Evening Report (VIP) -- October 22, 2013

October 22, 2013 09:49 AM


DISAPPOINTING JOBS DATA PRESSURES DOLLAR... The U.S. Labor Department this morning released its monthly employment data, delayed due to the 16-day government shutdown. The data shows the economy added fewer jobs than expected in September, although unemployment improved marginally. A total of 148,000 non-farm payrolls were added last month, below expectations that 180,000 jobs were added. Unemployment declined from 7.3% to 7.2%.

The U.S. dollar index softened immediately after the report and extended losses. A weaker dollar is associated with keeping U.S. goods competitive on the global market. Given the recent uptick in wheat sales, wheat futures were supported by dollar weakness. Corn and soybean futures remained under pressure throughout the day due to ongoing harvest-related pressure. Click here for more.


CONSULTANT LOWERS BRAZILIAN CORN ESTIMATE... Crop Consultant Dr. Michael Cordonnier has lowered his Brazilian corn production estimate by 2 MMT to 70 MMT due to lower acreage and fertilizer use. Because of an oversupplied domestic market that has driven the price of corn below the cost of production, Brazilian producers are expected to switch some safrinha corn acres to winter wheat and other crops, with full-season acreage already reduced by more competitive prices for soybeans.

Meanwhile, Dr. Cordonnier left his Brazilian bean estimate unchanged at 88 MMT, noting that planting has picked up recently now that most areas have seen soil moisture levels recharged. He says about 30% of the crop has been planted, with Parana leading the way with 50% planted.

Dr. Cordonnier left his Argentine corn estimate unchanged at 25 MMT, saying planting continues at a slower-than-usual pace with 20% of the anticipated crop in the ground. He pegs the Argentine soybean crop at 55 MMT and says he'll watch for signs of farmers switching intended corn acres to soybeans due to more competitive prices.


STRENGTHENING BRAZILIAN CURRENCY POISES RISK FOR PRODUCERS... Brazilian farmers benefit financially when their currency, the Brazilian real, is weak compared to the U.S. dollar. At the end of August, the real was trading at 2.45 reals per dollar and it is now at 2.17 reals per dollar. While Brazilian producers can make the most of the real when purchasing inputs, Dr. Cordonnier says since commodity prices are set in dollars, but paid in the real, they put more money in their pockets for every sack of soybeans they sell when the real is weak compared to the dollar.


REPORT DETAILS ANIMAL AG ADVANCEMENTS... The Animal Agriculture Alliance has issued a report highlighting the advances in animal agriculture that is a stark contrast to the 2008 report released by the John Hopkins Bloomberg School of Public Health's Center for a Livable Futures that initiated "Meatless Mondays."

The new report states illness rate from E. coli has dropped to a level that meets the U.S. Department of Health and Human Service's "Healthy People 2010" goal. It also notes that less than 3% of all U.S. greenhouse gas emissions are attributed to livestock production. The report also details how animal agriculture is up to the challenge to increase productivity to feed a growing world population. Click here for more and a link to the full report.


WILL GOV'T SHUTDOWN HAUNT REPUBLICANS IN ELECTIONS?... Polls show the majority of Americans blame Republicans for the recent partial government shutdown. Before the shutdown began on Oct. 1, some younger Republicans not around the last time (1995-96) the Republican Party led a shutdown said, "But this time it is different." It wasn't. Finally some deal-makers in the party took the lead, with Senate Majority Leader Mitch McConnell (R-Ky.) being one of them. Now he is being criticized by extreme conservative groups in his state, and the longtime senator is in a contentious primary race that won't be decided until May 20.

The GOP in recent elections have turned would-be victories into defeat, and it could happen again in Kentucky and several others states where leaders in the party are being faulted for "giving in" to reach a consensus. While the 2014 elections cannot be considered a "wave" election yet, many Americans are very upset with Washington, Congress and the White House, with a lot of the disgust directed at extreme elements in both parties, but a decided tilt of anger toward extremely conservative Republicans.

A potentially important development this week that shows veteran Republicans are aghast at their party's behavior is Bill Graves, the former two-term Republican governor of Kansas. Graves now heads the American Trucking Associations (ATA) and urged the group to rethink its ties to House Republicans because of the influence of tea party conservatives. Graves told industry executives Monday they should be ready to shift their support to Democrats following the 16-day government shutdown and with a major infrastructure legislative agenda ahead. His remarks followed the U.S. Chamber of Commerce signaling it will consider supporting "pragmatic" candidates in primary elections to help get Washington past the confrontational politics. Get more details.

PF Perspective: While most election experts gave Democrats very low odds of garnering the net gain of 17 seats needed to regain the House in 2014, their commentary after the shutdown isn't so certain. While most still think the odds of a turnover in the House are low, those odds are rising nonetheless. The GOP arch conservatives surely wouldn't force another shutdown in early 2014 would they? No one has been able to predict what the party will do of late, so nothing should be ruled out. But if that were to occur, a wave election is likely after all -- and it would usher in more Democratic members than anyone currently thinks. And several moderate GOP senators are probably wondering whether or not conservative groups are going to set up a primary challenge for them come 2014. If so, the Democrats could get a true working majority faster than most now think.

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