Evening Report (VIP) --March 7, 2013

March 7, 2013 09:00 AM

SEASONAL DROUGHT OUTLOOK CALLS FOR 'SOME IMPROVEMENT' ACROSS WESTERN CORN BELT... The National Weather Service's Climate Prediction Center (CPC) updated its Seasonal Drought Outlook this morning, calling for some improvement across the western Corn Belt. But it's important to note CPC labels this broad area, which includes South Dakota, Nebraska, western Iowa, western Missouri and western Minnesota, as "drought ongoing, some improvement."

The outlook states that springtime brings an increase in precip across much of the country and notes recent rain and snow observed in late February across much of country's midsection as the reason for the "upgrade" to some drought improvement for the western Corn Belt. But for Kansas southward, CPC notes there's only one month of the wet season included in the forecast period and therefore, "more substantial, longer-term improvement is unlikely." Therefore, ongoing drought is expected through the forecast period that extends through May. Click here for related map.

PF PERSPECTIVE: The updated Drought Outlook map reflects a notable shift in the area of the western Corn Belt that's expected to see some improvement. But it's also important to note that drought -- in some form -- is expected to linger in this key production area. It also suggests recent moisture improvement across the Central and Southern Plains is only temporary and signals stress to the HRW wheat crop will resume and intensify as it comes out of dormancy.


DROUGHT MONITOR REFLECTS LITTLE CHANGE... The updated National Drought Monitor reflects very slight improvement in the nation's drought, with 34.33% of the contiguous U.S. drought-free, compared to 33.62% last week. Very minor improvement was reported in Kansas, where "exceptional" drought shrank by just 0.15 percentage points with the entire state still covered by some form of drought. In Oklahoma, "exceptional" drought shrank by 2.26 points to 9.54% and Texas saw slight expansion of drought, with "exceptional" now covering 7.41%, up from 5.17% last week.

The monitor reports that 44.53% of the Midwest is drought-free compared to 40.47% last week. The monitor notes that moderate precipitation (0.5 – 1.5 inches) fell across parts of Missouri and southern Illinois, improving ponds and lakes. But it also notes that existing snowpack would yield "considerable benefit" to well depths and pond/lake levels in the days and weeks ahead through melting. "Significant precipitation has fallen across Minnesota and Wisconsin during the past 90 days, but most of it is sitting on top of the frozen ground, locked away in the snowpack. The scenario is the same across much of northeast Iowa, so no changes were made across the entire region," it states. Click here for related maps.


ENSO-NEUTRAL CONDITIONS EXPECTED INTO SUMMER... CPC says ENSO-neutral conditions are favored into the summer. However, it says there is increasing model divergence and overall less confidence in the forecast during the last half of the year, partly because of the so-called "spring barrier," which historically leads to lower model skill beginning in late spring.


EXPORT DATA POINTS TO HIGHER SOYBEAN EXPORT PROJECTION... Traders expect tomorrow morning's USDA Supply & Demand Report to reflect a slight drop in soybean carryover from last month and for corn and wheat carryover to be increased from last month due to a slowdown in demand. Following is a snapshot of how exports are stacking up based on USDA's Weekly Export Performance Indicator:

Wheat: With 13 weeks left in 2012-13 marketing year, total wheat bookings are running 5% behind year-ago. In the February Supply & Demand Report, USDA left its wheat export forecast unchanged (and steady with 2011-12) at 1.05 billion bushels. Total commitments (sales plus shipments) are at 82% of USDA's export forecast, which is below the five-year average of 94% and last year's pace of 92% at this time. This data suggests USDA's current export projection is in the ballpark, but it could be reduced.

Corn: With the 2012-13 marketing year half complete, total corn bookings are running 54% below year-ago. USDA lowered its export projection to 900 million bu. in the February Supply & Demand Report, which is 41.7% below the previous marketing year. USDA reports total bookings as a percent of total exports are at 63% compared to 83% last year at this time and a five-year average of 75%. These figures suggest the current export projection is still too high, although USDA is likely to wait before further lowering its forecast.

Soybeans: With the 2012-13 marketing year half complete, total soybean bookings are running 17% above year-ago. USDA left its export projection unchanged in its February Supply & Demand Report at 1.345 billion bu., which represents a 1.2% drop from the previous marketing year. USDA reports total bookings as a percent of total exports are at 96%, which is above the five-year average of 88% and last year's pace of 81% at this time. With the U.S. export window open a bit longer than usual due to shipping delays in Brazil, traders look for USDA to raise its export projection slightly. But once Brazil's shipping season begins in earnest, demand for U.S. beans should slow dramatically, meaning USDA could again leave its forecast unchanged in tomorrow's report. Click here for pre-report expectations.


BOEHNER: FARM BILL WILL GET DONE THIS YEAR... House Speaker John Boehner (R-Ohio) told members of the Ohio Farm Bureau this week that he expects the House as well as the Senate to pass a farm bill this year, according to The Lima (Ohio) News. He says, "the really big fight will be over how big of changes we're going to make" to the Supplemental Nutrition Assistance Program, formerly known as food stamps. Boehner also repeated his strong opposition to a supply-management plan for dairy.


CORRECTION TO TUESDAY'S BRAZILIAN TRANSPORTATION STORY... In Tuesday's "Evening Report" we incorrectly labeled the asphalt highway through central Mato Grosso. The correct highway number is BR-163. We apologize for any confusion our transposition error may have caused.

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