Evening Report (VIP) -- February 7, 2014

February 7, 2014 08:52 AM
 

Traders expect USDA to tighten old-crop carryover Monday... USDA is expected to tighten its old-crop carryover forecasts for corn, soybeans and wheat in Monday's Supply & Demand (S&D) Report as traders anticipate higher export forecasts for all three. Average pre-report trade guesses put corn carryover at 1.606 billion bu., down from 1.631 billion bu. in January; soybean carryover at 143 million bu., down from 150 million bu. in January; and wheat carryover at 602 million bu., down from 608 million bu. in January.

2013-14 carryover

Avg.

Range

USDA Jan.

2012-13

in billion bushels

Corn

1.606

1.574-1.667

1.631

0.821

Soybeans

0.143

0.130-0.151

0.150

0.141

Wheat

0.602

0.588-0.653

0.608

0.718

As we highlighted in yesterday's "Evening Report," total corn and soybean bookings are running well ahead of the paces needed to reach USDA's export projections. USDA could wait another month to alter its wheat export projection, but a slight tightening to wheat carryover is anticipated by the market.

 

Employment data disappoints, again... The Department of Labor reports the U.S. economy added 113,000 non-farm payrolls in January, well below expectations for around 185,000 jobs being added. The unemployment rate, however, came in as expected at 6.6%, down from 6.7% in last month's report. The labor force participation rate edged up 0.2 percentage points from last month to 63.0%, which is still near a 35-year low. Economists hoped December's weak job gains would be revised much higher, but the figure was only increased by 1,000 jobs to 75,000. Get more details.

PF perspective: The biggest discussion point coming out of this report is that we now have two months in a row of disappointing jobs data. This will present the first major test for Janet Yellen as the Federal Reserve chair and for the rest of the Federal Open Market Committee. The panel has opted to taper its asset purchase program by $20 billion in two installments, putting the effort at $65 billion per month.

There are arguments on both sides -- one is that even though the data was disappointing, it still signals an expansion in the U.S. jobs market. The other view is that the slowing of jobs growth could be enough for the Fed to halt its tapering efforts. Markets appear to be moving toward the latter as U.S. stock futures dropped after the data was released but the major U.S. stock indices rallied today. That could mean we’re back to a "bad news is good news" view on tapering. That view is being enhanced by the manufacturing data earlier this week that also disappointed and helped spur a major drop in the Dow.

Attention also will come on Fed speakers in coming days to get a read on whether they are indeed rattled by this latest set of data. How they characterize the data will have a lot to say about how the market view may shift on the issue of tapering the asset purchases.

 

Attaché lowers Argentine corn and soybean crop pegs... The U.S. ag attaché in Argentina trimmed its estimates of the country's corn and soybean crops to 23.8 MMT and 54.5 MMT, respectively. These compare to USDA's current estimates of 25 MMT for corn and 54.5 MMT for soybeans. USDA could align its estimates to these targets in Monday's S&D Report.

The attaché says weather during December and January featured extreme high temperatures and drought throughout much of the country, but notes heat hasn’t been as damaging as in past years since it has been broken up by scattered rains. Click here for more.

 

'Made in Rural America' initiative... Today, President Barack Obama directed his administration, working through the White House Rural Council, to lead a new "Made in Rural America" export and investment initiative. This initiative is charged with bringing together federal resources to help rural businesses and leaders take advantage of new investment opportunities and access new customers and markets abroad. Specifically, the president has instructed his Rural Council -- in coordination with USDA, the U.S. Department of Commerce, the Small Business Administration, the Export-Import Bank, the Office of the United States Trade Representative, and other agencies -- to commit to connecting more rural businesses of all types to export information and assistance through a comprehensive strategy. Get the details of this plan of action here.

 

EU not ready to lift tariffs on U.S. meat... The European Commission is expected to offer to lift 96% of existing import tariffs on U.S. goods Feb. 10, a week ahead of face-to-face talks between top trade officials from the two sides. Reuters reports the EU wants to keep protection for a few sensitive products, including beef, pork and poultry.

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