First Thing Today (VIP) -- December 19, 2012

December 19, 2012 12:47 AM

GOOD MORNING! Grain and soy futures traded in a narrow, choppy range in overnight action. Corn futures are currently 1 to 2 cents lower, while soybeans have pared losses to a similar amount. Wheat futures are favoring the upside in choppy trade at all three locations.

FISCAL CLIFF STILL CREATING ECONOMIC UNCERTAINTY... Economists continue to express uncertainty about the impact of the U.S. fiscal cliff situation, with most still at least for now, sticking with expectations for slow, steady U.S. economic growth in 2013 of 2% to 2.5%. However, many are poised to update their outlooks depending on what happens -- or doesn't -- relative to the fiscal cliff situation.

FISCAL CLIFF ISSUES NARROWING, BUT HOUSE TO VOTE ON PLAN B THURSDAY... Fiscal cliff negotiations continue between President Barack Obama and House Speaker John Boehner (R-Ohio), but House GOP leaders will likely call for votes Thursday on bills extending current tax rates for most Americans. The likely vote Thursday will be on measures to extend current tax rates for families earning up to $250,000 and allow rates to increase only for those with income above $1 million -- the parameters Boehner on Tuesday labeled "Plan B" in case his talks with the president collapse. Of note, Thursday's vote will include extensions of the estate tax and a fix to make sure the alternative minimum tax (AMT) does not hit middle-income taxpayers. Meanwhile, sources signal an Obama-Boehner deal is nearing as differences are narrowing, but history shows progress will not come easy.

HOUSE, SENATE WILL LIKELY VOTE ON FARM BILL IF PUNTED... If the new farm bill is punted to 2013 as most now expect, then both the Senate (again) and the House would likely have to vote on the legislation, with debate on the floors of both chambers -- including some likely contentious amendments up for debate. The timeline for completing the bill, some say, would be August.

DAIRY POLICY A THORNY FARM BILL ISSUE... Rep. Collin Peterson (D-Minn.) has said any 2008 Farm Bill extension must include the dairy gross margin/supply management program included in both Senate and House farm bills -- a very unlikely development. If not, Peterson told Politico he could bring up to 40 members to vote against any fiscal cliff package. Another option would be to resurrect the lapsed Milk Income Contract Loss (MILC) program on a September to September basis.

STABENOW HAS A PLAN B, TOO... On Tuesday, Senate Ag Chairwoman Debbie Stabenow (D-Mich.) became a cosponsor of an amendment on agriculture aid by Sen. Jeff Merkley (D-Ore.) to the Superstorm Sandy disaster supplemental bill. The Merkley proposal would provide fiscal one-year funding for five agriculture disaster programs using money from the Commodity Credit Corporation. The programs would cover loss of livestock forage on private and federal lands; livestock deaths on private or public lands because of natural disasters; emergency assistance to livestock, honeybee and aquaculture operations; replanting costs for nursery tree and orchard growers; crops for which federally subsidized insurance is not generally available, including aid for fruit growers with losses in 2012.

RUSSIAN WHEAT STOCKS DOWN 40% FROM YEAR-AGO... According to Russia's SovEcon, the country's wheat stocks as of Dec. 1 stand at 15.2 MMT, which is down 40% from the year-prior due to hot, dry weather this summer. But Russia's Ag Ministry expects 2013 production to help ease the tight supply situation. It expects 2013 winter grain harvest to total 38.6 MMT, compared with production of 29.2 MMT in 2012. This would represent a 32% increase year-over-year. As of mid-December, 15.7 million hectares had been sown, including 13 million hectares of winter wheat.

CHINA CLEARS ARGENTINE CORN SHIPMENTS... Argentina's government yesterday reported that China has cleared the first two containers of Argentine corn that had initially been held after quarantine authorities detected GMO strains that haven't been approved in the shipments. These represent the first shipments of Argentine corn to China after the countries recently finalized a phytosanitary agreement on corn trade.

CASH CATTLE PROSPECTS UNCERTAIN... Yesterday's late reversal in price action was largely technical in nature and futures remain at a premium to last week's cash cattle prices, signaling a bias toward steady to higher cash trade this week. The impending winter storm event could encourage packers to bid more aggressively than they might normally to secure cattle ahead of the storm. But another day of mixed boxed beef action yesterday, with Choice cuts down 93 cents and Select values up 51 cents, adds some uncertainty as does the fact that processors are buying for a short week due to the Christmas holiday.

CASH HOG BIDS SEEN MOSTLY STEADY... Packers are expected to pay mostly steady prices for cash hogs today on variable demand. While some packers are still working to secure supplies for late-week needs ahead of the winter storm event, others are exercising caution as margins are back near breakeven with some cutting in the red. Yesterday's $1.13 surge in the pork cutout value that coincided with impressive movement of 153.25 loads will give margins a boost.

OVERNIGHT DEMAND NEWS... Oman bought 20,000 MT of South American corn overnight. Tunisia tendered for 50,000 MT of optional origin durum wheat and 50,000 MT of optional origin feed barley. Taiwan tendered for 75,600 MT of U.S. wheat. Japan bought 114,330 MT of barley and 27,060 MT of feed wheat in a simultaneous buy-and-sell tender. The country also tendered for 120,000 MT of feed wheat and 200,000 MT of feed barley.

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