CME GROUP: LIVESTOCK SETTLEMENTS MAY BE MODIFIED IF GOV'T SHUTDOWN LINGERS... CME Group has alerted its customers that certain CME dairy and livestock contracts, which are cash settled based on USDA data, could be affected if the agency shutdown is prolonged. If so, the exchange may have to modify its current settlement procedures on such products, including October 2013 lean hogs, live cattle and feeder cattle futures and options. The October lean hog contract expires Oct. 15, while the cattle contracts expire Oct. 31. CME Group says it will continue to monitor the situation and will keep customers updated on any potential changes.
GOV'T FUNDING FIASCO OVERSHADOWS FARM BILL EXTENSION EXPIRATION... There has thus far been no solution regarding the government shutdown, but GOP leaders in the House are floating a plan to pass individual funding bills to reopen selective government agencies, according to reports citing a senior aide by Reuters. Meanwhile, the expiry of the one-year farm bill extension overnight has largely been overshadowed by the continuing resolution debacle.
Some programs will be affected immediately by the expiration, including programs for marketing U.S. farm products overseas and the Senior Farmers Market Nutrition Program. There will also be no new enrollments in the Conservation Reserve Program and the Wetlands Reserve Program.
As we have noted in the past, the most significant impact would not come until early 2014 when USDA would be required to start taking steps under permanent law to increase milk prices. If Congress does not extend the 2008 farm legislation or address the issue in some other way, the cost of dairy price supports would double, raising the possibility that milk prices eventually could increase sharply.
FSA ANNOUNCES SEQUESTER-BASED CHANGES TO 2013 MARKETING ASSISTANCE LOANS... USDA's Farm Service Agency (FSA) announced yesterday several changes to its commodity loan programs to accommodate the automatic funding reductions known as sequester. With commodity loan programs operating on a crop year basis and Sept. 30 marking the end of the federal fiscal year, adjustments will occur for the 2013 crop year as follows:
- Loan-making for all commodities will be suspended on Oct. 1 and are targeted to resume mid-October.
- Loan repayment and loan servicing for all disbursed commodity loans will continue.
- Beginning in mid-October, the 2013-crop loans, and if applicable, loan deficiency payments (LDPs), will receive 5.1% reductions.
- Re-pledged 2012 crop sugar loans are not subject to sequester. 2013-crop loan rates are not affected.
Commodity loans issued by FSA, marketing associations and loan servicing agents are all subject to these reductions.
WEEKEND RAINS SPUR SOYBEAN PLANTING IN BRAZIL... South American crop consultant Dr. Michael Cordonnier says rains over the weekend in south-central locations of Brazil (Mato Grosso do Sul, southern Goias, Minas Gerais and Sao Paulo) should encourage producers to begin planting soybeans. He says more rain will be needed to completely recharge soil moisture, but with precip in the forecast, there should be enough moisture to assure adequate establishment of the early planted crop.
Further south, Dr. Cordonnier says too much rain and cold temps are hampering corn planting and are a threat to the wheat crop.
Dr. Cordonnier left his South American crop estimates unchanged from last week and said despite recent pressure on soybean prices, expectations remain that Brazilian soybean acreage will expand by around 4% from last year. He currently pegs total South American soybean production at 158.8 MMT, up from 146.4 MMT last season. He sees total South American corn production at 100.6 MMT, down from 111.6 MMT last year due to expansion of soybean area at the expense of corn.
CONSULTANT: U.S. CROP ESTIMATES COULD MOVE HIGHER... Dr. Cordonnier says his U.S. corn and soybean crop estimates "could move higher" as he has a neutral to higher bias going forward due to better-than-expected early yield results. He currently pegs the U.S. corn yield at 152 bu. per acre and said he may raise it by "a bushel or two" if yield results continue to impress. He currently pegs the soybean yield at 40.5 bu. per acre and said he may raise it another bushel. But before raising his estimates, Dr. Cordonnier said he wants to see if yields continue to be a pleasant surprise.