Investors ‘massively’ divided over US corn harvest
The degree of uncertainty over the US corn crop, even with well over half harvested, has prompted a "massive" range of trade guesses for an official report which promises to be one of the most important of the season.
Soybean and Corn Advisor, the consultancy run by influential crop scout Michael Cordonnier, has followed up Informa’s 11.2bn-bushel estimate on Friday for the US corn crop with a forecast 1.234bn bushels (31.3m tonnes) lower.
The gap between the forecasts, at the extreme ends of the range produced by brokers in the run up to the US Department of Agriculture’s monthly Wasde crop report, is unusually wide.
‘There is no consensus’
Indeed, it is large enough to accommodate the harvest in Argentina, the second-ranked exporter, with room to spare, besides being bigger than the range of estimates ahead of last month’s Wasde report.
Market estimates for October 11 Wasde corn data
Yield – average, 122.884 bushels per acre; highest, 127.0 bushels per acre; lowest, 120.0 bushels per acre
Harvested area – average, 86.136m acres; highest, 87.5m acres; lowest, 83.0m acres
Harvest – average, 10.601bn bushels; highest, 11.194bn bushels; lowest, 9.960bn bushels
Current USDA figures – yield, 122.8 bushels per acre; harvested area, 87.4m acres; harvest, 10.727bn bushels
Sources: USDA, ThomsonReuters
And it reflects the degree of uncertainty not only over the yield of the crop – with Informa believing the USDA’s current estimate of 122.8 bushels per acre is too low, and Dr Cordonnier seeing it as too generous – but over harvested area too.
"The consensus for Thursdays production number are out and the best way to describe the numbers is that there is no consensus, especially when it comes to corn," Darrell Holaday at broker Country Futures said.
"The range in corn production from high to low is 1.2bn bushels. That is massive."
Country Futures itself believes the Wasde will show a corn production number of 10.42bn bushels.
‘No better than 1988′
Dr Cordonnier said that his forecast for harvested area was based on comparison with 1988, the last severe US drought year, when a far higher proportion than normal of corn was abandoned or chopped for silage.
Market estimates for October 11 Wasde soybean data
Yield – average, 37.006 bushels per acre; highest, 38.5 bushels per acre; lowest, 35.3 bushels per acre
Harvested area – average, 74.579m acres; highest, 75.4m acres; lowest, 73.3m acres
Harvest – average, 2.759bn bushels; highest, 2.903bn bushels; lowest, 2.630bn bushels
Current USDA figures – yield, 35.3 bushels per acre; harvested area, 74.6m acres; harvest, 2.634bn bushels
Sources: USDA, ThomsonReuters
"I do not think this year is, outside the Deep South, any better than 1988," he told Agrimoney.com, pegging the area of corn harvested for grain at 83m acres, well below the current USDA figure of 87.4m acres.
Informa Economics has employed not only a lower figure for crop abandoned, but a higher seedings forecast too, by some 1.5m acres, after data from the Farm Services Agency, which handles farm support programmes, indicated that sowings of both corn and soybeans were higher than the USDA figure.
However, Dr Cordonnier questioned the reliability of "part-formed" FSA data which were, thanks to a freedom of information inquiry, released earlier than the agency would have published under its own steam.
Furthermore, the sowings estimates in the USDA’s late-June area report looked likely to be notably accurate, given the early planting season increased the proportion of completed, rather than intended, seedings in farmers’ returns.
‘Desperately needs accurate guidance’
While Wasde reports tend in any event to be high points of the agricultural commodities calendar, Thursday’s Wasde looks especially significant for corn, and soybeans, given the range of forecasts, and at a time when thin supplies magnify the importance of estimate revisions on the crops’ balance sheets.
"Trade desperately needs accurate guidance on 2012 row crop supplies," said Richard Feltes at broker RJ O’Brien, which pegs the corn harvest at 10.468bn bushels.
Statistics: Posted by yoda — Tue Oct 09, 2012 12:20 am
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By Christopher Preble
I have a new piece up at ForeignPolicy.com this morning, commenting on the GOP’s apparent confusion about government spending and the effects that such spending has on others.
The party that opposes nearly all other forms of federal spending happily embraces the military variety. Republicans assert that military spending cuts will result in massive job losses, even as they argue that cuts in other federal spending would grow the economy and create jobs in the private sector. They are skeptical that the federal government should engage in nation-building at home, but celebrate it abroad. Republican candidate Mitt Romney accuses Obama of fostering a “culture of dependency” in the United States, yet ignores that U.S. security guarantees have created an entire class of affluent countries around the world that now rely upon U.S. tax dollars to pay for their defense.
