First Thing Today -- July 20, 2012

July 20, 2012 01:34 AM


BEANS CONTINUE TO CHARGE HIGHER... Soybean futures continue to surge amid supply concerns as forecasts show little hope for a dramatic turnaround in weather. As of 6:30 a.m. CT, soybean futures were trading 7 to 28 cents higher, corn 1 to 9 cents higher, Chicago wheat widely mixed, Kansas City wheat 3 to 10 cents lower and Minneapolis wheat narrowly mixed. The U.S. dollar index is solidly firmer this morning.

RIN PRICES RISING... The price of ethanol RINS (used by blenders to reach their blend mandate in times of lower production) is on the rise as ethanol production slows amid surging corn prices and tight supplies. RINS produced in 2012 traded at 4.75 cents per gallon Thursday compared to 1.85 cents at the beginning of the month.

FAO WORRIED ABOUT RISING FOOD PRICES, BUT SEES NO CRISIS... A senior economist with the United Nations' Food and Agriculture Organization (FAO) told Reuters the agency is concerned with rapidly rising grain prices, but reiterated the situation is not a repeat of the 2007-08 food crisis. FAO's Abdolreza Abbassian says, "We are concerned for two reasons: first the pace at which price rises are taking place and second because at least for the time being there seem to be no relief in prices, in particular for corn, soybeans and wheat. We do not see any production or supply problems with rice. That is very important for food security of millions of people around the world."

JAPANESE CORN USE CONTINUES TO SLIP... Japan's use of corn in animal feed hit a 20-year low in May as high prices are encouraging feedmakers to use alternative grains. Corn accounted for 43.7% of the feed ration in May, down 0.2 points from April and 2.3 percentage points lower than year-ago. Every 1-percentage-point decline in Japan's corn use in feed rations equates to around 200,000 MT less corn imports needed.

SURE PROPONENTS SEEK TO ADD EXTENSION OF CONTROVERSIAL PROGRAM TO ANY FARM BILL CONFERENCE... House Speaker John Boehner (R-Ohio) on Thursday said no separate ag-disaster bill is needed because the crop insurance program should provide adequate protection for farmers who took the highly subsidized programs. But several Democratic members want to revive the controversial Supplemental Revenue Assistance Payments Program (SURE) and cover losses from this year. Funding for SURE to cover 2012 crops, as well as three livestock disaster programs, were taken out of the 2008 Farm Bill by Democratic House and Senate leaders due to budget considerations. Now some of those same Democratic and some Republican lawmakers are urging retroactive funding for the expired programs. Rep. Kristi Noem (R-S.D.) added an extension of the livestock program to the farm bill that passed the House Agriculture Committee, but the SURE provision was not. Instead, Senate Finance Chairman Max Baucus (D-Mont.) recently introduced a bill that would resurrect that program. "Farmers could have protected themselves with crop insurance, but a lot of times they don’t buy sufficient coverage," said Rep. Collin Peterson (D-Minn.), "If we can get this thing (farm bill) to conference … my expectation would be that we would extend the disaster provisions for the 2012 crop." But attaching SURE to the farm bill could prove unsettling to a delicate farm bill balance to date. Conservative Republicans note the SURE legislation costs $1 billion over 10 years. So SURE — which in December 2011 issued $2.8 billion for 2008 and 2009 losses — could make farm-bill passage even harder.

HOUSE PANEL REACHES ACCORD ON RUSSIA PNTR... After the Senate Finance Committee earlier this week cleared a bill that would grant Russia Permanent Normal Trade Relations (PNTR), House Ways and Means Chairman Dave Camp (R-Mich.) announced he and leading Democrats on his panel have reached an agreement to introduce PNTR with Russia, and will hold a markup session next week. The House bill will largely echo the Senate measure, with one major exception. It will not include language sanctioning human rights abusers, which Senate Finance Chairman Max Baucus (D-Mont.) included in his trade bill in an effort to win enough votes. Camp said the human rights language is not under his committee’s jurisdiction, but he will push to pair it with a bill which the House Foreign Affairs Committee passed in June (HR 4405), with the trade legislation in the House Rules Committee, and then bring the package as a whole to the floor. Camp previously insisted on a "clean" trade bill without any human rights language. With the House strategy, the legislation stands a good chance of becoming law just in time for Russia’s formal accession into the World Trade Organization (WTO) in August -- something the Obama administration has made a priority. The bill would remove Russia from a list of countries facing U.S. trade restrictions under a Cold War-era amendment to a 1974 trade law. That amendment, known as Jackson-Vanik, was intended to punish the Soviet Union and other Eastern bloc countries for restricting Jewish imigration, an issue that has long since been resolved. Without PNTR, U.S. companies would not benefit from increased access to Russian markets that comes with WTO membership.

CATTLE ON FEED, CATTLE INVENTORY REPORTS OUT THIS AFTERNOON... Traders are expecting the monthly Cattle on Feed Report to show On Feed at 102.6%, Placements at 98.9% and Marketings at 93.8%. If there's a surprise, it's likely to be in the Placements category. Traders aren't expecting significant impacts from the drought to show up until next month, but worsening pasture conditions may have pushed more calves into feedlots last month than anticipated. The twice-yearly inventory will show the U.S. cattle herd continues to contract, although a rebuilding of the beef breeding herd is expected to be reflected in beef replacement heifers.

COLD STORAGE REPORT ALSO OUT THIS MORNING... Traders are expecting total pork inventories as of the end of June to be 590.6 milion lbs., based on the average guess. Total beef stocks are guessed at 504.6 million pounds. If realized, the pork and beef stocks figures would be record large for the end of June.

OVERNIGHT DEMAND NEWS... Japan purchased 209,610 MT of wheat in its weekly tender, including 124,298 MT of U.S. supplies. Indonesia bought 25,000 MT of Indian wheat.

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