Evening Report (VIP) -- October 17, 2012

October 17, 2012 09:53 AM

CME GROUP TO ACQUIRE KCBT... CME Group and the Kansas City Board of Trade (KCBT) today announced they have signed a definitive agreement under which CME Group will acquire the KCBT for $126 million in cash. CME Group said it was committed to maintain a committee made up of KCBT market participants to advise on HRW wheat contract terms and conditions for at least three years, and to maintain the KCBT trading floor in Kansas City for a period of at least six months. CME Group said the addition to HRW wheat adds to its "broad agricultural product offering."

The acquisition is CME's first in five years, when it wrapped up a purchase that put the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange under its control. Click here for more details.



SUBSTANCE AMONGST THE DEBATE SQUABBLE... While round two of the presidential debates last night likely did not alter the dynamic of the race, it did clearly show that President Barack Obama and GOP Candidate Mitt Romney dislike each other on multiple fronts. Romney's main argument is the U.S. can't afford four more years under Obama as it would feature a repeat of the last four that "crushed" the middle class. Romney pointed to the unemployment rate, the number of people in poverty, growing food stamp dependency, slow economic growth and burdensome regulations as proof the president does not understand "what it takes to get the economy working again."

Obama focused in part on Romney's five-part plan for the U.S. economy, saying it is really a "one-point plan" to "make sure that folks at the top play by a different set of rules." He later took aim at the lack of details in Romney's economic plans, asking, "If somebody came to you, governor, with a plan that said, 'Here, I want to spend $7 or $8 trillion and we’re going to pay for it but we can’t tell you until maybe after the election how we’re going to do it.' You wouldn’t have taken such a sketchy deal."

Obama zeroed in on Romney's positions on taxes, trade, energy and women's health issues in an attempt to cast him as more conservative than the GOP candidate has currently suggested. And Romney accused Obama of cutting permits and licenses for domestic oil production on federal land and in federal waters. Get more details here.



CLARIFICATION ON THE BIGGEST CLASH OF THE DEBATE: LIBYA... President Obama for the first time accepted responsibility for the security lapses that contributed to the U.S. ambassador and three other Americans on Sept. 11 in Benghazi at last night's debates. He also sought to turn the issue against Romney, accusing him of playing politics with a national-security crisis. Obama said he called the Benghazi attack "an act of terror" during a statement in the Rose Garden the day after it occurred, challenging Republican accusations that the administration had been misleading when it described the attack as a demonstration sparked by an anti-Muslim video.

"I want to make sure we get that for the record, because it took the president 14 days before he called the attack in Benghazi an act of terror," Romney responded, to which the president replied, "Get the transcript." Moderator Candy Crowley of CNN then corrected Romney, saying the president "did in fact" call the attack an act of terror. Crowley later said that while Romney had been right "in the main" about the Obama administration's overall response to the attack, he had not chosen the correct words.

A look at the Rose Garden transcript reveals that while Obama said, "No acts of terror will ever shake the resolve of this great nation," his comments that day also appear to reference the video, when he said, "We reject all efforts to denigrate the religious beliefs of others." On Sept. 21, Secretary of State Hillary Clinton said "what happened in Benghazi was a terrorist attack. Asked about Clinton's statement at a Sept. 24 taping of ABC's "The View," Obama skirted the issue, saying it "wasn't just a mob action" and that the investigation was ongoing.



MONSANTO SUSPENDS SEED ROYALTY FEES IN BRAZIL... Monsanto Co. has temporarily stopped charging royalties on its Roundup Ready soybean varieties in Brazil as it appeals a court ruling on the matter. A local court ordered Monsanto to drop the royalties in Mato Grosso, citing its patent expired in 2010 and has not been renewed.

"We look forward to resolving this preliminary matter on appeal over the next several weeks. Previous rulings in Brazil have been clear and recognized Monsanto's intellectual property rights as well as established its ability to collect royalties for its products," said Todd Rands, Monsanto's Legal Director for Latin America. "In the interim, we will continue to comply with the court's initial ruling. We will reserve our rights to reestablish royalty collections to the extent the courts allow us to do so in future rulings."




CORN: While futures appear to have put in a short-term low, choppy price action is likely to continue over the near-term. With that said, we are closely monitoring the market for a buyback signal as hedgers are 100% sold on 2012-crop production in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery. Hedgers should hold the Dec. $6.50 put options which were purchased on 40% of 2012-crop for 31 1/2 cents as a crop insurance hedge in case the market plunges. Cash-only marketers are 75% priced on 2012-crop production -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery. Hedgers and cash-only marketers should get current with advised cash sales.

BEANS: Hedgers and cash-only marketers should get current with advised cash sales, as the trend for futures remains down, suggesting the market could face more near-term pressure. With hedgers 100% sold on 2012-crop production for harvest delivery, you should be prepared to reown a portion of 2012-crop when the market signals a low is in place. Barring a sharp price plunge, the Nov. $14.00 put options which were purchased for 42 3/8 cents on 25% of 2012-crop will expire virtually worthless on Oct. 26. Cash-only marketers have 75% of expected 2012-crop forward sold for harvest delivery.

WHEAT: Futures are leaning on support. If support is clearly violated, hedgers and cash-only marketers should be prepared to advance 2012-crop sales. Hedgers may also add hedge coverage to protect downside price risk if there are signs of a top. Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Get current with those sales levels.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold for harvest delivery. Be prepared to advance 2012-crop sales on the "squeeze" in futures.

CATTLE: Fed cattle producers should continue to carry all risk in the cash market as the downside is limited by tightening supplies and demand is solid. Feeder cattle buyers and sellers carry all risk in the cash market for now.

HOGS: Let the corrective rally unfold, but be prepared to add hedge coverage when the price recovery runs out of steam. We're watching resistance at the summer highs closely.

FEED: Remain hand-to-mouth on feed needs until corn and meal futures signal short-term lows are in place. We're watching corn closely as a low may already be in place, but we aren't convinced enough to extend coverage yet. Meal futures are still in a downtrend, suggesting more price pressure is possible.


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