April 24, 2014

Iowa Congressman Steve King Interested In Ag Committee Chairmanship

Oklahoma Congressman Frank Lucas has said he will give up the chairmanship of the House Agriculture Committee next year. Iowa 4th District Congressman Steve King has been mentioned as a possible candidate for Chair of that Committee, a suggestion to which he had this:

Steve King Audio 1

King says he is concerned that if he is appointed chair of the committee – House leaders may not give him free rein

Steve King Audio 2

Last year saw numerous battles within the Republican caucus in the House – and King sees himself as the conscience of House conservatives – who often rebelled against the wishes of the Speaker of the House. King says he doesn’t want to compromise

Steve King Audio 3

King says if he is given the gavel of the Agriculture Committee – there are several issues from the new farm bill he would like to revisit

Steve King Audio 4

The livestock issue he mentioned is the so-called King Amendment – which didn’t make it into the final farm bill. It would prohibit states from enacting any laws that set standards for agricultural production that exceed those in other states governing the same production.


Source: NAFB


Weekly Market Commentary with Miller Risk Management

Weekly Summary

Grain markets showed a strong divergence this week as corn failed to gain any ground despite big gains in both soybeans and wheat.  There were a few different reasons for this which we will get into individually in the crop below.  In general though, fund pushes continued while weather forecasts supplied the bulk of direction.

As for weather forecasts, they likely played the biggest part in the divergence with weather for the HRW areas providing a significant threat to production that had not yet suffered while at the same time the cornbelt is expecting warmer temps and drier conditions that should significantly aid progress in the Southern and Eastern belts.  The western cornbelt is expecting some intermittent rains, but that itself could be viewed as bearish as the rains are moderate and soil conditions in some areas of MN, SD and Western IA are fairly dry.

Ukraine was also an issue as tensions arose again on Monday with Pro-Russian forces seizing buildings, property, etc in the eastern Ukrainian city of Slovensk.  The faction declined to lay down arms by the Monday deadline set and for a few days, there was some uncertainty as to how Russia would act in the matter given their actions in the Crimea.  Additonally, Russian air foreces buzzed a U.S. warship in the Black Sea that same weekend for around half hour which didn’t add comfort to anyone.  By late week some of the tension had died down with a supposed “deal” that would allow Pro-Russian forces to return property that was taken in return for Amnesty, but even that looked shaky by late Friday afternoon.


Soybean market were mild to start the week with little news or reason to rally.  Chinese defaults were still weighing slightly on the market, and, in fact, continued again this week.  However that fact was buried once the NOPA monthly crush data was released on Wednesday.  While the report is industry based and includes only members of the NOPA association, it does cover a good portion of the industry and is a good proxy for USDA data.  The report showed March crush rate at 153.84 mbu, well above the 146.1 mbu anticipated by the trade.  That number is also about 12 mbu higher than the month before and a new all time high for the month of March (at least since NOPA reports started).  If all other things had been equal, the market would likely have seen a small bump and moved on, but that’s not the case with export pace also running very strong and the U.S. increasingly becoming reliant on imported soybeans out of South America.

That being said, the unexpected bump in demand seemed to require some sort of response from the market in terms of price and a renewed effort to “ration” demand, as it were.  At the very least, the price differential between the U.S. and South American needs to remain wide enough for imports to continue.  The USDA report last week showed imported soybeans of 65 mbu and many analysts are calling for that number to increase to around 85 mbu before the marketing year end. At this rate of crush, that seems pretty likely but its also important to remember that the markets job, in general, is to over-react to the situation to ensure longer term supply.  That over reaction (which we are likely in right now) is what leads to increased volatility in the market.  This week’s closing comments eluded to that fact.  The comparison being that prior to the corn “shortage” in 1996-1997 the market believed pipeline supplies to be between 800 mbu to 1.00 bbu when it turned out that, in fact, we could dip down to around 500-600 mbu.  That appears to be situation in soybeans right now; they are in the process of finding “pipeline”.

Outside markets were somewhat influential this week, primarily with news that Chinese GDP data coming in a tick above expectations.  Quarter 1 GDP data for the Asian nation was expected at a “poor” (remember its all relative) 7.3% and came out at 7.4%.  That doesn’t seem like much difference, and it’s really not but it was enough to take the edge off of some concerns about Chinese policy.  The government came out later saying the number was not enough for them to change policy, but that’s something that we need to note as well; it means monetary growth and credit policy will remain tight.


