Evening Report (VIP) -- October 4, 2012

October 4, 2012 10:18 AM

EL NINO IN LIMBO... The National Oceanic and Atmospheric Administration (NOAA) says "borderline ENSO-neutral" to "weak El Nino conditions" are expected to continue through the winter, with a possible strengthening during the next few months. But it says compared to the past few months, the odds of El Nino developing have been reduced.

"Due to the recent slowdown in the development of El Nino, it is not clear whether a fully coupled El Nino will emerge. The majority of models indicate that borderline ENSO-neutral/weak El Nino conditions will continue, and about half suggest that El Nino could develop, but remain weak," states NOAA. "The official forecast therefore favors the continuation of borderline ENSO-neutral/weak El Nino conditions into Northern Hemisphere winter 2012-13, with the possibility of strengthening during the next few months."


STATS CANADA REPORT BULLISH FOR CANOLA... Pro Farmer Canada Editor Mike Jubinville's reaction to this morning's Statistics Canada crop production reports was the "shocking major downward revision" of the 2012 canola crop. While the market was expecting a cut to the canola crop, the estimate of 13.359 MMT came in even smaller than expected.

Jubinville says with harvest well underway, "weather conditions in the last few weeks may have had an impact on yields for certain crops. For example, disease may have contributed to lower canola yields in parts of the Prairies, and drought may have affected corn for grain yields in Eastern Ontario."

Stats Canada's wheat crop estimate also came in below traders' expectations at 26.7 MMT Click here for a full breakdown of the Canadian crops.


MARGINAL DROUGHT IMPROVEMENT ACROSS SOUTHERN PLAINS AND MIDWEST... According to the National Drought Monitor, marginal drought improvement was seen for the nation on whole, with 24.10% of the contiguous U.S. drought free, less than a percentage-point improvement from last week. Slight improvement was seen across the eastern Corn Belt and South, while drought intensified across the High Plains. Click here for more, including related maps.


SOYBEAN EXPORT SALES WELL AHEAD OF 'NEEDED' PACE... For the week ended Sept. 27, USDA reports soybean sales for 2012-13 of 1,296,600 MT, coming in above traders' expectations. China was the lead buyer with sales of 1,025,000 MT, including 225,000 MT switched from unknown destinations and decreases of 3,000 MT. Export commitments are running 40% ahead of year-ago and USDA projects 2012-13 exports to be 22.4% below last season. With 48 weeks of the marketing year left, total soybean commitments as a percent of USDA's export forecast are at 82% -- nearly double the five-year average! Bottom line: Current prices are not rationing demand. Click here for the full Weekly Export Sales Report.


ARGENTINE EXCHANGE SEES RECORD SOYBEAN ACREAGE... The Buenos Aires Grains Exchange said it expects Argentine farmers to plant a record 19.7 million hectares of soybeans for the 2013 crop, up 4.5% from last year. Meanwhile, it expects corn acreage to decline by 12% to 3.4 million hectares. It says after last year's drought slashed corn and soybean production farmers are struggling financially and will favor the cheaper costs of planting soybeans over corn.


USGC SEES RECORD 2012 CORN CROP IN CHINA... The U.S. Grain Council (USGC) says due to higher yields and an increase in planted acreage, it projects a record 2012 corn crop in China, between 5 MMT and 6 MMT larger than last year's crop. The council declined to provide an exact estimate on the 2012 crop or the actual size of the 2011 harvest. China's official estimate of 2012 corn production stands at 197 MMT, while USDA is expecting a crop of 200 MMT. USDA pegged last year's crop at 192.78 MMT. Click here for more details, including their outlook on demand.


EU PANEL SAYS STUDY ON MONSANTO NK603 CORN 'INADEQUATE'... A French study linking a variety of genetically modified corn to increased cancer risks in rats has been deemed as inadequate by the European Food Safety Authority (EFSA). Among other things, the EFSA says the study's authors failed to establish appropriate control groups as part of the study, and chose a strain of rat that is prone to developing tumors during its normal lifespan. "Therefore, based on the information published by the authors, EFSA does not see a need to re-examine its previous safety evaluation of maize NK603 nor to consider these findings in the ongoing assessment of glyphosate," EFSA said in an official statement.

Russia temporarily banned imports of the corn variety and France said it would also ban the corn if the findings were confirmed.


FARM BILL: WHAT'S THE OBJECTIVE?... Washington Consultant Jim Wiesemeyer says that when tackling the "Byzantine-like farm bill debate," asking the question, "What's the objective?" makes it much easier to understand. In the past this argument has been framed in terms of farm/operation size. That debate point is still there, but an examination of the House and Senate farm bill versions relative to one crop versus another may overshadow it.

The new farm bill process started with one objective that will be met -- eliminating direct payments. But another objective -- making crop insurance the template for producer risk management -- has shown that lawmakers are unwilling to forgo having some type of government involvement in U.S. farm programs.

While government is currently involved in the federal crop insurance program, it is delivered by the private sector. But there are some (namely those in government) who believe government workers would do a better job delivering crop insurance to farmers. One need only consider the complexity and delayed payments of previous government-delivered farm programs, such as ACRE and SURE, to see how cumbersome crop insurance would become if the government controlled it.

Plus, government employees are directed not to offer producers any guidance about what program option is best for them. In contrast, many crop insurance agents work through scenarios with their customers to develop the best plan. For an extensive breakdown of the biases regarding the House and Senate farm bill options, click here.

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