First Thing Today (VIP) -- December 24, 2012

December 24, 2012 12:42 AM

GOOD MORNING! Corn futures have traded on either side of unchanged today and as of 6:30 a.m. CT are split, with nearbys up 2 to 4 cents and deferred months slightly lower. Soybean futures are fractionally to 3 cents higher with the exception of far deferred months, which are seeing greater gains. Wheat futures also chopped in a narrow range overnight. Chicago and Kansas City wheat are steady to 3 cents higher while Minneapolis wheat is mostly slightly lower. A weaker U.S. dollar index is helping grain and soy futures to favor the upside.

ABBREVIATED TRADING HOURS TODAY... Grain and livestock markets will trade an abbreviated schedule today with grains closing at noon CT and livestock markets ending at 12:15 p.m. CT. All markets and government offices are closed Tuesday, Dec. 25, for Christmas. Normal trade will resume Dec. 26. Pro Farmer will observe an abbreviated release schedule today with a market snapshot update at 10:00 a.m. CT, followed by a brief market analysis following the closing bell.

OBAMA, DEMOCRATIC SENATORS WORKING ON SCALED-BACK FISCAL CLIFF PACKAGE... The Senate returns to Washington on Thursday, and House members have not yet been given the word to return. But President Obama made clear Friday he wants a package, likely scaled back some, regarding fiscal cliff issues to be passed by year's end. The Senate will also work on a bill dealing with aid for Hurricane Sandy. There are some economic indicators out this week, with Wednesday bringing the Case-Shiller home price index and the Richmond Fed survey. Thursday will see jobless claims, New Home Sales and Consumer Confidence info, with the week wrapping with the Chicago PMI survey and Pending Home Sales. For agriculture, Friday brings the Weekly Export Sales report (pushed back to Friday with Christmas on Tuesday) and the quarterly Hogs & Pigs report.

PETERSON SLAMS HOUSE GOP LEADERS FOR BLOCKING FARM BILL PROGRESS... In an interview with the Minneapolis Star Tribune, Representative Collin Peterson (D-Minn.), ranking member on the House Ag Committee, placed blame for the bogged down farm bill squarely on the House GOP leadership. He said election-year politics and now fiscal cliff negotiations involving House Speaker John Boehner (R-Ohio) and President Obama kept the farm bill off the House floor. According to Peterson, the problem now is Republican leadership has run out of time to "put it in whatever they come up with [for a deficit deal]. That has shifted the power from us to Obama and Boehner, which makes us very nervous... They're both fixated on just cutting money without regard to the long-term policy implications... There's talk that they're going to eliminate direct payments and extend the rest [of the expiring farm bill]."

INCOMING JAPANESE PRIME MINISTER TARGETS DEFLATION, YEN... The yen plummeted to a 20-month low against the dollar after Japan's new prime minister, Shinzo Abe, indicated he may change the law governing the country's central bank if policy makers do not raise their inflation target from 1% to 2%. He also called on the Bank of Japan to "resist" moves by the U.S. and Europe to lower the value of their currencies and for the central bank to do all that it can, including "unlimited easing" to revive economic growth and end deflation. The Bank of Japan last week said it would consider raising its price target at its upcoming January meeting and unveiled a program to provide cheap funds to commercial banks in return for them increasing their loans. These comments have many concerned the central bank will increase its currency-debasing measures to reach the inflation goal.

CONFLICTING SIGNALS IN USDA FOOD PRICE FORECAST UPDATE... Updated food price forecasts from USDA’s Economic Research Service (ERS) are providing conflicting signals about the change in food prices for 2012. USDA economists have kept a forecast increase of 2.5% to 3.5% for several months, but that may no longer be the case. According to the commentary released by ERS on food prices, the agency said their "inflation forecast for both all food and food-at-home (grocery store) prices in 2012 remains unchanged at 2.5% to 3.5%." However, the data table that accompanied the update indicated the forecast for all food in 2012 is now 2.25% to 2.75%. It’s not clear which set of figures is correct and we have asked ERS for a clarification on this matter. They are still keeping their forecast for 2013 at an increase of 3% to 4%.

LIMITED CASH CATTLE DEMAND OVER THE HOLIDAYS... Choice and Select cuts firmed on Friday, with Choice cuts rising $1.03 and Select values rising $1.09, but movement slowed to 146 loads. This helped spur more active cash cattle trade late Friday at $126, up $1.50 to $2.00 from the week prior. But demand this week will likely be limited due to shortened kill hours over the holidays. Also, futures could face pressure today as traders digest slightly bearish Cattle on Feed and Cold Storage Reports released post-market close on Friday. Any moves could be exaggerated by thin holiday trading volume.

PORK IMPROVEMENT BOOSTS HOG CUTTING MARGINS... Friday's Cold Storage Report revealed record-large frozen pork stocks as of Nov. 30, but the total was still well below expectations. This should favor market bulls to start today's session. Adding to the bullish tone was a 96-cent rise in the pork cutout value Friday along with decent movement of 68.75 loads. This pulled packer profit margins back into the black, which could make them more willing to raise cash hog bids. Countering this idea, however, is the fact that packers are preparing for another holiday shortened week and plant closures due to Christmas.

WEEKEND DEMAND NEWS... South Korean flour mills bought 23,000 MT of U.S. wheat on a free-on-board basis for April shipment. India issued a global tender for 150,000 MT of wheat for February to march delivery.

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