Evening Report (VIP) -- October 10, 2012

October 10, 2012 10:02 AM

RUSSIA NOT DISCUSSING GRAIN EXPORT CURBS... At today's meeting discussing the grain harvest and supply situation, Russian President Vladimir Putin said despite concerns over rising prices, there are no plans to restrict grain exports. Putin also said only surplus grain should be used for export, not intervention stocks which are sold domestically. Wheat futures had little reaction to this news, as the country's "exportable" supplies are quickly dwindling, meaning Russia will not be a major exporter of wheat in the second half of 2012-13 no matter what the government ultimately decides on grain export curbs.



MARTELL: DRAMATIC CHANGE TO ENSO... Meteorologist Gail Martell of MartellCropProjections.com says sea surface temperatures in the tropical Pacific Ocean have dropped to 0.1 C above normal, indicating ENSO-neutral conditions. She says this is the coolest reading since the beginning of June -- signifying a major shift in the climate.

Noting this dramatic change, Martell says, "North of the equator, a distinctive pattern of cold and warm waters has developed. A horseshoe formation of cold water surrounding a core of warmth is known as the Pacific Decadal Oscillation (PDO), now in the negative cold phase. Very cold, in fact, with a minus 1.93 reading," says Martell. "The cold water in the Central Pacific is encroaching on the equatorial sea, likely explaining why El Nino -- the warm episode -- has declined."

Martell explains the cool phase of the PDO often coincides with La Nina, whereas its warm phase goes with El Nino.



A FEW DETAILS FROM ROMNEY'S FARM SPEECH... As reported in "First Thing Today," GOP Candidate Mitt Romney gave a speech at an Iowa farm yesterday that was short on farm policy specifics, though he did release a 14-page ag position paper. Such details largely depend upon the personnel he would pick if elected. But Washington Consultant Jim Wiesemeyer notes, "something tells me he would not pick an ag secretary who was born in Pittsburgh, Pa., nor a deputy secretary who studied environmental policy at MIT and before becoming deputy secretary, served for eight years as assistant professor and director of the Agriculture, Food and Environment graduate program at the Friedman School of Nutrition Science and Policy at Tufts University, Boston, Massachusetts."

Romney said President Barack Obama hasn't done enough to support ag and encourage growth, but this seems an odd line in light of record-setting farm income. (This strength can be chalked up to Mother Nature and strong demand.) He also expressed support for energy independence and the Renewable Fuels Standard (RFS), something that will not likely set well with many livestock, poultry and dairy producers. Click here for more.




CORN: With hedgers 100% sold on 2012-crop production in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery -- we are now watching for reownership opportunities. While futures appear to have put in a short-term low, the trend is still down and a period of choppy price action is likely. Hedgers should hold the Dec. $6.50 put options which were purchased on 40% of 2012-crop for 31 1/2 cents as a crop insurance hedge. Cash-only marketers are 75% priced on 2012-crop production -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery. Hedgers and cash-only marketers should get current with advised cash sales.

BEANS: Hedgers are 100% sold on 2012-crop production for harvest delivery. With the market giving no clear indication a low is in place, there's no urgency for hedgers to reown a portion of 2012-crop on the board. Hedgers should hold Nov. $14.00 put options which were purchased for 42 3/8 cents on 25% of 2012-crop as a crop insurance hedge. Cash-only marketers have 75% of expected 2012-crop forward sold for harvest delivery. Hedgers and cash-only marketers should get current with advised cash sales.

WHEAT: We continue to be impressed with the fortitude of the wheat market in the face of price action in corn and soybeans. With that said, hedgers and cash-only marketers should be prepared to advance 2012-crop sales if futures clearly signal a bearish downside breakout from the extended, choppy range. Hedgers may also add hedge coverage to protect downside price risk if there are signs of a top. Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Get current with those sales levels.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold for harvest delivery. Get current with advised sales, but no additional sales are recommended with so much time left in the 2012-13 marketing year.

CATTLE: Fed cattle producers should continue to carry all risk in the cash market as the downside is limited by tightening supplies. Feeder cattle buyers and sellers carry all risk in the cash market for now.

HOGS: Let the corrective rally unfold, but be prepared to add hedges when the price recovery shows signs of running out of steam. We're watching resistance at the summer highs closely.

FEED: The price break in corn and meal futures will eventually be an opportunity to extend feed coverage. But remain hand-to-mouth until futures signal short-term lows are in place.

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