House passes disaster aid package, now what?

The House passed a $383 million disaster aid package for livestock producers on Thursday. The last-minute bill was put in after an attempt to extend the 2008 farm bill was pulled earlier this week. The final vote was 223 to 197 with bipartisan support and bipartisan opposition. 46 Republicans voted against the bill, 35 Democrats voted for it.

The next big question is will the package go anywhere? The Senate has indicated they will not take it up this week and may not even take it up when Congress returns in September. The upper house continues to push the lower house to pass the farm bill.

Senate Ag Committee chair Debbie Stabenow issued a statement: “It’s deeply troubling that the House would leave farmers and small businesses in the lurch at a time when our agriculture economy is vulnerable and facing incredible uncertainty. A five-year Farm Bill not only provides the immediate relief producers need to battle drought and disaster, it also gives farmers the long-term certainty and additional tools they need to keep growing and creating jobs over the long-term.

“By refusing to bring up the Farm Bill, House leadership is doing what Congress always does – kicking the can down the road instead of coming together to solve problems. If Congress does not pass a Farm Bill, there will be no reform, direct payments will continue, we’ll lose the opportunity for major deficit reduction and we’ll deliver a real blow to our economic recovery.”

Closing Grain and Livestock Futures: August 2, 2012

Sep. corn closed at $7.94, down 6 and 1/2 cents
Aug. soybeans closed at $16.53, down 29 and 1/4 cents
Aug. soybean meal closed at $523.70, down $13.50
Aug. soybean oil closed at 51.54, down 19 points
Sep. wheat closed at $8.65, down 14 and 1/2 cents
Aug. live cattle closed at $120.00, up $1.00
Aug. lean hogs closed at $91.60, down $1.60
Sep. crude oil closed at $88.91, up $.85
Oct. cotton closed at 70.44, up 38 points
Aug. Class III milk closed at $17.17, up $.04
Aug. gold closed at $1,587.40, down $16.30
Dow Jones Industrial Average: 12878.88, down 92.18 points

Global dairy prices mostly higher

Cash nonfat dry milk prices nudged little higher on the Chicago Mercantile Exchange on Thursday, the Global Dairy Trade Auction at Fonterra this week saw anhydrous milk fat prices 1.3 percent lower, skim milk powder increased 3 percent, whole milk powder increased 3.5 percent, milk protein concentrate was up 11.5 percent from the previous sale and the cheddar cheese price increased 5.5 percent.

Dairy Market News says while current supplies are adequate, cheese plants are concerned about the milk supply in the coming months as the drought and high feed prices push producers to cull more cows and more producers to sell-out altogether. Hope is at least some of those cows would move to other areas. The challenge is even bigger for cheese plants using milk from grass-fed cows. Adding to the concern, schools will start opening up for classes in the next few weeks meaning more milk going into the fluid market. The monthly Dairy Products report did show an increase in cheese production in June but the year-over-year increases have been steadily declining each month.

Spotty showers not enough in Wisconsin

The U.S. Drought Monitor says the severity of the drought eased a bit in Wisconsin last week. As of July 31, the total amount of area in drought in the Badger State declined 8 points to 51.4 percent. There was a ten-percent decline in extreme drought area to 9 percent of the state. The area is south of a line from central Grant County to southern Milwaukee County. A week ago that line stretched from northern Grant County up to southern Marquette and Green Lake Counties and down to central Ozaukee County.

The total area under severe drought is the same size as a week ago, 35 percent, but stretches a little further north into southern Clark County through central Wood County and down to Ozaukee County.

Wisconsin Ag Secretary Ben Brancel says the showers have been very spotty and the situation is still desperate for a number of Wisconsin farmers. He noted this week he stopped to see one farmer who’s corn looked great, the ears were full and just seven miles down the road a neighbor’s corn was waist-high and of little value. Brancel says the University of Wisconsin Extension Farmer-to-Farmer website has become a valuable tool connecting those with feed in Wisconsin to those who need it.

AUDIO: Brancel talks about the situation 6:31 mp3

Visit the UWEX Farmer to Farmer website here:

Corn, wheat led lower by soybeans

Soybeans led the other grains lower Thursday, primarily the result of investors liquidating long positions in the market, according to DTN. The dollar and outside markets changed course during the session, which accelerated losses in most commodities. Exports are healthy and ahead of the pace needed to reach USDA’s demand projections. The weather forecasts were drier than they were on Wednesday, but there was some rain in the Corn Belt Thursday morning. It’s beneficial, but time is running short for rain to do much good for soybeans.

Corn ended the Thursday session lower, but it might have been different if not for spillover pressure from soybeans and wheat. The commercial outlook for corn is growing less bullish, which means that demand rationing could be picking up the pace. Corn exports and shipments were bearish. However, this was offset by a sale of over 1.5 million metric tons of corn to Mexico. That happens to be largest one day sale since 1991. Ethanol production rebounded last week, but it’s below what’s needed to meet this year’s usage projections. There’s talk of feed wheat from Canada working into the Texas Panhandle to displace corn.

There were more double-digit losses for wheat Thursday, pressured by long-liquidation by noncommercial traders. There was news Thursday of cuts in wheat production estimates for China, Europe and Russia. But that news was offset by the higher dollar, as well as expectations for growth in Canadian wheat production.

