First Thing Today (VIP) -- April 4, 2013

April 4, 2013 01:11 AM


WEAKER TONE IN GRAINS... As of 6:30 a.m. CT, corn futures are trading 1 to 3 cents lower, soybeans are 1 to 2 cents lower, Chicago wheat is mostly 1 to 3 cents lower, Kansas City wheat is 3 to 6 cents lower and Minneapolis wheat is mostly 1 to 2 cents lower. The U.S. dollar index is sharply higher this morning after the Bank of Japan unveiled aggressive measures to fight years of deflation.

INDIA MAY LOWER WHEAT PRICE... India is considering lowering the minimum price it will sell government wheat stocks to private firms for export, according to Indian officials. India is trying to clean out excess wheat stocks onto the world market ahead of what's expected to be another bumper crop this year. But the minimum price the government currently charges exporters for the supplies is well above international prices.

CHINA BIRD FLU UPDATE... China says it will be timely and truthful in reporting cases of bird flu to its people and the world amid criticism it has tried to "hide" these situations in the past. China now has 9 reported cases of the new H7N9 strain of bird flu, with 3 of those resulting in deaths. Meanwhile, an Associated Press story says, "The virus can evidently move through poultry without making them sick, experts said, making it difficult to track the germ in flocks," raising concerns about a greater outbreak.

FIRM CUTS UKRAINE GRAIN FORECAST... Private firm UkrAgroConsult cut its 2013 Ukraine grain crop forecast by 1.5% to 52.4 MMT due to planting delays and the late greening up of winter crops due to snowfall across central, northern and western regions of the country. But production is still expected to increase sharply from last year's 46.2-MMT output, which was hampered by severe drought.

FED’S WILLIAMS SEES QE3 SCALE BACK STARTING IN SUMMER... This summer could bring the start of a scaling back in the asset purchase efforts by the U.S. Federal Reserve, San Francisco Fed President John Williams said Wednesday. While not a voter on the Federal Open Market Committee (FOMC) in 2013, Williams said if his economic outlook is realized, "I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens we could start tapering our purchases then. If all goes as hoped, we could end the purchase program sometime late this year." The Fed has signaled it would keep its accommodative stance on monetary policy and the asset purchase "until the outlook for the labor market has improved substantially in a context of price stability."

USDA CONTINUES TO MULL OPTIONS TO AVOID SUGAR LOAN FORFEITURES... Corn’s 25% price drop won’t affect possible purchases of sugar for use in ethanol as the government tries to stem a sweetener glut, USDA Secretary Tom Vilsack told Bloomberg in an interview. USDA is required to manage sugar supplies under federal law, and biofuel use is one tool to prop up prices that are approaching levels at which the government is required to buy up inventories, he said. "There’s obviously a significant oversupply, and the law requires us to deal with an oversupply," Vilsack said. "There are consequences if we don’t deal with it that are fiscally more dire than if we do deal with it," possibly by buying sugar for biofuels plants, he said. Nearly all U.S. ethanol is made from corn. USDA last month said it’s considering "several options" to support prices, including purchasing excess sweetener, possibly for sale to ethanol plants, or restricting imports to the minimum required by international treaty. Vilsack said the department continues to weigh its options without committing to any one path. "You have to be sure that once you pull the trigger, you’re pulling it in a way that’s going to actually do what it’s supposed to do, which is to stabilize things and to minimize the cost to taxpayers," Vilsack said.

DIFFERING VIEWS ON CORN QUALITY... A U.S. Grains Council (USGC) report says tests indicate the 2012 corn crop was superior in quality to 2011 corn, which is says was a high quality crop. USGC says 77.8% of corn samples tested for export from October 2012 to February 2013 had no detectable levels of aflatoxin (less than 5 parts per billion) compared to 75.2% in 2011-12. The other 22.2% had greater than 5 parts per billion of aflatoxin, but less than the 20 parts per billion allowed for export, compared to 24.8% in 2011-12. But Charles Hurburgh, an agricultural engineering professor at Iowa State University, tells Reuters grain handlers have "a great deal of incentive not to offer" corn with high levels of aflatoxin for export. The Reuters story also points out that crop insurance payouts for mycotoxins totaled nearly $75 million as of February, triple the level of a year ago.

WEEKLY EXPORT SALES REPORT OUT THIS MORNING... For the week ended March 28, traders expect: corn sales between 175,000 and 400,000 MT; wheat sales between 400,000 and 700,000 MT; soybean sales sales between 300,000 and 625,000 MT; soymeal sales between 40,000 and 150,000 MT; and soyoil sales between 0 and 15,000 MT.

CATTLE TRADERS REMAIN CAUTIOUS... Moderately active cash cattle trade around $128 in the Plains supported live cattle futures Wednesday. But traders are reluctant to push front-month live cattle futures above the cash market. The cautious stance signals traders remain concerned about sustained strength given demand concerns.

PORK TRADE REMAINS SLUGGISH... The pork cutout value was 11 cents lower and packers moved only 32.38 loads of cuts and trim Wednesday. While the pork market continues to sputter, traders' concerns with pork demand are easing as pork holds a strong competitive price advantage over beef. As a result, retailers are expected to more actively feature pork this spring.

OVERNIGHT DEMAND NEWS... South Korea purchased 139,000 MT of South American corn and 4,000 MT of Indian feed barley. Japan bought 32,320 MT of feed wheat.


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