First Thing Today -- July 18, 2012

July 18, 2012 01:26 AM


PROFIT-TAKING OVERNIGHT... Grain and soy complex futures are under modest profit-taking pressure this morning, although futures are off the overnight lows. As of 6:30 a.m. CT, corn futures were trading mostly 4 to 7 cents lower, soybeans 6 to 10 cents lower, Chicago wheat mostly 6 to 11 cents lower, Kansas City wheat 4 to 9 cents lower and Minneapolis wheat 4 to 7 cents lower. The U.S. dollar index is firmer this morning.

VILSACK TO BRIEF PRESIDENT OBAMA, VP BIDEN ON US DROUGHT... USDA Secretary Tom Vilsack, contacts advise, will soon brief President Barack Obama and Vice President Joe Biden on the depth and impact of the ongoing U.S. drought gripping much of the nation. Earlier this week USDA announced that Undersecretary Michael Scuse would visit rural communities across the country to show support to farmers and ranchers affected by a string of extreme weather in 2012. In the coming weeks and months, Obama and Biden, along with Vilsack, will also likely visit key drought-impacted areas -- some of which are in key swing states in the coming presidential election and will no doubt be tinged with some political aspects. Vilsack, who has largely been outside the new farm bill process, has recently urged the GOP-led House to vote on its version of the farm bill, which the administration does not favor due to significantly higher cuts in food stamp funding versus the Senate-passed measure. Obama and Biden will now likely join Vilsack in urging House Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) to put the House farm bill on the chamber's agenda.

TEXAS GOV. PERRY NOT CONSIDERING ASKING FOR RFS WAIVER... Texas Republican Governor Rick Perry is not considering asking the Obama administration for a waiver of the renewable fuels requirements because of a drought in the Midwest that has boosted corn prices, Bloomberg News reported Tuesday. In late April 2008, Perry asked the Environmental Protection Agency to ease the requirements by 50% because of grain shortages and rising food costs. EPA waited until Aug. 7, 2008, the day before the USDA August Crop Production Report to reject the wavier.

RUSSIAN AG MINISTRY LOWERS PRODUCTION, EXPORT FORECASTS... Earlier this week, Russia's ag minister said there was no need to reduce the country's production or export forecasts despite adverse weather faced by crops this year. But an ag ministry update today puts grain output at 80 MMT to 85 MMT versus the ag minister's 85 MMT forecast and also cut the export outlook to 16 MMT from a range of 18 MMT to 20 MMT indicated by the ag minister earlier this week. Meanwhile, Russia's deputy prime minister says there is no reason for the country to ban grain exports.

SENATE FINANCE TO MARK UP RUSSIA TRADE MEASURE, BUT ISSUE WITH HOUSE... The Senate Finance Committee today will mark up a compromise measure that would grant permanent normal trade relations (PNTR) to Russia as the country officially joins the World Trade Organization near the end of summer. The bipartisan compromise would require the Obama administration to boost its monitoring of Russia's trade practices and legal system. Another bill, aimed at punishing those accused of killing Russian whistleblower Sergei Magnitsky, also is on the agenda. Committee Chairman Max Baucus (D-Mont.) has said he intends to link the two bills. However, House GOP leaders do not want to formally link the two pieces of legislation. Meanwhile, the Senate won’t get to vote immediately on the deal struck by Baucus and Senate Republicans, as existing sanctions are considered revenue legislation -- and all revenue legislation must originate in the House.

CHINA HAS NO PLANS TO SELL COTTON RESERVES OR INCREASE QUOTAS... says China has no plans to sell 300,000 MT of cotton from state reserves or issue additional import quotas "for now." Recent market talk centered on the country both selling state reserves and increasing import quotas.

JAPAN EXPECTED TO RELAX U.S. BEEF IMPORT RULES... Japan is expected to ease restrictions on U.S. beef imports as early as November as the country seeks to take part in U.S.-led trans-Pacific free trade talks, according to the Nikkei Business Daily. Currently, Japan allows imports of U.S. beef from cattle 20 months or younger, but Japan's Food Safety Commission is assessing the risk of easing that to 30 months.

CASH CATTLE TRADE STARTS EARLY... Kansas and Texas feedlots started moving cattle at $113 Tuesday, down $1 to $2 from last week's trade. Nebraska cattle also traded around $2 lower in the dressed and live markets Tuesday. August live cattle futures ended around $2.50 above the initial cash trade, meaning followthrough selling pressure is possible, although traders should maintain some futures premium given tight supplies and hot temps.

PORK PRODUCT MARKET STRENGTHENS... The pork cutout value was $1.22 higher Tuesday and packers moved a strong 111.3 loads of product. That's the first solid sign of a short-term bottom in the product market, although it will take additional strength to firm up the cash hog market. Cash hog bids are called steady to lower again today.

OVERNIGHT DEMAND NEWS... Japan canceled a tender for 120,000 MT of feed wheat and 200,000 MT of feed barley due to a lack of bids and high prices on bids received, but the country issued another tender for the same tonnages. Jordan tendered for 100,000 MT of optional origin wheat.

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