Evening Report (VIP) -- October 31, 2013

October 31, 2013 10:11 AM

CATTLE ON FEED: SLIGHTLY POSITIVE... The Cattle on Feed Report, which was delayed from earlier this month, is getting a mildly positive read as it showed On Feed slightly below the average pre-report trade guess at 92% thanks to stronger-than-expected Marketings of 106% of year-ago levels. Placements were slightly above expectations at 101% of year-ago.

Cattle on Feed


Avg. Trade Guess


% of year-ago levels

On Feed











The breakdown of calves placed on feed last month shows lighter-weight calves went into feedlots at a slower pace than year-ago, while placements of heavier-weight calves picked up. Calves under 600 lbs. were down 7.8% from year-ago, with 600-pounders down 5.6% from year-ago; 700-pounders rose by 8.1% from year-ago and 800-plus pounders were up 6.5% from year-ago.

The report could help support live cattle futures tomorrow, although more focus is on the cash cattle market. October cattle expired today at $134.50 and December live cattle ended the day around $2 below that level, which could help to support the contract if cash trade comes in at least steady with week-ago.


COLD STORAGE BEARISH FOR CATTLE, NEUTRAL FOR HOGS... USDA also released its Cold Storage Report this afternoon, which showed end-of-September frozen pork stocks at 566.367 million lbs., which came in slightly above the average pre-report trade guess of 562.1 million pounds. Frozen beef stocks at 445.047 million lbs. came in around 13.5 million lbs. higher than traders expected.

Total pork stocks ended September 10% tighter than year-ago, but were up 3% from the previous month. The biggest percentage gain came for bellies, which are up 45% from year-ago and 18% higher than the previous month.

Frozen beef stocks are up 5% from year-ago and are 3% higher than the previous month. This is a disappointment for the market as traders expected a slight reduction in stocks from the previous month.


IMPORTERS MAKE BIG CORN/SOYBEAN PURCHASES DURING GOVERNMENT SHUTDOWN... USDA's Foreign Ag Service (FAS) today released a combined Weekly Export Sales Report for the weeks ended October 10, 17 and 24 to get the market caught up on activity during the government shutdown. The data shows during this period importers took advantage of a softer U.S. dollar index by increasing bookings.

Corn sales during the three reporting weeks for 2013-14 delivery of nearly 4.556 MMT -- coming in well above traders' expectations. Export commitments climbed from 53% ahead of year-ago the week ended Oct. 3 to 88% ahead of year-ago. USDA currently projects exports to come in 66.7% ahead of year-ago, which suggests there is definitely room for USDA to raise its export projection in the November Supply & Demand (S&D) Report.

Foreign Ag Service (FAS) noted the following daily corn sales that would have qualified as daily sales announcements during the government shutdown: For the week ending Oct. 17, sales to Mexico of 1,568,800 MT and sales to unknown destinations of 304,800 MT -- all for delivery in 2013-14. The large purchase by Mexico was not rumored by the market, yet it did little to move prices today.

Soybean sales during the three-week period of 4.742 MMT for 2013-14 also came in well above traders' expectations. Export commitments climbed from 15% ahead of year-ago the week ended Oct. 3 to 25% ahead of year-ago. USDA currently projects exports to be 4.2% ahead of year-ago, which gives USDA room to raise its export projection in next month's S&D Report.

FAS noted the following daily soybean sales that were not released that would have qualified as daily sales announcements during the government shutdown: For the weeks ending Oct. 10 and 17, soybean sales for unknown destinations of 203,000 MT and sales to China of 120,000 MT -- all for 2013-14.

Wheat sales during the three-week period of 1.309 MMT came in at the low end of expectations. Export commitments declined from 43% ahead of year-ago the week ended Oct. 3 to 39% of year-ago. USDA currently projects exports to be up 9.2% from year-ago, which still gives USDA room to raise its export projection in next month's S&D Report. USDA made no mention of sales that would have qualified for daily sales announcements.


IGC RAISES GLOBAL TOTAL GRAINS CARRYOVER... The International Grains Council (IGC) has raised its 2013-14 total grains carryover estimate by 7 MMT from last month to 374 MMT, up 39 MMT from 2012-13. The group raised its global wheat carryover estimate by 2 MMT to 182 MMT (175 MMT in 2012-13), with global corn carryover up 4 MMT to 152 MMT (126 MMT in 2012-13). IGC left total soybean carryover unchanged at 29 MMT, up 3 MMT from last season.

IGC raised its global wheat production forecast by 3 MMT from last month to 696 MMT due to a "substantial recovery" seen in the CIS (former Soviet Union). It raised world trade by 1 MMT to 142 MMT, saying small increases from last year for China and Egypt outweigh declines elsewhere. IGC raised its global corn production peg by 5 MMT to a record 948 MMT. But it also sees trade increasing by 6% from last year.


