First Thing Today (VIP) -- April 2, 2014

April 2, 2014 01:39 AM

Good morning!

Soybeans continue the uptrend in overnight hours... Corn futures faced mild profit-taking overnight and as of 6:30 a.m. CT are around 1 to 2 cents lower. Soybeans, on the other hand, enjoyed followthrough buying in both old- and new-crop contracts. The market is roughly 6 to 9 cents higher, with the front-month nearing tough support at $15.00. Wheat futures are again under pressure with the SRW wheat market 8 to 9 cents lower, HRW wheat down 7 cents and HRS wheat 5 to 6 cents lower. The U.S. dollar index is chopping around unchanged.

Senate Finance panel on Thursday will pass tax incentive extenders... The Senate panel will mark up the "extenders" package on Thursday, and approval is all but certain, as it has the backing of both Finance Chairman Ron Wyden (D-Ore.) and ranking member Orrin Hatch (R-Utah). Most observers continue to predict the end zone on this issue will not occur until after the November elections. The package includes a two-year retroactive extension of the lapsed biodiesel tax incentive and runs through 2015.

China’s Cofco, Hopu Investment to take 51% stake in Noble Group agribusiness unit... China’s state-owned grain trading company Cofco will join private-equity firm Hopu Investment Management Co. in purchasing a 51% stake in the Noble Group Ltd. agribusiness unit for $1.5 billion, according to several reports. The deal had been rumored in early March when Noble Group said it was in discussions with a consortium for a joint venture with its agribusiness unit. This follows Cofco taking a 51% stake in Dutch trading firm Nidera in late February.

Agroconsult slashes soybean and corn crop pegs... Agroconsult yesterday slashed its Brazilian soybean production estimate by 2.3 MMT to 86.9 MMT, citing drought as well as caterpillar and fungus infestation. The ag analysis firm says the higher costs to control them will limit the nation's soybean production expansion next season, as well. Agroconsult expects farmers to increase the area planted to soybeans by 1 million hectares next year, versus an increase of 2.5 million hectares this season. Agroconsult also lowered its 2013-14 Brazilian corn crop peg by 1.4 MMT to 71.2 MMT.

Canceled Chinese bean buys land in South Africa... Around 60,000 MT of Brazilian beans have been diverted to South Africa following Chinese order cancellations, according to Reuters. The cancellations are known -- China is thought to have canceled up to 600,000 MT of South American bean shipments slated for March through May delivery due to poor processing margins for soybean crushers due to Chinese bird flu as well as a lack of storage space. Meanwhile, Brazil is ramping up its soybean shipments. The country's trade ministry says Brazilian soybean exports jumped from 2.79 MMT in February to 6.23 MMT in March, citing strong Chinese demand.

China's first auction of cotton stockpiles since slashing prices met with strong demand... China's first cotton auction since the nation cut its minimum bidding price on state reserves spurred strong demand; the nation sold 79.9% of the cotton available for auction, or 40,119 MT of the 50,179 MT up for grabs. From November to March, mills bought just 33.4% of the cotton available for auction and 36% for the first two months of the year due to high prices and the poor quality of the state-owned reserves. The nation also recently announced it will permit 1 MMT of import quotas for every 4 MMT of cotton purchased from state reserves in an effort to boost sales. China is working to end its stockpiling program that has resulted in the country amassing 60% of the world's cotton inventory. It plans to replace the program with a subsidy-based one.

Trade continues to anticipate lower cash cattle trade... Negative processing margins for packers led to very light trade in Nebraska at $150 yesterday -- down $2 to $4 from the week prior. Traders expect active cash cattle trade will also be at lower prices this week. Adding to bearish cash trade expectations, Choice and Select boxed beef cuts slid $1.25 and $2.06, respectively, yesterday, and movement remained light at just 119 loads. Nevertheless, downside risk for nearby contracts should be limited since April futures are more than $5 below the low end of last week's cash trade.

Lots of gaps on the lean hog chart... Volatility has increased markedly in the lean hog market over the past week, signaling a top is likely near, but few are willing to guess when that will occur. Limit to near-limit losses Monday were followed up with a gap higher start and strong gains yesterday. Meanwhile, technicals continue to signal the market is overbought.

Overnight demand news... Japan's ag ministry is seeking 200,000 MT of feed barley and 120,000 MT of feed wheat in a simultaneous buy and sell auction. Taiwan tendered for 92,550 MT of U.S. milling wheat. Bangladesh tendered for 2,000 MT of soyoil.

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