First Thing Today (VIP) -- August 22, 2013

August 22, 2013 01:37 AM


PROFIT TAKING TO START THE DAY... Traders shifted back into profit-taking mode overnight. As of 6:30 a.m. CT, corn futures are trading near session lows with losses around 5 cents in the front-month with deferreds around 7 cents lower. Soybeans are down 10 to 16 cents through the March contract, while far deferred months are mixed. Wheat futures are 2 to 5 cents lower for all three flavors. The U.S. dollar index is up sharply, which is expected to weigh on the stock market.

DAY 3 CROP TOUR RESULTS... Day 3 of the Pro Farmer Midwest Crop Tour revealed a corn yield in Illinois of 170.48 bu. per acre, which compares to 121.60 bu. per acre last year and a three-year average of 148.04 bu. per acre. Illinois soybean pod counts in a 3'x3' square totaled 1,115.97, which compares to 944.05 last year and a three-year average of 1,149.47. The western leg of the Tour released corn yield and pod count data for districts 1, 4 and 7 of western Iowa, but the results for the entire state will not be released until tonight.

On Day 4 of the Tour, scouts on the eastern leg will depart from Iowa City, Iowa, while scouts on the western leg of the Tour will take off from Spencer, Iowa. Both legs of the Tour will meet in Rochester, Minnesota tonight for the release of Iowa and Minnesota results. Check "Evening Report" for preliminary route reports.

PRELIMINARY EURO-ZONE PMI HITS HIGHEST LEVEL IN 26 MONTHS... The Flash Purchasing Managers' Index (PMI) for the euro-zone rose 1.2 points in August to 51.7, the highest level in more than 2 years, topping expectations by a wide margin, according to preliminary data from Markit. Readings over 50 indicate expansion in business activity. The rise was led by an uptick in the PMI for the block's largest country, Germany.

CHINESE ECONOMY STABILIZING... A preliminary reading of the HSBC Markit Purchasing Managers' Index showed a big uptick above the 50 economic contraction line to 50.1 for China in August, thanks to jump in the new orders sub-index. This was a welcome improvement from the July reading of 47.7. This signals some of the country's recent measures to boost the economy may be starting to work.

OFFICIAL: CHINESE CORN IMPORTS TO RISE SHARPLY IN 2013-14... Chinese corn imports are expected to more than triple from the year prior to 10 MMT in 2013-14, due to high domestic corn prices and increasing meat demand, says Country Director for China at the U.S. Grains Council Bryan Lohmar. This would push China ahead of Mexico and South Korea to the world's second largest corn importer behind Japan. The official says that buyers in China have already used most of their import quotas for the year, but if allowed, they would buy immediately for the next year, too. Around 7.2 MMT are allowed in corn import quotas for private and state-run companies each calendar year. USDA data indicates China has already bought around 3 MMT of U.S. new crop corn, which compares to purchases of 800,000 MT at this time last year.

DEMAND FOR CHINESE SOY RESERVES SLIPS... Results from China's auction of state soybean reserves today signals a slowdown in demand, as just 187,050 MT of beans (37.7% of the total offered) were sold. This compares to 198,976 MT sold in last week's auction.

WEEKLY EXPORT SALES OUT THIS MORNING... For the week ended Aug. 15, traders expect: corn sales between 550,000 MT and 950,000 MT; wheat sales between 400,000 MT and 650,000 MT; soybean sales between 1.35 MMT and 2.00 MMT, soymeal sales between 150,000 MT and 400,000 MT; and soyoil sales between 0 and 25,000 MT.

PORK CUTOUT PLUNGE TO WEIGH ON FUTURES... A sharp, $2.50 drop in the pork cutout value is expected to weigh on lean hogs again today after the market posted a low-range close yesterday. The softer price did encourage strong movement of 425.1 loads, however. Pressure on nearby contracts will likely be kept in check by the steep discount they maintain to the cash hog index, but building supplies and a softer cash market will also limit buying interest going forward. Also in focus will be monthly the monthly Cold Storage Report. Last month's report showed the largest-ever monthly decline in frozen pork stocks.

CASH CATTLE STANDOFF CONTINUES... Traders took some profits out of the market on Wednesday as they waited for cash cattle trade to begin. The August contract remains at around a $1 premium to the bulk of last week's trade, signaling friendly expectations. Initial bids came in at $121 yesterday in the Southern Plains, but asking prices are $4 to $5 above these levels. Showlists are down and packers are enjoying wide profit-margins. However, the beef market has delivered a sub-par performance this week as beef price strength has tended to slow movement. Yesterday, Choice and Select values slid 14 and 38 cents, respectively, but movement did pick up to 195 loads.

OVERNIGHT DEMAND NEWS... Vietnam purchased 120,000 MT of U.S. soymeal for shipment in October, November and December. Japan bought 153,090 MT of milling wheat in four grades for bulk shipment, including 129,055 MT of U.S. wheat.

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