First Thing Today (VIP) -- December 13, 2012

December 13, 2012 12:30 AM


MIXED TONE IN GRAINS... As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are narrowly mixed and wheat futures are choppy with a slight upside bias at all three exchanges. The U.S. dollar index is firmer this morning.

FARM BILL SAFETY NET OFFER AND COUNTEROFFER MADE... But significant differences remain over how to blend revenue assurance and target/reference price safety nets. Both sides accuse the other of not going far enough in compromise, sounding a lot like what is occurring in the fiscal cliff debate. But the key remains: Farm bill issues will accelerate once farm-state lawmakers know how much they need to cut over ten years, and how long they will have to write the new farm bill language. The level of nutrition spending cuts will be determined by President Obama and congressional leaders.

HAS THE U.S. GOV'T EVER ACTUALLY REDUCED SPENDING?... The current debate in Washington won't likely really cut actual spending for most programs, but will reduce the rate of growth relative to the budget baseline. A look back shows there were a few times when year-over-year spending actually reduced, right after World War I, as well as after WWII. Then again in 1955 (end of Korean War) and just barely again in 1965. Since then, there have been no year-over-year decreases in spending. So you can see how hard it is for the debate to turn to actual spending cuts, but that is where the major problems are, especially in the years ahead with retiring baby-boomers seeking growing amounts of health care.

WEEKLY EXPORT SALES REPORT OUT THIS MORNING... For the week ended Dec. 6, traders expect: corn sales between 100,000 and 300,000 MT; wheat sales between 350,000 and 550,000 MT; soybean sales between 600,000 and 850,000 MT; soymeal sales between 200,000 and 350,000 MT; and soyoil sales between 15,000 and 40,000 MT.

PRIVATE FIRM SEES BIGGER 2013-14 EU WHEAT, CORN CROPS... In its first official forecast for 2013-14, private firm Strategie Grains sees EU wheat production rising 9% to 134.2 MMT on an increased plantings and higher yields. Strategie Grains sees 2013-14 EU corn production rising 16% to 55.7 MMT.

CASH CATTLE NEGOTIATIONS REMAIN SLOW... Bids and asking prices in the Plains remain $4 to $5 apart, with neither packers nor feedlots showing any urgency to actively ramp up cash negotiations. As a result, cash sources aren't expecting active cash cattle trade until Friday and this week's cash tone is still very much uncertain.

PORK CUTOUT CONTINUES TO SLIDE... The pork cutout value dropped 83 cents Wednesday for its sixth straight day of declines. But the drop in cash hog bids over that period has been stronger than that in the pork product market. As a result, packers have seen margins move back solidly into the black. Still, packers are unlikely to raise cash hog bids as their near-term slaughter needs are covered and market-ready supplies remain ample.

OVERNIGHT DEMAND NEWS... South Korea purchased 69,000 MT of U.S. or South American corn, 24,100 MT of U.S. wheat and tendered for up to 140,000 MT of corn. Japan purchased 134,157 MT of wheat in its weekly tender, including 110,855 MT of U.S. supplies.


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