First Thing Today (VIP) -- April 1, 2014

06:33AM Apr 01, 2014

Good morning!

Followthrough buys lift corn and beans... Corn futures enjoyed mild followthrough buys overnight, as contracts hit their highest level since September 2013. Corn futures are 2 to 4 cents higher as of 6:30 a.m. CT. Old-crop soybeans are enjoying double-digit gains in overnight trade as traders continue to react to tight March 1 stocks. New-crop beans have also rebounded to post gains around 9 to 10 cents. Wheat futures faced profit-taking overnight and are posting losses around 5 to 7 cents in the SRW and HRW wheat markets, while HRS is down 3 to 6 cents. The U.S. dollar index traded in a narrow range overnight and is currently favoring the downside.

FBI probing high-frequency trading firms for abuse of information... Federal agents are investigating whether high-frequency trading firms break U.S. laws by acting on nonpublic information to gain an edge over competitors. News of the probe comes after Michael Lewis accused high-speed trading firms of rigging the markets in a new book called "Flash Boys."

Camp's retirement from Congress significantly reduces chance for tax reform anytime soon... House Ways and Means Chairman Dave Camp’s (R-Mich.) announcement on Monday that he will retire will very likely lower already low odds of any quick action on a tax policy overhaul. Camp’s announcement follows the recent departure of former Senate Finance Chairman Max Baucus, the Montana Democrat who left the Senate for a post as ambassador to China. Camp was already term-limited as chairman, and Rep. Paul Ryan (R-Wis.) is considered the most likely candidate to replace Camp at the head of the panel next year.

HRW crop condition declines amid dry conditions... According to data from state statisticians, the condition of the HRW wheat crop declined again due to a continuation of dry conditions. The percent of the crop rated "poor" to "very poor" rose by four percentage points to 25% in Kansas the week ended March 30. Texas saw a four percentage-point increase in the amount of wheat rated "poor" to "very poor" to 59%. And the amount of wheat rated in the bottom two categories rose two points last week in Oklahoma to 44%. Next Monday, USDA will issue its first Crop Progress and Condition Report of 2014. Click here for more details about the condition of the winter wheat crop.

Mixed Chinese PMI data keeps stimulus talk alive... China's official purchasing managers' index (PMI) rose to 50.3 in March, up 0.1 from February and in line with expectations. However, HSBC's final PMI reading came in at 48.0, down 0.1 from last week's preliminary reading. This is the third consecutive month China's HSBC PMI, which focuses more so on large, state-owned companies, has been below 50. Readings above 50 signal expansion in the nation's manufacturing sector, while readings below 50 reflect contraction in the sector. Signs of waning economic activity in China continue to signal the nation may use stimulus spending to prop up the economy. Already, the nation's premier has indicated such measures are in the works.

China raises March soybean import estimate... China's soybean imports will likely total 5.11 MMT in April, according to the nation's ministry of commerce. In addition, the ministry raised its soybean import forecast for March to 5.69 MMT, which is up 440,000 MT from its previous forecast.

South Korea to ease beef import restrictions on zilpaterol... A South Korean government official says the country will ease its restrictions on beef imports containing the growth enhancer zilpaterol from June. Previously, the country had a zero-tolerance policy regarding zilpaterol drugs like Merck & Co.'s Zilmax, which has been mired in controversy since August. South Korea banned shipments of U.S. beef from the U.S. after traces of the feed additive zilpaterol were found in shipments. The nation's food ministry says that from June, the government will permit 1 part per billion (ppb) of zilpaterol in beef muscle and 5 ppb in beef liver.

Higher showlists, softer beef values are early signals for lower cash trade... Showlist estimates are up 2,000 to 3,000 head in most locations this week, which adds to ideas last week's lofty cash cattle prices may represent near-term tops. Plus, the product market is on the decline, which has pulled packer profit margins deeper into the red. This will make packers unwilling to pay up for supplies this week. However, futures' wide discount to last week's cash trade should limit additional downside risk in futures.

PEDV uncertainty persists... While lean hogs faced heavy pressure yesterday (excepting the front-month that benefited from its discount to the futures market), most contracts were able to pull off a high-range close. Closer examination of the data from the Quarterly Hogs & Pigs Report that spurred the selloff showed the report may not have fully reflected the impact of the porcine epidemic diarrhea virus (PEDV). This along with recently increased volatility has traders uncertain regarding near-term price direction. Meanwhile, the product market is also delivering some mixed signals. A $1.23 surge in the pork cutout value yesterday slowed movement to 213.88 loads.

Overnight demand news... Taiwan purchased 20,000 MT of U.S. corn and 15,000 MT of U.S. soybeans. An Isreali group tendered for 85,000 MT of corn and 20,000 MT of animal feed wheat. Jordan tendered for 150,000 MT of optional origin animal feed barley.