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USDA action, favorable weather bearish
USDA, in a surprise announcement, opened up 24 million acres of CRP land for
haying/grazing yesterday afternoon. That should provide additional feed supplies
for cattle producers, and thus easing the feed grain supply tightness somewhat.
The idea by USDA was to allow a one-time haying/grazing harvest after July/Aug
to provide more feedstuffs for livestock producers. However, this won't be high
quality hay, as clearly it will be cut about 1-2 months later than ideal and be
mature hay by that time (it had to be after the all important 'nesting season').
The $1.2 billion dollars of feed would probably have been worth 2x as much if
they had allowed earlier use, but alas, economics (or common sense) have never
been a part of the political world! This move will ease feed grain supplies as
less corn will need to be fed, and more feed available to replace the
considerable acres of hay/pasture being torn up for 2008 grain production (3
million acres this year).
Also, while USDA was clear this wasn't an 'early out'
for CRP land, the practical implications are that it's possible to clear trash
from CRP coming out this year or next, making it much easier for producers to
convert to cropland in the future. This also sets precedence by USDA that CRP
land is available to meet the nations food and feed supplies, and obviously
should be as it is a great resource important to our country. This pressured
corn/wheat overnight to double digit losses, and may continue to have a
psychological effect on markets long after the move is over. If it's available
for hay at no charge, why not let producers crop it and save the entire payment?
Also yesterday afternoon the crop progress report showed corn planting at 88%
complete, an advance of 15% from last week (vs. 6% normal) so we are 'catching
up' to normal progress. Soybean growers planted 25% of their crop last week
(vs. 20% normal), moving to 52% complete vs. 67% normal so we are catching up to
normal progress with another good week of planting. The western Corn Belt is
virtually on schedule with normal, but the eastern corn belt is still
struggling. The worst states are OH and MO where some ground is likely to be
switched from corn to soybeans, with ILL, PA, and IND all lagging significantly
too. However, topsoil finally is drying out in the east, and the weather
forecast looks more like normal weather over the coming 2 weeks so hopefully
progress will start to accelerate in the eastern corn belt. The crop is also
behind normal, and many acres will need to be replanted due to cool/wet
conditions providing a poor stand. However, the disastrous start to the 2008
crop through May 10 has quickly reversed direction the past 2 weeks, with
progress moving along much better. The improving planting progress/conditions
will provide price pressure to the market over the coming week.
Winter wheat crop conditions also improved 2% G/E last week, raising yield
potential further above 'trend' as Pro Ag yield models jumped a huge 0.5
bu/acre, the largest jump this year. That reverses last week's drop and
continues to suggest this year's wheat crop is still getting better. If cool
weather persists, what looked like bummer might turn out to be a bumper crop!
Rain also fell in KS, OK, and TX the past 24 hours that will greatly aid filling
wheat heads. The crop is still well behind normal, with only 64% headed vs. 76%
normal. KS is 80% headed vs. 97% normal, so there is still a long ways to go for
that crop (another 30 days???). OK is 99% headed while TX is 93% headed. Rain
now will help fill maturing grain, and Pro Ag expects the crop to keep getting
better unless heat reduces yield potential (more 90-100 degree temps are on the
way this coming week).
Overall, crop prospects are improving from a poor start, so some premium will
need to be taken off the grains. With sagging outside markets this week so far
(energy the main driver) and USDA's CRP haying/grazing program, we could see
significant losses in the near term. Is it time to complete corn/bean sales?
It's gut check time for bulls!
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USDA, in a surprise announcement, opened up 24 million acres of CRP land for haying/grazing yesterday afternoon. That should provide additional feed supplies for cattle producers, and thus easing the feed grain supply tightness somewhat.