First Thing Today -- July 25, 2012

July 25, 2012 01:28 AM


GRAINS REBOUND OVERNIGHT... Ideas sharp price pressure the first two days this week was overdone fueled a recovery overnight. While rains are in the outlook, forecasters are not looking for a drought-breaking event. As of 6:30 a.m. CT, corn futures were trading mostly 4 to 9 cents higher, soybeans mostly 7 to 13 cents higher, Chicago wheat 3 to 15 cents higher, Kansas City wheat 8 to 14 cents higher and Minneapolis wheat 7 to 11 cents higher. The U.S. dollar index is supportive for grain and soy futures as it's sharply lower this morning.

OECD: US SHOULD RETHINK ETHANOL MANDATE AMID DROUGHT... If drought conditions worsen and the US corn crop continues to shrink, the US should take a hard look at corn-based ethanol mandates, according to the Organization for Economic Cooperation and Development (OECD). Ken Ash, head of trade and agriculture at OECD told Reuters he'd like the US to consider reducing the corn-based ethanol mandate if USDA's first survey of this year's corn crop shows significant problems, as expected.

DAY 1 HRS TOUR RESULTS... Scouts on the Wheat Quality Council HRS wheat tour found better yield potential than year-ago in southern North Dakota, northern South Dakota and western Minnesota. The average yield on all samples taken yesterday was 42.9 bu. per acre, up nearly 9% from similar routes last year. Scouts found a mature crop with little disease pressure and good quality yesterday. The tour will sample fields in northwestern and north-central North Dakota today.

ODDS RISING OF AG DISASTER AID BILL IN HOUSE... The odds are shifting to the upside regarding a possible House vote on a solo drought assistance bill after House Speaker John Boehner (R-Ohio) said, "We understand the emergency that exists in rural America. And we will address it as soon as possible." Separate bills have been introduced in the Senate (S 3384) and House (HR 6167) that would reinstate three expired livestock disaster aid programs, but also a controversial crop aid program called the Supplemental Revenue Assistance Payments Program (SURE). The Senate approach to a separate ag disaster aid bill is also uncertain, as Senate Ag Chairwoman Debbie Stabenow (D-Mich.) has instead pushed for the House to take up a new farm bill, which includes extending the expired livestock disaster aid program, but not SURE. It appears some farm-state lawmakers are using the need to extend the lapsed livestock disaster aid programs as leverage to get the House to bring up its version of a new farm bill.

GEITHNER TO WARN LAWMAKERS ON THREATS TO FINANCIAL SYSTEM... Treasury Secretary Timothy Geithner plans today to warn House lawmakers that regulators need their help to ensure the financial system is safe from threats posed by Europe and elsewhere. According to his prepared testimony before the House Financial Services Committee, Geithner will tell lawmakers the financial system, years after the meltdown, still faces "a challenging and uncertain overall economic environment," and will ask members to help, not hinder, regulatory efforts to implement the Dodd-Frank financial reform law. Geithner singles out continued debt woes in Europe as the single biggest risk to the nation's economy, but will also tell lawmakers of the need to shore up the financial system to protect the US from the dangers it presents. He will also caution lawmakers on the dangers posed by the coming fiscal cliff. If Congress fails to avert the influx of tax hikes and spending cuts set to take effect at the beginning of 2013, it will make the ongoing slowdown in the US recovery even worse.

LATE-WEEK CASH CATTLE TRADE EXPECTED... Feedlots are asking around $117 for cash cattle in the Plains, while packers have yet to establish initial bids. That signals late-week cash trade is likely. Cattle traders are still waiting to form solid cash cattle opinions. While showlist numbers are down sharply from week-ago, it's likely going to take strength in the boxed beef market to get packers to raise cash cattle bids.

PORK MARKET STRENGTHENS... After a sluggish start Monday, the pork product market rebounded with a $1.57 gain in the cutout value and movement improved to 82.3 loads yesterday. While that will help packer margins, the price strength was all in loins (up $5.60) and ribs (up $9.43). With the cutout value solidly above $90.00 again, it's going to take strength in all cuts to encourage packers to broadly raise cash hog bids.

TAIWAN PASSES MEASURE TO ALLOW US BEEF CONTAINING RACTOPAMINE... Taiwans' parliament on Wednesday took a step toward easing restrictions on US beef imports when it approved a measure to allow the import of beef containing ractopamine. This clears the way for a resumption of stalled trade talks between the US and Taiwan.

RUSSIA TO CUT PORK IMPORT DUTY... As part of its accession to the World Trade Organization, Russia will cut its pork import duty starting Aug. 23. Pork imports within the annual quota will have no import duty versus a 15% tariff previously, while imports above the quota will be taxed at a 65% clip compared to 75% previously. Poultry import duties will remain at 25% within the quota and 80% above the annual allotment.

INDONESIA TO SCRAP SOYBEAN IMPORT DUTY... Indonesia will temporarily suspend its 5% duty on soybean imports from Aug. 1 through the end of the year, according to multiple government sources. Indonesia, which buys nearly all of its imported soybeans from the US, is concerned with rising prices amid the US drought.

OVERNIGHT DEMAND NEWS... South Korea bought 29,300 MT of US wheat and 41,500 MT of Australian wheat, but passed on another tender for 23,000 MT of US wheat due to high prices. Taiwan purchased 60,000 MT of Brazilian corn.


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