First Thing Today -- July 23, 2012

July 23, 2012 01:37 AM


SHARP LOSSES OVERNIGHT... Corn, soybean and wheat futures came under heavy pressure overnight amid profit-taking as weather forecasts aren't as stressful as previously expected and given heightened euro-zone concerns, specifically in Spain. As of 6:30 a.m. CT, corn futures were trading 13 to 25 cents lower, soybeans 20 to 42 cents lower, Chicago wheat 6 to 33 cents lower, Kansas City wheat 5 to 29 cents lower and Minneapolis wheat 15 to 18 cents lower. The U.S. dollar index is firmer this morning.

FORECAST IS WETTER, NOT QUITE AS HOT... Forecasts call for oppressive heat today as triple-digit heat indices will be common across the Corn Belt. But the forecast for the remainder of the week isn't quite as hot and there are improved rainfall chances for some areas. The key now is whether the forecast rains develop. The National Weather Service forecast for Aug. 28-July 1 calls for above-normal temps across all of the country except the far west with above-normal precip over much of the northern, central and eastern Corn Belt. Below-normal precip is expected to continue across southern and southwestern areas of the region during the period.

AFIA URGES PRESIDENT OBAMA TO WAIVE ETHANOL BLENDING MANDATE UNDER THE RENEWABLE FUEL STANDARD... In a letter to President Obama, the American Feed Industry Association (AFIA) urged the president to waive the ethanol blending mandate under the Renewable Fuel Standard (RFS). With present drought conditions impacting the cost and availability of corn supplies, AFIA believes that food security should command the same priority as energy security and that the administration must immediately use the RFS waiver to mitigate disaster. "Livestock and poultry feed represent up to 70% of the cost of producing this nation’s meat, milk and eggs. Any negative influence on the cost of feed represents an increase in the cost of on-farm food production," explained Joel G. Newman, president and CEO of AFIA. "That cost is absorbed by the entire food chain, resulting in consumers paying higher costs for food; an unfortunate circumstance given today’s economy," the group said in a statement. AFIA says it urges EPA Administrator, Lisa Jackson, USDA Secretary Tom Vilsack and Secretary of Energy, Steven Chu, to give immediate attention to waiving the RFS mandate in order to mitigate the current and future economy.

ELECTION-YEAR TOPICS FOCUS OF CONGRESS THIS WEEK... The Senate takes up competing tax bills while the House this week considers a regulatory reform package -- both topics which have more to do with Nov. 6 elections than actual legislation that will not likely be signed into law at this juncture. Meanwhile, as the US drought continues, farm-state lawmakers and others are using that as potential leverage on House GOP leaders to debate the farm bill, but to date the topic is not on the full House floor agenda. Some farm-state senators are continuing to try to leverage the ongoing drought to pass an extension of the Supplemental Revenue Assistance Payments (SURE) program. The agenda for congressional committees features hearings on the Treasury Department's financial stability report, tax incentives for education, the 10th anniversary of the Sarbanes-Oxley Act, regulatory reforms to the swaps and futures markets, and President Obama's moratorium on drilling in the Gulf of Mexico.

CHINA TO PROTECT FARMERS AGAINST SHARP PRICE FALL... China plans to stockpile corn and soybeans for state reserves and set a price floor for wheat and rice to protect farmer's income from a drastic price decline, according to the ag ministry. No figures were given for stockpiling plans or the price floors.

RUSSIAN GRAIN EXPORT UPDATE... Russia exported 27.149 MMT of grain in 2011-12, according to an Interfax report quoting a Russian ag ministry official. Those exports included 21.26 MMT of wheat, 3.56 MMT of barley, 1.9 MMT of corn and 405,000 MT of other grains. Exports in 2012-13 are seen at 16 MMT according to the ag ministry, down from their initial peg of 20 MMT as production is expected to decline due to unfavorable weather.

KAZAKHSTAN CUTS CROP FORECAST... Kazakhstan's grain crop is now seen at 12.8 MMT, according to the country's ag ministry, down from 14 MMT previously due to drought. This year's crop is now expected to be less than half of last year's record 27-MMT crop.

INDIA OFFICIAL SAYS NO EXPORT CURBS ON TAP... Even though monsoon rains are 22% below normal so far, the Indian government is not considering any halt in exports of wheat and rice, according to the country’s ag secretary. "I don’t think there is any reason to be concerned. As of now, there is no problem about availability of foodgrains and I do not think we need to put our export commitment on hold," Ashish Bahuguna says. "If India wants to be a stable player in the international market, we must continue with exports."

NFA SEEKING TO SHORE UP ITS ACTIVITIES IN WAKE OF PEREGRINE SITUATION... The National Futures Association (NFA) has come under fire in the wake of the Peregrine Financial situation and the Wall Street Journal reported Sunday the group is seeking to change its procedures following revelations that Peregrine Financial founder Russell Wasendorf Sr. had perpetrated a fraud involving some $200 million in customer funds over 20 years that went undetected by NFA. Now, NFA is planning to require banks that hold customer funds for brokerages to enable online verification of account balances and it has retailed a law firm to go over NFA audit practices. They also want more info and expertise from commodity trading firms and exchanges to help shore up NFA oversight.

CATTLE REPORTS NEUTRAL/SUPPORTIVE... Last Friday's Cattle on Feed Report should have limited market impact, but the Cattle Inventory Report was supportive, especially long-term. Once the report data is factored into the market, traders will turn their focus to the boxed beef market, which is still working to find a short-term low.

CASH HOGS CALLED MOSTLY STEADY... Packers are still working with negative margins, but they have improved dramatically from recent weeks. Plus, hot temps will stress hogs and likely slow movement is some areas. As a result, there's expected to be enough packer demand to trigger steady cash hog bids at most Midwest locations to start the week.

WEEKEND DEMAND NEWS... South Korea bought 18,000 MT of Chinese non-GMO soybeans. Jordan tendered for 100,000 MT of optional origin wheat.
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