Trouble is, as I point out, President Obama “hasn’t been anxious to kick other countries off the dole.” He boasts that the “the United States is still the world’s ‘indispensable nation,’” and he pledges that the U.S. military will continue “to underwrite global security,” which doesn’t leave much for anyone else’s military to do.
Such an ambitious mission is expensive.
Obama’s unwillingness to make deep cuts in military spending confirms his rhetoric. Over the next decade, the Pentagon’s annual base budget (which excludes most war costs) will average $517 billion in constant 2012 dollars, 11 percent higher than what Americans spent during the George W. Bush years.
For many Republicans, but especially for Mitt Romney, that isn’t nearly enough. They accuse the president of gutting the Pentagon’s budget, and loudly complain about his unwillingness to undo the automatic spending cuts that would cut even more (that they, inconveniently, engineered).
Republicans could reasonably claim that military spending should get a pass because the Constitution clearly stipulates a federal role in defending the country. But nowhere is it written that Americans must provide security for others; that is the job of their governments, not America’s.
Indeed, the Republicans’ reflexive commitment to more military spending is particularly curious given their appreciation for how incentives work in the domestic sphere. Republicans know quite well that people are not inclined to pay for things that others will provide for them. GOP leaders speak often of moral hazards — when individuals or businesses behave irresponsibly because others are there to bail them out. The same problem exists in international politics, but is strangely ignored in the GOP’s plan to continue policing the world.
I conclude the piece with some unsolicited advice for the GOP nominee, but I doubt he’s listening. You can read the whole thing here.
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April 25, 2012
Is the austerity consensus falling apart in Europe?
With the probable election of the first socialist president in France in more than 15 years, and bond rates rising in Spain and Italy, investors appear to be questioning the committment of the euro zone to tackling budget deficits and the sovereign debt crisis.
Markets were shaken after a first round of French presidential elections on Sunday put Socialist Francois Hollande, who wants the euro zone to focus on growth rather than austerity, ahead of incumbent Nicolas Sarkozy. The two contenders face off in a final vote May 6.
Further undermining stability, the Netherlands’ government collapsed yesterday after failing to reach agreement over austerity measures, placing its AAA credit rating at risk. But Spain still managed to lure strong interest in the auction with overall demand outstripping supply by more than four-to-one.
The money raised was towards the top of its targeted range of €1-2 billion. But it had to pay a steep price. The borrowing rate leapt to 0.634% from 0.381% for three-month bills and to 1.58% from 0.836% for six month bills, when compared with the last similar auction on March 27.
Spain has promised to cut its public deficit – the annual shortfall of income compared to spending – to 5.3% of gross domestic product in 2012 and just 3% of GDP in 2013. Last year it had allowed the deficit to hit 8.5% of GDP – 2.5 percentage points over target.
Desperate to meet its targets, the government approved €27 billion in fiscal tightening in its 2012 budget, in addition to an earlier round of tax increases and spending cuts amounting to €15.2 billion.
But analysts say those targets will be harder to reach as tax income declines and welfare costs rise because Spain is back in recession just two years after emerging from the last downturn. Spanish GDP fell by an estimated 0.4% in the first quarter of 2012 after a 0.3% decline in the last three months of 2011, the Bank of Spain said yesterday.
Social unrest in Greece and Spain are rocking the governments of those two countries. Greece has seen its economy contract an astonishing 5% and along with austerity measures, will cause enormous pain among the citizenry. An election next month is not likely to solve anything, as the major parties are all committed to drastically cutting the budget in order to keep receiving the EU bail out package to prevent default. If anything, some of the fringe parties on the right and left may make sizable gains as they promise a way out of the crisis without the accompanying sacrifices being asked by the current government.
Recession has complicated the Spanish situation enormously. There is little chance they will meet those deficit targets – or even come close – while the economy is contracting. The demonstrations in Spain have been massive and a general strike last month paralyzed many sectors of the economy. Spanish prime minister Mariano Rajoy has pledged to continue the austerity program – referred to as the "harshest budget ever seen in Europe – but has very little room to maneuver. Unemployment is expected to climb to depression-era levels of 25%.
All of this has led some analysts to wonder if by this time next year, the austerity budgets in most of the eurozone will be history. It is possible that governments may fall, unrest roil the streets, and some countries default rather than inflict pain on their citizens – the result of decades of overspending and over promising. What becomes of the european experiment if this happens, no one knows.
But it is very possible that the face of Europe will change dramatically and the ancient concept of a United States of Europe end in a sea of red ink.
Statistics: Posted by yoda — Wed Apr 25, 2012 12:16 am
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