First Thing Today (VIP) -- December 17, 2012

December 17, 2012 12:16 AM


BEANS CONTINUE TO RALLY... Soybean futures are leading price strength in the grain and soy complex this morning. As of 6:30 a.m. CT, soybeans are trading 2 to 10 cents higher, corn fractionally to 4 cents higher, Chicago wheat mostly 1 to 3 cents higher, Kansas City wheat 1 to 2 cents higher and Minneapolis wheat 1 to 4 cents higher. The U.S. dollar index is posting modest gains this morning.

HURRICANE RELIEF BILL, FISCAL CLIFF TALKS AND FARM BILL NEGOTIATIONS ARE FOCUS IN WASHINGTON... The Senate will consider a $60.4 billion supplemental spending bill (HR1) that would provide relief to areas affected by Hurricane Sandy. The bill, agreed to by Senate appropriators and requested by the Obama administration, would provide federal disaster funds to the states affected by Hurricane Sandy, which impacted the East Coast in late October. Fiscal cliff discussions will continue, with a deal awaited between the White House and congressional leaders to prevent tax hikes and spending cuts next year. Our sources say talks have been more frequent ahead of a hoped-for conclusion to this issue before year-end. Meanwhile, agriculture interests are zeroed in on the farm bill and how and whether it will be melded into any fiscal cliff package. Top officials are continuing to talk with new options under review by both political parties. Majority Leader Eric Cantor (R-Va.) reiterated last week the House is committed to address the issue of the farm bill "prior to leaving for the end of the year," but he has not said exactly when.

FISCAL CLIFF UPDATE... House Speaker John Boehner (R-Ohio) proposed allowing tax rates to rise for the wealthiest Americans if President Barack Obama agrees to major entitlement cuts. Boehner in recent talks with President Obama suggested hiking tax rates for top wage earners, including those with annual incomes of $1 million or more annually, beginning Jan. 1. Boehner also reportedly wants to use a new method of calculating benefits for entitlement programs known as "chained CPI," which would slow the growth of Medicare and other federal health programs and save hundreds of billions over the next decade. The proposal, as a whole, still is not acceptable to President Obama and Democratic leaders in Congress. Obama has drawn the line at the top two tax brackets, which would allow rates to rise for individuals reporting income of $200,000 and families with income of at least $250,000, but the White House has signaled it is willing to let the rates rise short of the 39.6% due to take effect for the top earners. The new offer would push the revenue to around $1 trillion over a decade. Obama’s latest offer was $1.4 trillion, down from $1.6 trillion in his initial proposal.

PRIVATE FIRM RAISES BRAZIL SOYBEAN ESTIMATE... AgRural raised its Brazilian soybean production estimate to 82.2 MMT following the private consulting firm's first production survey. Previously, AgRural had forecast the Brazilian soybean crop at 81.9 MMT.

CHINA TO KEEP 'PRUDENT,' 'PROACTIVE' MONETARY POLICY TO PROMOTE GROWTH IN 2013... China pledged to maintain steady economic policies in the new year as the country strives to grow its economy in the face of global economic uncertainty. China says it will encourage appropriate growth in bank loans and will attempt to keep the yuan stable to protect against global economic headwinds. Meanwhile, China will temporarily lower import tariffs on a host of goods next year in an attempt to boost domestic demand and promote industrial production, according to the Ministry of Finance. Few details were offered, but more than 780 products would see lower duties from Jan. 1 forward.

U.S., JAPAN HELD LATE-NOVEMBER BEEF TRADE TALKS... U.S. and Japanese officials held additional talks on beef trade issues in late November. Officials discussed what steps Japan will take if there is a violation on the U.S. side of the trade terms while the two sides did concur on age verification and on removal of specified risk materials (SRMs), with some saying a looser definition of SRMs that must be removed will be a part of the final rules. Currently, Japan halts imports from the U.S. plant in the event of a violation of age or specified risk material (SRMs) rules, while the U.S. wants Japan to only halt the affected shipment. While little action is expected over the holidays, Phil Seng of the U.S. Meat Export Federation says the elections in Japan should not hamper progress in the beef negotiations. Agreement on the new terms of beef trade are hoped for in early 2013 to allow U.S. beef from animals up to 30 months to be shipped to Japan.

BULLISH CASH CATTLE HOPES... After cash cattle traded steady to $1 higher in the Plains last Friday, traders are hopeful more cash strength will be seen this week. But cattle traders may be reluctant to actively buy futures to start the week given the premium the December contract holds to the cash market.

CASH HOGS CALLED STEADY TO FIRMER... Packer demand for cash hogs is expected to be relatively strong this week as plants gear up for the last full slaughter schedule this year. Given cutting profitable margins, cash sources are expecting packers to open the week offering steady to firmer bids for cash hogs.

WEEKEND DEMAND NEWS... Exporters reported no purchases or tenders.


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