First Thing Today (VIP) -- August 19, 2013

August 19, 2013 01:35 AM
 

GOOD MORNING!

OVERNIGHT ACTION UPDATE... As of 6:30 a.m. CT, corn futures are up 7 to 8 cents and soybean futures are enjoying gains in the teens to 20s, with nearbys leading to the upside. Wheat futures of all three flavors are roughly 3 to 6 cents higher. The U.S. dollar index is chopping around unchanged this morning, while crude oil is posting slight losses.

PRO FARMER MIDWEST CROP TOUR KICKS OFF... Crop scouts on the Pro Farmer Midwest Crop Tour will begin sampling today. On Day 1 of the Tour, scouts on the eastern leg will travel from Columbus, Ohio to Fishers, Indiana. Scouts on the western leg of the Tour will sample fields on their way from Sioux Falls, South Dakota to Grand Island, Nebraska. Stay tuned for preliminary route reports in "Evening Report" and check your website tonight for official crop tour results for Ohio and South Dakota.

DROUGHT CONCERNS HEIGHTEN AFTER DRY WEEKEND... Corn and soybeans are on the rise this morning as weekend rains did not materialize for the Midwest, which is heightening concerns about the worsening of drought in areas of the western Corn Belt, including Iowa. Warmer temps are expected this week, but some forecasts do call for rain chances in the central and northern Midwest late this week.

EGYPT'S MILITARY-LED GOV'T MULLS CHANGE IN 'STRATEGIC RELATIONSHIP' WITH COUNTRIES CHALLENGING THEIR CRACKDOWN... And the development has caused high anxiety in several markets, especially oil. Meanwhile, President Obama's position on Egypt is under attack by some Democrats and others. Some Democrats are calling for a change in course beyond President Obama's announcement Thursday that he's canceling next month's joint military exercises in Cairo. They say the administration should immediately freeze U.S. aid to the country and forcefully demand a return to democracy. "While suspending joint military exercises as the president has done is an important step, our law is clear: Aid to the Egyptian military should cease unless they restore democracy," said Sen. Patrick Leahy (D-Vt.), the chairman of the Senate panel that controls spending for the State Department and foreign operations. In a joint statement Friday, hawkish Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) also urged the president to immediately call Morsi's July 3 ouster a military coup and suspend $1.3 billion in annual U.S. military aid.

U.S. ECONOMIC DATA TO BE SCRUTINIZED FOR FED TAPERING CLUES... Lawmakers remain on their long summer recess, returning to Washington on Sept. 9. In various meetings back in their states, legislators have been commenting on several topics, including immigration reform, the farm bill, tax reform and health care reform. The data on the U.S. economy remains a key focus for markets, and this week will bring some additional data to digest, including the release of the minutes from the July 30-31 FOMC meeting. Those will be combed for any signs of how much of a push there was for the tapering of asset purchases to start that month or in September. Monday’s Crop Progress report will gain more attention given dryness working its way into areas of Illinois. Thursday will bring the weekly export update, Cold Storage and the U.S. and Canadian Hogs report. The U.S. and Canadian Cattle report would normally have been released that day but has been suspended due to the sequester budget cuts. And Friday will see USDA release the monthly Cattle on Feed report.

LUCAS KEEPS UP PRESSURE TO PASS NEW FARM BILL... House Ag Chairman Frank Lucas (R-Okla.) was interviewed this weekend by the Oklahoma Farm Report Online. Lucas said prospects of a bumper corn crop in 2013 might force especially the corn farmers who have strongly called for the shallow loss plan advanced in the Senate to rethink what will help their producers. Lucas said that when you start talking corn, "Now we’re bouncing around in the four dollar range, depending on which weather forecast you get. I would say there’s a distinct possibility that shallow loss revenue might not work for them." Lucas is also pushing a change to permanent law, updating it to become whatever is finalized for the Title I (farm programs) portion of the new farm bill instead of the 1949 and 1938 Acts. Lucas said "it's much easier to defend a position established rather than having to advance new legislation every four to five years."

FUNDS EXPAND BEARISH POSITION ON CORN... Though corn futures posted slight weekly gains last week, CFTC data shows that managed funds extended their net-short position to 123,221 contracts as of Tuesday, up 9% from the week prior. Funds switched to a net long position in soybeans last week and they trimmed their net short position for wheat. Fund activity will remain a closely watched as a trend setter for price action.

CME GROUP CUTS INITIAL MARGINS FOR SEVERAL AG COMMODITIES... On Friday, CME Group lowered its initial margins for speculators for a number of commodities, including: corn (down 25% to $2,025 per contract), soybeans (down 11.8% to $4,050), soybean meal (down 12.5% to $2,363), old-crop soybean oil (down 20% to $1,350), new-crop wheat (down 16.7% to $2,700), live cattle (down 25% to $1,013) and lean hogs (down 20% to $1,350 per contract).

FRENCH SOFT WHEAT CROP SEEN AT HIGHEST LEVEL IN NEARLY A DECADE... French analyst Agritel estimates the country's soft wheat crop at 37 MMT, which would be up 4% from last year and the country's largest crop in nine years. The country's farm ministry pegs the French crop at 36.1 MMT.

SEASONAL DECLINE LIKELY AHEAD FOR HOGS... Lower prices are anticipated for the cash hog market this week as supplies are building and demand is expected to soften seasonally as autumn approaches and Labor Day buying wraps up. Recent cool temps and lower grain prices have also boosted supply prospects. Most packers are thought to be well supplied on near-term needs, which is expected to result in a steady to lower cash hog market today, despite strong packer profit margins. The pork cutout value rose a solid $1.27 on Friday, though movement was relatively light at 286.2 loads.

UPDATE ON MERCK'S TEMPORARY ZILMAX SALES HALT... Merck & Co.'s animal health division on Friday announced it would temporarily suspend sales of the feed additive Zilmax in the U.S. and Canada while it studies reports of animal lameness and immobility that some companies have associated with the growth supplement. Merck spokeswoman Pam Eisele says customers who currently have cattle on Zilmax will be able to buy enough of the feed additive to complete the feeding cycle, but she says Merck will not accept new customers until a plan to audit and recertify current users of the Zilmax is wrapped up. An estimated 70% of the U.S. beef industry's cattle supply is fed either Zilmax or its competitor beta-agonist Optaflexx, a brand of ractopamine produced by Eli Lilly & Co., according to Merck.

SEASONAL UPTREND LIKELY TO CONTINUE IN CATTLE... Live cattle futures extended their recent uptrend last week and more of the same is likely this week after firmer cash cattle at $123 on the Southern Plains late last week, up $2 from the bulk of trade the week prior. Higher boxed beef prices last week and tightening market-ready supplies gave feedlots an edge in negotiations. However, the higher prices have also slowed movement. On Friday, Choice boxed beef cuts rose $1.09 and Select firmed 68 cents, but movement slowed to 130 loads. Traders will continue to watch boxed beef movement and prices for signs of consumer resistance to higher prices. This will be key to action in the futures market.

WEEKEND DEMAND NEWS... There is no export activity to report.

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