Evening Report (VIP) -- September 18, 2012

September 18, 2012 10:40 AM

POTENTIAL FOR CROP RECOVERY IN SOUTH AMERICA... South American crop consultant Dr. Michael Cordonnier says all signals point to expansion of soybean acres for 2012-13 in South America. In Brazil, he expects an 8% increase in acreage to 27 million hectares, and in Argentina he expects a 9% increase in acreage to 20.5 million hectares. The mid-point of his soybean production estimate is 151 million metric tons (MMT), which, if realized, would be 36 MMT above 2011-12.

For corn, Dr. Cordonnier says Brazilian producers are expected to reduce their full-season corn acreage but to increase their second-crop safrinha acreage. "The full-season corn yields are expected to be better than last year's drought-reduced crop, but the safrinha corn yields are expected to be lower than the record yields from the last growing season," he says.

Meanwhile, Argentine producers are expected to reduce their corn acreage in favor of more soybeans, but yields should recover to increase production from last season. Collectively, Dr. Cordonnier expects South American to produce 101 MMT of corn, which, if realized, would be up about 6 MMT from 2011-12.


RAINS IN THE FORECAST FOR SOUTHERN BRAZIL... Southern Brazil may finally receive some much-needed rains this week to ease drought concerns, says meteorologist Gail Martell of MartellCropProjections.com. She says weather models show the potential for 0.5 to 1.5 inches of rain in northern Rio Grande do Sul. "Winter weather was so dry that a 5.3-inch moisture deficit built up in Brazil's southern-most farm state," she says.

Martell says Parana, Sao Paulo and Mato Grosso do Sul are all expecting scattered showers tomorrow and Thursday as a wave of low pressure presses northward. "While some farms are expected to receive up to 1.5 inches of rain, others may miss out entirely. Parana last received measurable rainfall on June 21. Conditions are extremely dry," she adds.


USDA: PORK PRODUCERS NOT YET SPRINTING TO THE EXITS... This morning in its Livestock, Dairy and Poultry Outlook, USDA says despite record-high feed prices, sow slaughter data suggests hog producers are not "sprinting towards the exits." Given that traders believe the worst is now behind in terms of sow slaughter, a statement such as this raises concern about more near-term downside risk for the cash hog market and lean hog futures.

USDA says hog slaughter data for June, July and August does not point to large herd liquidation. "If a large-scale liquidation was underway, it is unlikely that prices would have bottomed out as they did in August," says USDA, referring to sow prices. Click here for more.


A WOLF IN SHEEP'S CLOTHING OR JUST PLAIN NUTS?... Today's "Inside Washington Today" features a guest column by Larry Combest, a former Texas House representative who served for nearly 20 years, including time as Chairman of the Ag Committee. He currently works as a lobbyist for a firm focused on ag and renewable energy. In the column, he delivers scathing criticism of the American Enterprise Institute (AEI), which he says has "devolved from objective, even helpful, analysis of farm policy to fanatic obsession where truth and facts are subordinated to AEI’s mission to end U.S. farm policy."

Specifically, Combest takes aim at the AEI's claim that the 2012 Farm bill poses not one but "the two biggest threats to American free enterprise today" and a recent AEI article titled "The 2012 farm bill: A wolf in sheep’s clothing." He points out that this statement and the article are rife with inaccuracies, full of contradictions and out of touch with reality. Combest concludes that "a close inspection of the big bucks donated to AEI high-powered and monied special interests might turn up more than one wolf in sheep's clothing."


EIA RAISES GASOLINE PRICE FORECAST... The U.S. Energy Information Administration (EIA) released its Short-term Energy Outlook today. The report says higher crude oil prices, refinery outages, a pipeline disruption and Hurricane Isaac all contributed to higher gasoline prices in the month of August. EIA raised the average regular-gasoline retail price forecast for the third quarter of 2012 to $3.66 per gallon, up 17 cents from $3.49 previously. The report shows EIA expects retail gasoline prices to soften later this month as the market transitions from summer-grade to winter-grade gasoline specifications. Regular gasoline price forecasts put the fourth quarter at $3.58 and the first quarter of 2013 at $3.43. Click here for more inputs-related news.


NEW SURVEY REPORTS FARMLAND VALUES IN SOUTHERN CORN BELT... A new survey by the Federal Reserve Bank of St. Louis found district farmland values average $4,705 an acre while ranch/pastureland averages $2,349 an acre during the second quarter of 2012. Not surprisingly, the highest average land values in the district are in the St. Louis and Louisville zones. Click here for "Your Precious Land" for more survey results.

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