First Thing Today (VIP) -- December 10, 2012

December 10, 2012 12:20 AM
 

GOOD MORNING!

MIXED TO LOWER OVERNIGHT... As of 6:30 a.m. CT, corn futures are trading fractionally to 5 cents lower, soybeans 3 cents lower to 2 cents higher, Chicago wheat 4 to 5 cents lower, Kansas City wheat 1 to 3 cents lower and Minneapolis wheat mixed. The U.S. dollar index is modestly firmer this morning, but off the overnight highs.

FISCAL CLIFF, USDA DECEMBER CROP REPORTS AND FOMC MEETING ARE THE FOCUS IN WASHINGTON THIS WEEK... Continued work on fiscal cliff issues, updated demand projections from USDA and a meeting of the Federal Reserve's Federal Open Market Committee (FOMC) highlight this week in Washington. In Congress, discussion about a new farm bill continues as a potential inclusion in whatever is worked out as a final package relative to the fiscal cliff matter. Congressional hearings will focus on tax reform and energy policy, the Volcker Rule, derivatives reform, and spectrum law implementation. On the economic front, attention shifts from economic data to the Federal Reserve as the two-day FOMC meeting concludes on Wednesday. For agriculture, the focus will be Tuesday's release of USDA's Supply & Demand Report and ag trade data. That will set the stage for the January Annual Production Summary which will be the next update on the supply side of the equation. Meat trade data will come out on Wednesday with the continued focus on demand for U.S. ag products via the Weekly Export Sales Report on Thursday morning.

CHINESE EXPORT GROWTH SLOWS, SOY IMPORTS REMAIN STRONG... China's trade surplus unexpectedly narrowed to $19.6 billion in November from $32 billion the previous month as export growth was much lighter than expected at 2.9% above year-ago and imports were steady, according to official customs data. Meanwhile, China imported 4.16 MMT of soybeans in November, a 3.2% increase from October. Through the first 11 months of this year, Chinese soybean imports stand at 52.49 MMT, an 11.4% increase from 2011.

CHINESE ECONOMIC GROWTH OVERSHADOWS MODEST INFLATION... China's industrial output rose 10.1% over year-ago in November from a 9.6% increase in October and retail sales came in 14.9% higher than year-ago last month, both besting expectations. That's further evidence China's economy continues to recover after slumping through the third quarter. Meanwhile, China's consumer price index (CPI) rose 2% over year-ago last month, up from a 1.7% rise in October. While inflation is rising, the modest 2% increase in consumer prices is not a concern. Food prices rose 3% over year-ago last month while non-food prices firmed 1.6%.

ARGENTINA TO CUT WHEAT EXPORTS BY 25%... Argentina will reduce 2012-13 wheat exports to 4.5 MMT from 6 MMT in 2011-12 due to expected poor harvest results, according to media reports out of the country. With just over one-quarter of the wheat crop harvested, yields are disappointing and crop quality is also a concern, reportedly causing the Argentine government to reduce the allowable amount of wheat exports.

U.S. URGES RUSSIA TO REVERSE ACTIONS ON BEEF, PORK RE: RACTOPAMINE... USDA Secretary Tom Vilsack and U.S. Trade Rep. Ron Kirk issued a statement this weekend, expressing concern at Russian actions to impose new requirements that imports of U.S. beef and pork be tested for ractopamine. The U.S. currently does not test for the compound so the move essentially limits/halts shipments of U.S. beef and pork to Russia. Russian officials denied the action was either politically motivated or in response to the U.S. version of Permanent Normal Trade Relations (PNTR). Ractopamine has been banned by some countries, but the U.S. and others continue to use the compound as it promotes lean meat production. U.S. officials are expected to head to Moscow this week for talks on the matter.

WAITING FOR SIGNS OF A SHORT-TERM LOW IN CATTLE... Cash cattle trade last Friday was $1 to $2 lower than the previous week around $124 in the Plains. Given back-to-back weeks of price pressure in the cash cattle market, live cattle futures will likely remain on the defensive until traders see some proof of a short-term low.

CASH HOGS CALLED STEADY/LOWER... Packers are expected to open the week offering steady to weaker bids for cash hogs. Most plants are bought ahead on slaughter needs and given negative cutting margins, packer demand for cash hogs is expected to be limited.

WEEKEND DEMAND NEWS... South Korea tendered for up to 210,000 MT of South American (preferred), Indian or European corn (U.S. origin notably excluded) and up to 70,000 MT of optional origin (Indian preferred) feed wheat. Saudi Arabia purchased 295,000 MT of U.S., European Union and Australian wheat. Iraq purchased 350,000 MT of Australian and Romanian wheat.

 

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