First Thing Today (VIP) -- April 10, 2014

06:38AM Apr 10, 2014
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Good morning!

Corn and beans lower, wheat mixed this morning... As of 6:30 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are 4 to 8 cents lower and wheat futures are narrowly mixed with SRW contracts favoring the downside while HRW and HRS futures are mildly favoring the upside. The U.S. dollar index is holding near unchanged this morning.

Chinese importers default on soy shipments... Chinese importers have defaulted on at least 500,000 MT (10 to 12 cargoes) of soybean shipments from the U.S. and Brazil, trade sources told Reuters. The importing companies were unable to secure letters of credit through their banks due to poor crush margins. Chinese crushers are estimated to be currently losing $80 to $100 per ton on the processing of soybeans. Meanwhile, China imported 4.62 MMT of soybeans in March, according to official customs data. That was down 4% from February but 20.3% greater than year-ago. Through the first three months of the 2014 calendar year, Chinese soy imports total 15.35 MMT, up 33.5% from year-ago.

Chinese trade data improves, but continues to flash warning signs... China amassed a trade surplus of $7.71 billion in March, which was a stark improvement from the $23 billion deficit in February. But Chinese exports declined 6.6% last month and imports dropped 11.3%, prompting additional concerns with the health of the world's second largest economy. Chinese Premier Li Keqiang says his country has no plans for short-term stimulus efforts, instead the focus is on medium- and long-term economic goals.

Weekly export sales out this morning... For the week ended April 3, traders expect: corn sales between 700,000 and 900,000 MT; wheat sales between 250,000 and 375,000 MT; soybean sales between 0 and 150,000 MT; soymeal sales between 100,000 and 250,000 MT; and soyoil sales between 0 and 30,000 MT.

USTR Froman leaves Japan with differences still in TPP talks... Two days of talks between the U.S. and Japan in Tokyo resulted in both sides indicating there is still a distance between them on some key issues. U.S. Trade Representative Michael Froman said as he left Japan today that there are still "considerable differences" and his Japanese counterpart in the talks, Economy Minister Akira Amari, said there was "quite a distance" between the two. Ag issues again appear one of the areas where agreement is elusive, although some reports indicate the U.S. may be willing to let Japan keep protections on rice but is taking a tougher line on products like dairy, sugar, beef and pork. Some reports indicate Japan is considering cutting tariffs on U.S. beef imports to 10% from the current 38.5%. Both sides said the talks will continue but odds are now slim that any deal can be put together by the time President Obama arrives in Japan later this month.

Bonus depreciation criticized by CRS for ineffectiveness... Further extending bonus depreciation or making it permanent could temper the effectiveness of an already questionable tax benefit, according to a report by the Congressional Research Service (CRS). "Its temporary nature is critical to its effectiveness. Yet, research suggests that bonus depreciation was not very effective, and probably less effective than the tax cuts or spending increases that have now lapsed," CRS said in its report. Studies cited in the report indicate that the provision, which has allowed for a faster depreciation schedule on business equipment, was muted in terms of boosting business investments. Also, continuing to extend the provision could undermine its future use, the report said.

Beef market finding 'value?'... Boxed beef prices dropped another $1.53 (Choice) to $1.74 (Select) Wednesday, but movement improved to 242 loads. The pickup in movement signals wholesale beef prices may have dropped to a level where "value" buying is resufacing. It appears retailers are using the price break to buy beef ahead of grilling season.

Pork cutout drops again... The pork cutout value plunged $3.14, marking the third day in a row of price declines. But movement improved to 506.93 loads Wednesday, suggesting there's still plenty of retailer buying under the market. If that remains the case, downside risk is limited for the pork product market.

Overnight demand news... Japan purchased 119,718 MT of wheat from its weekly tender, including 71,835 MT of U.S. supplies. South Korea tendered to buy up to 70,000 MT of optional origin corn and up to 70,000 MT of optional origin feed wheat.