First Thing Today (VIP) -- December 3, 2012

December 3, 2012 12:16 AM
 

GOOD MORNING!

RISK-ON ATTITUDE TO START THE WEEK... Upbeat economic data out of China and improved sentiment in the euro-zone are fueling a risk-on attitude to start the week. In addition, grains are getting support from bullish demand news. As of 6:30 a.m. CT, corn futures are trading 5 to 7 cents higher, soybeans mostly 10 to 17 cents higher and wheat futures are 6 to 9 cents higher at all three exchanges. The U.S. dollar index is under pressure.

KEY FARM BILL OFFICIALS AT FARM JOURNAL FORUM THIS WEEK... Several key farm bill officials will be presenters at this week's Farm Journal Forum, cosponsored by Informa Economics. Giving congressional updates on Thursday will be House Ag Committee Chairman Frank Lucas (R-Okla.) and Senate Ag Chairwoman Debbie Stabenow (D-Mich.). Meanwhile, USDA Sec. Tom Vilsack will likely talk about his meeting last week with those two lawmakers and others regarding the farm bill. The forum takes place in Washington, D.C., Dec. 5-6. Recent statements from key players suggest farm bill movement is finally at hand. The exact timeline is still murky but all options are being ruled in at this stage. At the recent meeting in USDA Sec. Vilsack's office with the four Ag panel leaders, Vilsack reportedly told them that if they could reach agreement on farm bill issues, he would go to the White House and push hard to get the bill wrapped into a fiscal package by year's end.

SOME FARM-STATE DEMOCRATIC SENATORS OPPOSE OBAMA'S PROPOSAL TO INCREASE ESTATE TAX... President Obama is proposing a 45% estate tax after the current 35% rate expires on Jan. 1. He would exclude from the tax the first $3.5 million of an estate's assets, down from the current threshold of $5.12 million (double for spouse). The proposal -- estimated to raise $276 billion over 10 years, according to the Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute -- is part of Obama's deficit-reduction plan. Under his proposal, some 7,500 estates would owe taxes next year, compared with 4,000 if current policy continued, based on analysis by the Tax Policy Center. If the White House and Congress take no action, the current tax cut will expire and the rate will rise to 55% next year and apply to assets above $1 million (double for spouse).

CHINA'S 2012 SOYBEAN PRODUCTION FALLS SHARPLY... China produced 12.8 MMT of soybeans this year, according to state-run China National Grain and Oils Information Center (CNGOIC), a reduction of 11.6% from 2011. Soybean plantings were down 9% as producers focused on corn, wheat and rice production. With production down, CNGOIC is forecasting record soybean imports of 57.5 MMT this year. CNGOIC confirmed that while crush margins are still negative, crushers have resumed soybean purchases.

CHINA'S MANUFACTURING SECTOR EXPANDING... China's official manufacturing purchasing managers' index (PMI) rose to a seven-month high of 50.6 in November from 50.2 in October. The official services PMI rose to 55.6 from 55.5 in October. The PMI data is further indication China's economy is responding to pro-growth monetary policy measures.

NEGATIVE CASH CATTLE EXPECTATIONS... After $2 to $3 lower cash cattle trade at $125 in the Plains last week, traders start the week with expectations of additional cash pressure. Given the premium December live cattle futures hold to last week's cash trade, there's risk of followthrough selling in the front-month contract if negative cash expectations build.

CASH HOGS CALLED STEADY/FIRMER... Packers are expected to open the week offering steady to firmer bids for cash hogs as they work to fill up kill lines to take advantage of profitable margins. With a plentiful supply of market-ready hogs, however, the pork product market must also be firm or margins will tighten and packers may lower cash hog bids.

WEEKEND DEMAND NEWS... Egypt purchased 400,000 MT of wheat, including 280,000 MT of U.S. wheat (165,000 MT of soft white, 115,000 MT of SRW). Israel tendered for 115,000 MT of corn, 35,000 MT of feed wheat, 20,000 MT of feed barley and 20,000 MT of sorghum -- all optional origin. Bangladesh tendered for 50,000 MT of optional origin wheat. India tendered for 6,000 MT of Argentine soyoil.

 

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