Closing Grain and Livestock Futures: August 2, 2012

Sep. corn closed at $7.94, down 6 and 1/2 cents
Aug. soybeans closed at $16.53, down 29 and 1/4 cents
Aug. soybean meal closed at $523.70, down $13.50
Aug. soybean oil closed at 51.54, down 19 points
Sep. wheat closed at $8.65, down 14 and 1/2 cents
Aug. live cattle closed at $120.00, up $1.00
Aug. lean hogs closed at $91.60, down $1.60
Sep. crude oil closed at $88.91, up $.85
Oct. cotton closed at 70.44, up 38 points
Aug. Class III milk closed at $17.17, up $.04
Aug. gold closed at $1,587.40, down $16.30
Dow Jones Industrial Average: 12878.88, down 92.18 points

Well driller price gouging investigated

The Missouri Attorney General’s office is investigating reports in farming country of price-gouging by water well drillers. State Attorney General Chris Koster says, “There have been complaints out of northwest Missouri about well drillers who were charging exorbitant prices to drill water wells these days. It highlights the problems that are being caused by this drought and the possibility of price-gouging statewide.

Koster says because drought covers every inch of the state there are those who are trying to take advantage of people by over-charging for their services. Missouri has been under a state of emergency since July 23rd because of the severe and extreme drought.

Missourians are urged to contact the Missouri Attorney General’s office to report any suspected incidences of price gouging (800-392-8222).

~Missourinet contributed to this story~

Analysts: Smaller producers may exit

Livestock industry analysts say one consequence of the drought and the resulting high corn prices will be another decline in the number of farmer-cattle feeders and smaller, independent pork producers.

Jim Robb of the Livestock Marketing Information Center tells Feedstuffs that the cattle industry will continue to transition to fewer and larger feeding operations as more one-yard commercial feeders and farmer-feeders go out of business.

While not necessarily predicting long-term structural change, market analyst Kevin Good of CattleFax agrees that many farmer-feeders will likely head to the sidelines over the next few months.

“With elevated corn values, the smaller farmer-feeder—more than likely as we go on into 2013—is not going to feed as many cattle,” Good told those attending the recent Cattle Industry Conference in Denver. “He’s going to be content to sell that corn and bypass the feeding operation.”

Pork industry economist Steve Meyer of Paragon Economics says it’s much the same situation in the hog business.

“The brunt of this is going to fall on the smaller producers,” Meyer says. “We haven’t even made up half of the losses from 2008 and 2009 in the last couple of years—and now we’re faced with record high feed costs.

“My forecast for production costs for next year is 95 dollars per hundredweight on a carcass weight basis.  That’s far and away the highest ever.”

Meyer says there are two categories of producers who will be most affected.

“One is, if you’re not right up there with the best on efficiencies, you’re not going to handle this,” he says, “and number two, if you have some other things like a grain enterprise in the operation, I think that’s probably going to facilitate a little faster response to this.”

Fair vendors using high-oleic soy oil

In the 54 years they’ve been in the food business, Charlie Cox, of Concession’s by Cox says they’ve heard about all the miracle cooking oils.

“One time you do everything with peanuts and then one time it was vegetable oil,” said Cox. “You’ve heard all these stories in the 54 years I’ve been in business, of course I go back to when we used to use lard, just lard, you know.”

But the high-oliec soy oil they’re using at the 2012 Ohio State Fair is the best they’ve found.

“This though has been the best to come along so far,” Cox said. “And from my standpoint, not only the best oil, but it also helps the best people and that’s the farmers.”

And Charlie Cox says there’s no question they’ll be using high-oleic soy oil in the future, for two reasons, the product is excellent and because it benefits farmers.

Audio: Charlie Cox, Cox Consessions (3:30 mp3)

John Schartman, Senior Marketing Manager for DuPont Pioneer’s Northeast Business Unit says the Ohio State Fair is an excellent place to get their product, Plenish high-oleic soybean oil, into the hands of potential customers.

“It’s a great opportunity to place the oil in their hands, give them experience with it, because that’s one of the routes to market,” said Schartman. “They’ll work through their normal channel of distribution and they’ll be able to obtain the oil for their use.”

Schartman adds that feedback from vendors he talked to ranged from, “met expectations,” to “exceeded expectations.”

Audio: John Schartman, DuPont Pioneer (2:20 mp3)

For John Motter, Chairman of the Ohio Soybean Council, seeing and tasting a product he grows on his Hancock County farm is exciting.

“It’s great to be able to sit down and enjoy something healthy at the fair,” Motter said.

Audio: John Motter, Chairman, Ohio Soybean Council (3:15 mp3)

Feedlot cattle trade at sharply higher prices

USDA Mandatory reported a moderate to active cattle trade in the Southern Plains on Thursday on moderate to good demand. Compared to last week, live sales were 3.00 to 4.00 higher in the Texas Panhandle and Kansas at 118.00. Trading in Nebraska was moderate on good demand. Early live sales were 4.50 to 5.00 higher at 119.00.  Compared to last week, dressed sales were 4.00 to 6.00 higher at 184.00 to 186.00, mostly 185.00. Trading was moderate in Iowa with dressed sales 4.00 to 5.00 higher than last week at 184.00 to 185.00. The cattle slaughter was estimated at 126,000 head, 2,000 more than last week, but 3,000 less than a year ago.

Boxed beef cutout values were firm on moderate demand and light to moderate offerings. Choice boxed beef was up .46 at 178.15, and select was .55 higher at 171.38.

Live cattle contracts settled 45 to 102 points higher on the Chicago Mercantile Exchange on Thursday. Cattle contracts had traded lower much of the session in slow trade volume. Traders had been cautious before the development of feedlot business as packer bids were significantly below asking prices. However, cattle began to trade around midsession at prices 3.00 to 5.00 higher than last week and gave a boost to futures. Additional support came from modestly higher boxed beef values in the morning report. August was up 1.00 at 120.00 and October was 1.02 higher at 125.10.

Feeder cattle settled 2 to 57 points lower. Continued poor feeding margins and a lack of commercial buying interest continue to weigh negatively on the feeder market. August settled .02 lower at 139.75, and September was down .57 at 140.55.

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