First Thing Today (VIP) -- December 14, 2012

December 14, 2012 12:38 AM
 

GOOD MORNING!

MIXED TO FIRMER TONE IN GRAINS... As of 6:30 a.m. CT, corn futures are narrowly mixed, soybeans mostly 8 to 13 cents higher, Chicago wheat mostly 2 to 5 cents higher, Kansas City wheat mostly 1 to 3 cents higher and Minneapolis wheat mostly 2 to 4 cents higher. The U.S. dollar index is modestly weaker this morning.

FARM BILL NEGOTIATIONS TAKE STEP BACK AS SENATE, HOUSE OFFICIALS SNIPE AT COUNTEROFFERS... Farm bill negotiations are beginning to look a lot like the fiscal cliff talks -- more sniping of each others' proposal with little to no progress in negotiations. In the case of the farm bill, it's actually a step back as it appears the Senate farm bill counteroffer is even more heavily skewed toward revenue assurance than before. The changes offered by Senate farm bill leaders work out to 90% funding for revenue and 10% for target/reference prices. Also, the Senate offer did not even list specific target prices and limited the proposal to only three crops -- wheat, rice and peanuts. House farm bill leaders from both parties easily rejected the Senate offer. Meanwhile, House Majority Leader Eric Cantor (R-Va.) repeated on Thursday that, "We are committed to trying to address the issue of the farm bill prior to leaving for the year."

VILSACK SAYS EXTENSION OF 2008 FARM BILL UNLIKELY BUT HOUSE LEADERS HAVE LANGUAGE READY... USDA Sec Tom Vilsack on Thursday said it was unlikely the 2008 Farm Bill would be extended. But most observers concluded that was just him putting pressure on farm bill officials to negotiate a final new farm bill. Besides, Vilsack would not make that call as it will be a congressional leader decision. Our sources signal legislative language is nearly complete for a one-year extension which would include funding to retroactively restart the Milk Income Loss Contract program (September 2012 through September 2013), as well as restarting lapsed livestock disaster programs. Unclear at this juncture is what will be used as a budget offset to restore those lapsed programs. One option is a slight reduction in any direct payments for 2013 crops, but other options are being mulled.

CHINA REJECTS TWO ARGENTINE CORN SHIPMENTS... Chinese quarantine authorities are holding two cargoes of Argentine corn at ports after detecting GMO strains that haven't been approved in the shipments. A Chinese official says all imports from Argentina are halted until the situation is resolved. These are believed to be the first shipments of Argentine corn to China after the two countries recently finalized a phytosanitary agreement on corn trade.

SINOGRAIN OFFICIAL: CHINA CORN OUTPUT NOT AS LARGE AS FORECAST... China's 2012 corn crop wasn't as big as forecast, according to Bai Haifeng, a division chief with state-run stockpiler China Grain Reserves Corp. (Sinograin). Instead of rising 15.34 MMT, as forecast by the National Bureau of Statistics, Haifeng says production rose only 5.1 MMT from year-ago to around 198 MMT, meaning China will be at a "small deficit" and will have to cut into government stocks to meet demand needs.

CHINA'S MANUFACTURING SECTOR EXPANDING... China's flash HSBC purchasing managers' index came in at a 14-month high of 50.9 in December, signaling the country's manufacturing sector is expanding. The new orders sub-index rose, but export orders were down, reiterating exports could be the stumbling block for China's economic recovery.

SOY CRUSH TO REMAIN STRONG... NOPA members are expected to report soybean crush totaled 157.4 million bu. last month, based on the average pre-report guess. That would be 2.5% higher than the October crush pace and 11.4% above year-ago. The record crush pace for the month was 160.3 million bu. in November 2009. Soyoil stocks are guessed at 2.244 billion pounds.

IGC SEES BIGGER 2013-14 GLOBAL WHEAT AND CORN CROPS... The International Grains Council (IGC) expects global wheat production to rise 5.4% to 690 MMT in 2013-14. IGC is forecasting global corn output to rise by 10.3% to 916 MMT next year.

STILL WAITING ON CASH CATTLE TRADE... Bids and asking prices remain far apart in the Plains, suggesting active cash cattle trade won't likely to be seen until late today. Some cash sources feel sales levels will be light as packers don't have a great need for animals and feedlots are not keen on moving cattle at prices below last week's $124 trade.

PORK CUTOUT SLIDE HALTED... Recent weakness in the pork product market was halted Thursday as the cutout value was 25 cents higher. While packer margins are back solidly in the black, demand for cash hogs is expected to remain relatively limited. Most Midwest plants are expected to offer steady bids for cash hogs to close out the week.

OVERNIGHT DEMAND NEWS... South Korean firms purchased 324,500 MT of optional origin corn (likely South American), bringing total purchases from the country this week to 630,000 MT. South Korea also purchased 24,000 MT of U.S. wheat.

 

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