Evening Report (VIP) -- October 18, 2012

October 18, 2012 10:08 AM
 

CATTLE ON FEED TO REFLECT TIGHTENING SUPPLIES... Traders look for Friday afternoon's Cattle on Feed Report to show all categories below year-ago levels. The average pre-report guesses peg On Feed at 97.8%, Placements at 85% and Marketings at 89.8% of year-ago levels. If realized, Placements would mark the third straight month of double-digit, year-over-year reductions in the number of animals moving into feedlots. This points to a dramatic reduction in marketings next year. However, at 89.8% of year-ago, the slowdown in Marketings suggests lots are not current, which is also reflected by dressed cattle weights that were 17 pounds heavier than year-ago the week ending Oct. 13.

Report expectations

Avg. Trade Guess

Range

% of year-ago levels

On Feed

97.8

96.8-98.7

Placements

85.0

81.0-89.7

Marketings

89.8

88.8-92.8

 

EXTENDED WEATHER OUTLOOK DOES NOT RESOLVE WESTERN CORN BELT DROUGHT... The National Weather Service's Climate Prediction Center (CPC) extended weather forecast through January calls for below-normal precip across Minnesota, Iowa, most of Missouri as well as eastern Nebraska and eastern Kansas. In its Seasonal Drought Outlook, the CPC says based on the forecast and the current soil moisture profile, it expects drought to persist across the western Corn Belt and Plains, as well as most areas west of the Rocky Mountains and Four Corners Region. But some drought improvement is expected in the eastern Corn Belt. This is not the forecast producers were hoping for, but given the inability of El Nino to develop, it's the forecast they expected. Click here for related maps.

 

DROUGHT IMPROVEMENT IN THE PLAINS... Drought conditions eased slightly across the U.S. the week ended Oct. 16 thanks to a pair of storm systems that brought rains to the Plains, according to the National Drought Monitor. It shows 74.98% of the contiguous U.S. is covered in drought, compared to 76.72% last week.

The systems brought significant precip from the Panhandle of Oklahoma to the Upper Great Lakes. As a result, eastern Oklahoma, northwestern Arkansas, southwestern Missouri, Nebraska, Kansas and Iowa benefited from broad, one-category drought improvements. Rainfall in the amount of 2 to 4 inches also prompted one-category improvements in southeast Minnesota and Central Wisconsin. Light rains also fell across the Ohio Valley last week. This paired with recent a wetter pattern during the past 60 days in the eastern Corn Belt allowed for the removal of moderate drought conditions across Indiana and Ohio. See the maps here.

 

RUSSIAN GRAIN UNION SEES POTENTIAL FOR STRONGER EXPORTS... Russian government officials contend that the country's grain exports for 2012-13 will range 10 MMT to 14 MMT, but the head of the country's grain union today said exportable supplies could be as high as 15 MMT to 16 MMT, although exports of 13 MMT to 14 MMT are mostly likely. The Russian government says 2012-13 grain exports will fall in the 10- to 14-MMT range. Through late September, Russia had already exported 7 MMT of grain.

 

FISCAL CLIFF LOOMS... With the approach of year-end, how Congress and the administration deal with the so-called "fiscal cliff" is gaining more attention. Lawmakers and the White House have consistently kicked the can down the road on this group of must-decide issues. They include the expiring 2001 and 2003 tax cuts, the expiring payroll tax holiday, a needed "fix" for the Alternative Minimum Tax (AMT), the estate tax exemption that is slated to go from $5.1 MILLION (double for spouse) to $1 million in 2013, and more. The lack of action can be attributed to a lack of leadership in Washington and placing too much weight on extreme positions -- in both parties.

House Speaker John Boehner (R-Ohio) said in a conference call Wednesday that he and President Obama have not spoken about the impending fiscal cliff in nearly four months. This is just the latest display of how the upcoming elections have put legislative action on hold.

The Washington Post reports Obama administration officials have signaled that unless Republicans give in to the president's demand "to raise tax rates for the wealthy," he is "prepared to veto legislation" intended to prevent the fiscal cliff.

Additionally, the Post says if Obama is reelected, he "may finally be able to dictate the terms of a bipartisan debt-reduction deal." And if he loses, he could still make sure tax rates rise before he hands over the keys to the White House in late January. "Administration officials declined to say whether the veto threat will stand if Obama loses the election," according to the Post.

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