First Thing Today (VIP) -- August 9, 2012

August 9, 2012 01:14 AM


FIRM TONE OVERNIGHT... As of 6:30 a.m. CT, corn futures are trading mostly 6 to 7 cents higher, soybeans 4 to 8 cents higher and wheat futures mostly 5 to 7 cents higher at all three exchanges. The U.S. dollar is firmer this morning after two-sided trade overnight.

SENATE-PASSED FARM BILL MAY HAVE 'BLUE SLIP' PROBLEM... The Senate farm bill, according to contacts, may have what is termed a "blue slip issue" which if confirmed would pose another thorny issue ahead. What's a blue slip? If the Senate, either intentionally or inadvertently, originates a revenue-raising bill, any Member of the House has the option of calling up a "blue-slip resolution" (named after the color of paper it is printed on after passage) to send the measure back to the Senate. The resolution gets immediate consideration as a matter of constitutional privilege, is debatable for an hour and is not subject to amendment (though it may be tabled or referred to committee). If confirmed, it means that even if the House were to pass a farm bill, and even if the Senate could get over any procedural hurdles to go to conference (several motions to go to conference are needed and all are fully debatable, meaning they need 60 votes), the Senate's got bigger problems if they do, indeed, have a blue slip problem and if so it will be interesting to see how they intend to fix the matter.

CHINESE INFLATION CONTINUES TO EASE... China's consumer price index (CPI) eased to 1.8% above year-ago in July, which was down from a 2.2% in June and a 30-month low. Food prices rose 2.4%, while non-food prices were up 1.5% last month. Meanwhile, the producer price index (PPI) came in 2.9% below year-ago. Also, Chinese factory output slowed and retail sales were up less than expected. The combination of data gives the Chinese government the green light to use additional monetary policy moves to boost economic growth.

FAO FOOD PRICE INDEX RISES 6% IN JULY... The United Nations' Food and Agriculture Organization (FAO) food price index averaged 213 in July compared to 201 in June. The rise was due to higher prices for grains and sugars and to a lesser extent a rise in oils/fats prices. "There is a potential for a situation to develop like we had back in 2007-08," FAO's senior economist and grain analyst Abdolreza Abbassian says. "There is an expectation that this time around we will not pursue bad policies and intervene in the market by restrictions, and if that doesn't happen we will not see such a serious situation as 2007-08. But if those policies get repeated, anything is possible."

WEEKLY EXPORT SALE REPORT OUT THIS MORNING... For the week ended Aug. 2, traders expect: corn sales between 900,000 and 1.2 million MT; wheat sales between 450,000 and 550,000 MT; soybean sales between 350,000 and 450,000 MT; soymeal sales between 100,000 and 200,000 MT; and soyoil sales between 15,000 and 25,000 MT.

HIGHER CASH CATTLE TRADE LIKELY, BUT NOT UNTIL LATER... Continued strength in the boxed beef market and lower showlist numbers have traders expecting firmer cash cattle prices compared with last week's mostly $118 trade in the Plains. But it doesn't appear active cash cattle trade will be seen until Friday as bids and asking prices were still $4 to $5 apart in the Plains Wednesday afternoon.

PORK CUTOUT DROPS AGAIN... The pork cutout value followed up Tuesday's sharp losses with another 32-cent decline yesterday, although losses were limited to loins and hams. Until the pork product market shows solid strength, however, packer demand for cash hogs will be limited as market-ready supplies are plentiful and margins are tight.

OVERNIGHT DEMAND NEWS... Japan purchased 106,530 MT of wheat in its weekly tender, including 80,575 MT of U.S. wheat. Japan also tendered for 42,000 MT of wheat and 32,000 MT of barley. Two state-run Indian firms sold 190,000 MT of wheat. Taiwan tendered for 94,250 MT of U.S. wheat.


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