern Hemisphere weather is behaving like El Nino -- Australia dry, Argentina wet. But the North America weather pattern looks like a page from the La Nina book. Very odd," she says.

The National Oceanic and Atmospheric Administration (NOAA) says ENSO-neutral (neither La Nina or El Nino) will be in place through the winter. But as Martell mentions, current weather events in the U.S. are similar to when La Nina is in place. For example, in NOAA's "frequently asked questions about La Nina," it states typical La Nina impacts in the U.S. include drier-than-normal conditions in the Southwest in late summer through the subsequent winter, as well as drier-than-normal normal conditions across the Central Plains in the fall and in the Southeast in the winter. "In contrast, the Pacific Northwest is more likely to be wetter-than-normal in the late fall and early winter with the presence of a well-established La Nina. Additionally, on average La Nina winters are warmer-than-normal in the Southeast and colder-than-normal in the Northwest," says NOAA.



OECD CITES U.S. FISCAL CLIFF & EUROPEAN CRISIS AS THREATS TO WORLD ECONOMY... The Organization for Economic Development and Cooperation and Development's (OECD) latest Economic Outlook says it expects the global economy to make a hesitant and uneven recovery over the next two years, with GDP growth of 1.4% in 2013 (steady with this year) and 2.3% growth in 2014. But OECD's Secretary-General Angel Gurría says "the world economy is far from being out of the woods."

Gurría elaborates, "The U.S. 'fiscal cliff,' if it materializes, could tip an already weak economy into recession, while failure to solve the euro area crisis could lead to a major financial shock and global downturn. Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the U.S., in Europe and elsewhere."

OECD projects U.S. GDP growth of 2% for 2013 and 2.8% for 2014, providing that the fiscal cliff is avoided. The euro-zone is expected to see GDP contraction of 0.1% in 2013, with recession lingering the first part of the year, and growth of 1.3% in 2014. Get more details.

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