BUDGET ONE OF MANY FOCUSES IN STATE OF THE UNION ADDRESS... The key topics during President Barack Obama's hour-long State of the Union address were raising the minimum wage, increasing spending on infrastructure, confronting climate change and passing gun-control legislation. As expected, Obama again called for reducing the budget deficit through a mix of tax increases and spending cuts, saying he would support "modest reforms" in programs including Medicare, as long as wealthy Americans contribute as well.
Obama called for a package of spending cuts and tax hikes to replace the $85 billion in automatic Fiscal 2013 spending cuts scheduled to begin March 1. Without a deal, Obama warned, furloughs would occur that would undermine the economic recovery, hurt military and domestic programs and "cost us hundreds of thousands of jobs."
Obama made clear that the tax code would be at the center of his efforts to broker deals with the GOP to tackle the deficit, spur growth and strengthen the middle class. The president underscored his interest in a corporate tax overhaul and said revenue generated by eliminating some tax breaks would permit reducing both the 35% top corporate income tax rate and the budget deficit. Get more details on the address and initiative proposals here.
OBAMA ON CLIMATE CHANGE, ENERGY INITIATIVES... During the State of the Union address, Obama also pushed for climate change legislation, but said he would use his executive powers if Congress balked. The EPA is currently moving to regulate emissions for new power plants, but a similar approach is now expected for existing plants.
Obama noted the 12 hottest years on record have come in the past 15 years, and he said the raft of extreme weather events of the past several years should not be considered a fluke and that we must "act before it’s too late." Obama said he wants Congress to pursue a bipartisan, market-based solution like the one Sen. John McCain (R-Ariz.) worked on.
He named specific goals, such as doubling renewable electricity generation again by 2020 and a new "Race to The Top" program to reward states for energy efficiency efforts. Obama also said he would call on Congress to make renewable energy production tax credits permanent in an effort to double renewable energy generation by 2020.
The president also proposed creating an Energy Security Trust that would shift drivers from oil-burning vehicles to ones using "a range of cost-effective technologies like advanced vehicles that run on electricity, homegrown biofuels and vehicles that run on domestically-produced natural gas." The trust would be paid for by revenue from oil and gas development on federal lands, including offshore production, and would fund research for clean energy technologies.
WEEKLY ETHANOL PRODUCTION UP FROM PREVIOUS WEEK... According to the Energy Information Administration, ethanol production the week ended Feb. 8 of 789,000 barrels per day (bpd) was up 15,000 bpd from the previous week and above the four-week average of 781,000 bpd. Meanwhile, stocks declined 3% from the previous week to 19.5 million barrels. Traders generally expect another uptick in production to be reflected in next week's report as more plants are reopening their doors after a temporary shutter.
ARGENTINE FARMERS RELUCTANT TO SELL CROPS... South American crop consultant Dr. Michael Cordonnier says Argentine farmers are reluctant to sell grain and under the current economic situation because there is speculation President Kirchner could increase the export tax or raise income tax rates for farmers who are "hoarding" their crops. Dr. Cordonnier explains the combination of the 30% inflation rate, the exchange rate (4.5 peso to the dollar) and the 35% export tax results in Argentine farmers only pocketing about 20% of the value of soybeans sold. Therefore, they are not anxious to sell soybeans and the Argentine government wants the revenue from the export taxes as it accounts for about 11% of government revenues. Click here for more perspective from Pro Farmer Editor Chip Flory.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Wait for an overdue corrective bounce to get current with recommended sales levels. We remain patient on 2013-crop sales given the moisture needs across the western Corn Belt. Hedgers should be ready to add hedge coverage on a corrective bounce into the $5.80 area in December corn futures.
BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Wait on a price bounce to get current with advised old-crop sales. Remain patient on 2013-crop sales for now, but be prepared to make initial sales either via cash forward contract sales or a hedge on a bounce to the $13.50 level in November soybean futures.
WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Wait to get current with advised sales as recent price pressure has been overdone. Be prepared to make initial 2013-crop sales on an extended price recovery. We don't want to get too aggressive with old- or new-crop sales at this stage as we have HRW crop concerns despite recent precip in the Plains.
COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold in the cash market. Be prepared to increase 2012-crop sales and to make initial 2013-crop sales if the market signals a near-term high has been posted. We have concerns the price runup will slow export demand.
CATTLE: Demand concerns are trumping tight supplies at the moment, which means there's more near-term downside risk until the market signals prices have fallen far enough. While there's more downside risk, fed cattle producers should continue to carry all risk in the cash market as the long-term outlook remains bullish. The sharp price break will eventually present an opportunity for feeder cattle buyers to establish long coverage.
HOGS: Hog producers should continue to carry risk in the cash market as the downside is overdone. With that said, there could be more near-term price pressure as the market searches for a price that encourages more demand.
FEED: Use the sharp price break to get current with advised feed coverage. 25% of 1st-qtr. corn needs are covered in long March corn futures at $6.87 and 25% of 2nd-qtr. Corn needs are covered in long July corn futures at $6.78 3/4. 25% of 1st-qtr. protein needs are covered in long March soybean meal futures at $395.30, and 25% of 2nd-qtr. Protein needs are covered in long July soybean meal futures at $388.00.