Corn markets were disappointing this week for a variety of reasons, first because of their inability to capitalize on strength in either soybeans or wheat and then on Thursday, the market slid just below technical levels that would indicate further weakness on the horizon.  Closes in both July and December on Thursday were at or just below levels that confirm a divergence in recent momentum patterns and warn of further moves lower.  To be fair, the next support candidate in December is $4.90, which is relatively tight.  However, we have to consider the timeframe of this move, and heading into a week where weather appears conducive to planting and also coming at a time when sentiment is relatively high, we could see a small break snowball on itself rather rapidly.

Monday, USDA released it’s first weekly planting report for the 2014 year with planting reported at 3% complete.  As much as the trade talked about delays, that number is only 3% less than the 6% average for this week.  Given, last week’s weather probably didn’t allow for much further progress as it was too cold and too wet in most areas.  Still, this coming week looks nearly ideal in many locations and after last year’s planting debacle, its going to be tough to get traders overly excited that producers cant make up a 5-10% deficit in a short amount of time.  The one area that may remain slightly slow is the northern and western cornbelts, where forecast are calling for intermittent rains this week. For the bulk of areas, however this isn’t a concern.  The western cornbelt isn’t really behind and it’s been temperatures that have held producers back.  Rains will be welcome in areas of IA, western MN, SD and NE, especially when they are accompanied by temperatures in the 60’s and 70’s.


As big of a week as it was for soybean prices, wheat really showed the most impressive moves to the upside, at least in terms of ability to recover from recent pressure.  The week started off with a bang, combining the strength of tensions in Ukraine and Russia with a serious frost threat.  While the Ukrainian/Russian news wasn’t exactly new, the weekend developments of Pro-Russian factions taking over eastern cities was and it represented a spread of recent trends that no one outside of Russia really wanted to see.  In addition, Russian air forces buzzing U.S. warships in the Black Sea and admissions by Putin that Russian military forces did in fact help in Crimea (not really news, but the first admission of such action) really added to concerns.  At the same time, forecasts for SW Kansas down through OK and Texas went from cold to hard freeze warning at a time when the crop is susceptible to damage.  While the Ukrainian situation was able to pushed to the back burner, the freeze issue wasn’t so quick to fade.

As mentioned above, Monday a hard freeze warning was issued for western KS, OK and Texas and by Tuesday morning temperatures dipped down to around 24 degrees as far south as Amarillo, TX.  The majority of wheat in this area was in the jointing stage, and therefore susceptible to damage at this point.  Areas of Texas were even more susceptible as they were already heading out.  The fringes of these areas dipped to around 30 degrees, which while certainly not healthy, probably didn’t do much damage.  The market has taken full advantage of this and ran with it, quickly heading back to levels last seen in the later part of March.  Traders will be watching for confirmation of further signs of how much damage was done when condition reports are released on Monday.

I would caution ahead of that release, however, that rating might not sink as much as people think.  First of all, the hard freeze areas almost entirely overlap with the worst drought affected areas, meaning much of the frost damage wheat was probably already written off or on its way out when a frost simply finished it off.  State ratings from TX and OK were already down to around 12% or so good to excellent, so any damage that did happen will have to come out of wheat that was ranked fair, at best.  As for Kansas, there is probably a better chance at seeing damage but more than likely its already been priced in at this point.

Wheat markets are becoming increasingly hard to analyze with HRW crops continuing to struggle and run carryout projections very lower.  On the other hand, conditions in SRW country are nearly ideal, and HRS planting is just beginning in areas of South Dakota.  As a whole though, I believe we will continue to see HRW maintain its historically odd and out of line premium to HRS  while the market as whole remains below prices seen two or so years ago.  The world wheat markets is not short and from a practical standpoint lower protein HRS wheat can, to a large extent, replace HRW in times of necessary.

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Growth Energy Responds To Corn Stover Ethanol Study

A study from the University of Nebraska was recently published in Nature Climate Change and suggests using corn residue to make ethanol and other biofuels reduces soil carbon and can generate more greenhouse gases than gasoline. 25x’25 says the study offers nothing beyond what biofuel interests already understand – that excessively removing agricultural residue from the soil has negative impacts on climate. Growth Energy CEO Tom Buis says the conclusions reached in the study are flawed.

For one thing – Buis says the study’s authors assume all 10 Corn Belt states would be harvesting 75-percent of corn stover – which is unrealistic and beyond what any cellulosic ethanol producers are actually considering. He says both USDA and EPA have refuted the study and called out the authors’ unrealistic assumptions – concluding the study doesn’t provide useful information relevant to the life cycle of greenhouse gas emissions from corn stover ethanol.  When it comes to reducing greenhouse gas emissions – Buis says a long-term, comprehensive approach that successfully partners first and next generation fuels is necessary – not a short-sighted, unrealistic and misleading study.