LITTLE CHANGE IN DROUGHT ACROSS MIDWEST AND PLAINS... According to the National Drought Monitor, drought covers 55.87% of the contiguous U.S., which is up slightly from 54.96% last week. Expansion in drought was due to the spread of abnormally dry conditions in the Southeast and Northeast, as slight drought improvement was noted across the Plains and Midwest. Rains across the Midwest this week, with more in the forecast according to the Monitor's outlook, could lead to some improvement in drought ratings next week. Click here for related maps.


RESTAURANT PERFORMANCE INDEX SOFTENS... For the fourth straight month, the National Restaurant Association's index of restaurant activity softened due to a decline in sales and traffic. The index softened by 0.3% in September to 100.2, which still represents expansion. Livestock analysts monitor the index as the restaurant sector represents a large portion of meat consumption.

Also concerning is The Conference Board's Consumer Confidence Index, which declined sharply in October to 71.2, down from 80.2 the previous month. Both groups note declining confidence among consumers in the government following the 16-day shutdown the first half of the month. More details on the indices are available here.


UKRAINE PREPARING TO SEND FIRST CORN SHIPMENT TO CHINA... Ukraine's state-run grain firm GPZKU is reportedly loading 70,000 MT of corn for its first shipment to China. The firm has signed contracts to supply China with the first 120,000 MT of corn to China, Reuters cites GPZKU's deputy chief as saying. Last year, the countries reached an agreement on sanitary and quality requirements for Ukraine to ship between 2 MMT and 2.5 MMT of corn to China each year to pay off a multi-billion-dollar Chinese loan to the country to improve its ag infrastructure.


FIRST FARM BILL CONFERENCE SESSION REVEALS PLENTY OF WORK AHEAD... The first conference meeting on the farm bill yesterday showed there are a number of contentious issues with which conferees will have to deal. For one, several conferees, including Stabenow, supported linking conservation compliance to crop insurance, a development many House negotiators strongly oppose. She also called on lawmakers to save grasslands by enacting a national sod-buster provision in the Senate bill. Lucas said he is not in favor of more regulatory burdens.

Some conferees called for addressing USDA's country-of-origin meat labeling rules and eliminating proposed restrictions on poultry industry contracting. A provision in the House bill would require the department to do an extensive economic analysis of the regulations within six months. The study would have to assess the impact of the rules on consumers, producers and packers. Stabenow also opposed an amendment sponsored by Rep. Steve King (R-Iowa) that would block California’s animal-handling regulations. Get more details.


HOUSE OPPOSES CROP INSURANCE RESTRICTIONS... Besides the crop insurance conservation linkage issue, the crop insurance provisions in the House bill are similar to the Senate in that a supplemental coverage option (SCO) and stacked income protection plan (STAX) are offered. However, the two bills offer significantly different coverage levels for SCO. Also, producers choosing the House revenue loss coverage (RLC) option would not be eligible for SCO coverage. SCO and STAX benefits are not limited in the Senate or House. Both the Senate and House allow cotton producers the choice between STAX and SCO coverage.


SIMILAR PAYMENT LIMITATIONS BETWEEN THE FARM BILLS... Payment limitation provisions are similar in the Senate and House bills. The Senate bill has a $50,000 payment limitation on combined ag risk coverage (ARC) and adverse market payments (AMP) benefits while the House farm bill package has a $50,000 combined limitation on price loss coverage (PLC) and RLC. Both chambers combine non-farm and farm sources of adjusted gross income (AGI) to form one overall AGI limitation with the Senate at $750,000 and the House at $950,000. Read more about the two farm bill versions.


DIRECT PAYMENT ELIMINATION HAS DIFFERENT IMPACTS FOR COMMODITIES... Both farm bills would eliminate direct payments, which currently pay out nearly $5 billion in annual payments no matter what prices average, and are paid on base acres whereby the grower doesn't even have to plant the program crop to get those "direct" payments. From a budgetary, reformist and political nature, those payments had to be eliminated. But the elimination of such payments clearly will impact cotton, rice and peanut growers versus corn and soybean growers based on a several analytical reports looking into the matter. The elimination of direct payments means the an effective safety net for rice, peanuts and cotton growers is needed, and that is where corn and soybean growers' interests in the Midwest failed to understand economics early in the farm bill process, which saw the Senate farm bill's target price levels nowhere near those of the House approach. But that all changed, at least for rice and peanuts, when Sen. Thad Cochran (R-Miss.) replaced Sen. Pat Roberts (R-Kan.) as the ranking member on the Senate Ag Committee.

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