Prices and Farm Bill Insight - Monday, 02 December 2013

The end of 2013 is now only 29 days away!    Many of us across the upper Midwest are thankful to see this year end and are hopeful that 2014 will be a bit merrier and brighter. 

Along with the end of the year comes the Farm Bill deadline.  Once again our leaders have found themselves unable to negotiate an agreement on this subject the Senate and the House of Representatives have polarizing views on the SNAP portion of the bill which is a highly emotional and sensitive subject.   In 2011 the U.S. set a record for the number of people receiving SNAP benefits-45 million people each month which amounted to a total of $78 billion spent that year alone.  Unfortunately that total number of recipients has now grown to 47.7 million in 2013.  What many of us don’t realize is exactly who benefits from this program:

  • 92% of the people receiving SNAP benefits are:  SENIOR CITIZENS, THOSE ON DISABILITY/HANDICAPPED, CHILDREN, and actually some EMPLOYED INDIVIDUALS QUALIFY as well.
  • 8% UNEMPLOYED-the current law states that if you are not getting a job or in an education program you are only eligible to receive SNAP benefits for 3 months out of every 36 months.

The Senate has proposed a cut to the SNAP program by $4 billion over the next 10 years while the House has proposed an amount 10 times that of $40 billion over 10 years.  Those numbers make it clear exactly how far apart the two groups are from being able to reach any sort of an agreement.  If we reach the end of the year and we have no agreement they will enter the 3rd year of debating this bill and a choice will need to be made:

  • To extend (again) the 2008 version of the Farm Bill.  (many farm groups are supporting this option IF the controversial Direct Payments are included within its extension)

OR

  • Revert back to the antiquated Farm Bill of 1938.

The Farm Bill of 2008 is an enormous bill with 15 separate components:

  • Commodities
  • Conservation
  • Trade
  • Nutrition
  • Rural Development
  • Research
  • Energy
  • Horticulture
  • Organic Agriculture
  • Livestock
  • Crop Insurance
  • Remainder not specified

The projected 5 year cost of this bill was $284 billion with the majority of this funding to be consumed by only a few components:

  • 67% Nutrition
  • 15% Farm Commodity Supports
  • 9% Conservation
  • 8% Crop Insurance

Grain prices remain vulnerable.  There is little debate over the fact that demand for corn will continue to grow in the coming months.  The issue that all producers need to understand is “does it matter”.  Several end-users are offering a positive basis to encourage producers to part with bushels but many analysts are worried these offers may disappear in January or once they cover 5-10% of their needs covered which typically happens following a year of high prices and usual “carry” in the market many producers use to forward sell is also dwindling away.  Is everything gloom and doom?  Hopefully not, many market analysts feel that there are still a few selling opportunities to come but also caution us to not expect those “pops” to take us above $5.00.  An example of how they believe this could happen was back in late September/early October when Funds went from net negative 45,000 wheat to a net positive 30,000.  That was worth a .65 cent rally.  Right now in corn the Funds are sitting with a net negative 130,000, when they pull these bushels out of the market they estimate we could see a short lived rally to $4.75-$4.80 range.

The 90 day outlook was released for this winter and if you love below normal temperatures and above normal snowfall this is a forecast you will like.  L  Most everyone loves a white Christmas and this year Elwynn Taylor gives all of us Iowan’s a 60% chance of snow cover by Christmas.

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