First Thing Today -- July 30, 2012

July 30, 2012 01:21 AM


DROUGHT/CROP CONCERNS PERSIST... Weekend rainfall was disappointing as coverage and amounts were far too little to end the persistent drought. This week's forecast calls for above-normal temps and only scattered, light rains late in the week. The National Weather Service forecast for Aug. 4-8 signals above-normal temps and below-normal precip are expected across all of the Corn Belt except far northern areas. As a result, traders are building more premium into the market as they search for a price that slows use amid declining supply forecasts. As of 6:30 a.m. CT, corn futures were trading 9 to 23 cents higher, soybeans 30 to 43 cents higher, Chicago wheat 10 to 20 cents higher, Kansas City wheat 7 to 18 cents higher and Minneapolis wheat 8 to 15 cents higher. The U.S. dollar is also firmer this morning.

LIVESTOCK, POULTRY GROUPS EXPECTED TO FILE RFS MANDATE WAIVER REQUEST TO EPA... Several livestock groups today will hold a teleconference to discuss the need for changes to the fuel standard, along with other ag disaster-related issues. The groups may announce they have filed a waiver request to EPA, who has authority to waive all or part of the renewable fuel standard. EPA’s threshold for granting a waiver is if the rule causes severe economic or environmental harm. But proving that harm is difficult. EPA in 2008 rejected Texas Gov. Rick Perry’s exemption request. Livestock groups say they are concerned rapidly depleting corn stocks, coupled with the corn ethanol mandate, will make it too expensive to continue all of their feeding operations. In turn, that would increase consumer costs for pork, poultry and beef. Most sources signal cutting or waiving the RFS mandate lacks an economic basis. On the political front, veteran observers believe EPA will make no significant changes to the ethanol mandate ahead of the Nov. 6 elections.

HOUSE GOP SCHEDULES VOTE ON ONE-YEAR FARM BILL EXTENSION, LINKED WITH LIVESTOCK AG DISASTER AID... The House of Representatives as soon as Wednesday will vote on a one-year extension of the 2008 Farm Bill, linked with an extension of disaster aid for livestock producers. Preliminary estimates indicate that the new disaster spending will cost $621 million over 10 years. This cost would be more than offset, with a net savings of $399 million over the same period. The bill would cut the 10-year funding baseline for direct payments by $261 million to help fund the disaster aid, according to an initial score by the Congressional Budget Office (CBO), but the reduction would not start until Fiscal 2014 (2013 crop) -- direct payments would be paid on 84.5% of base acres; for 2012, payments are made on 85% of a farm's base acreage. Spending on four conservation programs would be cut by $759 million over 10 years, with most of that coming from the Environmental Quality Incentives Program and the Conservation Stewardship Program, according to CBO. The bill would revive several expired disaster programs, including the Livestock Forage Program at a cost of $441 million, according to CBO. It would also include authorization for several other programs, including the Specialty Crop Research Initiative, renewable-energy incentives and others. Funding the programs would be left to appropriators. Several hurdles are evident in trying to get the linked measure approved.

CONGRESS WILL FOCUS ON KEY ISSUES BEFORE DEPARTING ON LONG SUMMER RECESS... Must-have bills or debates before the long summer recess will be the focus in Washington this week, including the aforementioned House GOP attempt for a combined farm bill extension and agriculture disaster bill, a House debate on tax cuts, and Senate action on a cybersecurity bill. After this week's close of business, both chambers will be in recess until Sept. 10. The Republican National Convention will take place from Aug. 27-30; the Democratic National Convention is Sept. 3-6. The futures markets will be the topic on Wednesday when the Senate Ag Committee will hold a hearing on the failures of MF Global and Peregrine Financial Group, and receive testimony from Commodity Futures Trading Commission Chairman Gary Gensler, James Giddens, trustee for the Securities Investment Protection Act Liquidation of MF Global, Inc., and others.

CHINA TO RESUME STATE SOYBEAN AUCTIONS... The Chinese government temporarily halted sales of state-owned soybeans last week as stockpiles harvested in 2008 were sold out. But state-owned soybean sales will resume this week, according to China National Grain and Oils Information Center, with the government auctioning 400,000 MT of supplies stockpiled in 2009-10.

FOCUS ON BOXED BEEF TRADE... After a solid start last week, boxed beef trade finished poorly with sharp price declines and a tailoff in movement Friday. If packers are going to raise cash cattle bids again this week, incentive must come from the boxed beef market. AS a result, that will be the focal point for cattle traders early this week as they form cash opinions.

CASH HOGS SEEN MOSTLY STEADY... With temps not expected to be as high as last week, the number of hogs coming to town is likely to increase as producers get caught up on marketings. That may limit packers' need for cash hogs. Packers are expected to offer steady cash hog bids at most locations today.

WEEKEND DEMAND NEWS... Exporters reported no tenders or purchases.

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