Evening Report (VIP) -- September 28, 2012

September 28, 2012 09:50 AM

BULLISH 'SEPTEMBER SURPRISE'... USDA delivered another "September surprise" in the Quarterly Grains Stocks Report, but this time it was bullish. Sept. 1 corn stocks came in 138 million bu. lower than expected at 988 million bushels. That triggered a sharply higher to limit-up price reaction in corn futures today. Click here for the full Pro Farmer reaction report.


HOGS AND PIGS REPORT: MOSTLY NEUTRAL... USDA's Sept. 1 hog inventory came in just a tick under expectations, as did the number of market hogs. The breeding herd number was in line with the average pre-report guess. As a result, the report is mostly neutral as it pertains to market price action.

However, there are some interesting numbers in the market hog inventory categories. We suspected the recent surge in pork production was due to liquidation of sows, but with the inventory of heavyweight hogs (as of Sept. 1) up 5% from year-ago and the breeding herd steady with year-ago, that's strong evidence sow liquidation wasn't as heavy as believed. Looking forward, hog slaughter, barring heavy sow liquidation, should run close to year-ago levels into the first quarter of 2013.

Summer farrowings and fall/winter farrowing intentions signal hog producers will scale back pig production. But with farrowing house efficiency still climbing, even a 2% decline in farrowings could give us another steady pig crop in the quarter ahead.

Quarterly Hogs & Pigs Report


Avg. trade guess


% of year-ago

All Hogs and Pigs




Kept for breeding




Kept for marketing




June-Aug pig crop




June-Aug pigs per litter




June-Aug farrowings




Sept-Nov farrowing int.




Dec-Feb farrowing int.




Hogs under 50 lbs.




Hogs 50 to 119 lbs.




Hogs 120-179




Hogs 180 and over





MARTELL: EL NINO FLOUNDERING... Sharp cooling in the central Pacific Ocean may be interfering with the development of El Nino, says meteorologist Gail Martell of MartellCropProjections.com. She reminds that a weak El Nino -- or none at all -- would reduce the chances for a bumper grain harvest in South America.

"The last El Nino occurred in 2009-10, inspiring a very wet summer growing season and high crop yields in Argentina and Brazil," says Martell. "However, if El Nino does not develop, all bets are off."


IGC FURTHER TRIMS 2012-13 GLOBAL GRAINS CARRYOVER... The International Grains Council (IGC) lowered its estimates of global 2012-13 corn and wheat carryover from last month, resulting in a 6-million-metric-ton (MMT) drop in total grains carryover to 332 MMT, down from to 372 MMT last season. IGC says planting of northern hemisphere winter grains is underway and they tentatively forecast 2013-14 production 2% higher than last year, driven by firmer prices and a recovery from weather-damaged crops in 2012-13.

IGC also introduced its first global soybean supply and demand projections, calling for an 8% recovery in output in 2012-13, which hinges on a sharp recovery to record levels in South America "for which favorable weather conditions will be critical."


EXPANSION IN RESTAURANT INDUSTRY GOOD FOR RED MEAT DEMAND... The National Restaurant Association's comprehensive index of restaurant activity posted a modest gain in August, boosted by stronger sales. Restaurant operators remain generally optimistic sales will improve in the months ahead, which could provide a near-term boost for red meat. But consumers could be more guarded as the holiday shopping season is quickly approaching. Click here for more.


USDA ANNOUNCES SURE SIGNUP PERIOD... USDA's Farm Service Agency (FSA) today said the signup period for the 2011-crop year Supplemental Revenue Assistance Payments (SURE) program will open Oct. 22, 2012. As of Sept. 30, 2011, FSA's authority to operate the SURE program expired along with four other, important disaster assistance programs: the Livestock Indemnity Program (LIP); the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish (ELAP); the Livestock Forage Disaster Program (LFP); and the Tree Assistance Program (TAP). Production losses due to disasters occurring after Sept. 30, 2011, are not eligible for disaster program coverage. Check this link for a list of eligibility requirements.


MAJOR EXPORT IMPLICATIONS OF TRADE SKIRMISH WITH MEXICO... A U.S.-Mexico trade skirmish could have big impacts on U.S. exports. The U.S. Commerce Department has signaled it might be willing to end a 16-year-old agreement between the U.S. and some Mexican growers that has kept the price of Mexican tomatoes relatively low for American consumers. American tomato growers say the price has been so low that they can barely compete.

Mexico immediately threatened to retaliate, claiming that the Obama administration was trying to placate farmers in an important swing state -- Florida. Producers of other U.S. commodities and big retailers recall the high tariffs Mexico slapped on U.S. producers of potatoes, pork and toilet paper -- $2.4 billion worth of goods -- during a trade fight over trucking that began in 2009 and ended last year.

Analysis by an economist at Iowa State University suggests pork producers would lose about $14 an animal if Mexico imposed similar tariffs on pork now. "We’re already having one of the worst financial periods ever because of high grain prices, and if we were to lose a major market like Mexico, it would be like Armageddon," Nick Giordano, vice president at the National Pork Producers Council, told the New York Times.

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