First Thing Today (VIP) -- February 14, 2013

February 14, 2013 12:20 AM


CORN MIXED, BEANS WEAKER AND WHEAT FIRMER... As of 6:30 a.m. CT, corn futures are narrowly mixed, soybeans are 1 to 5 cents lower, Chicago wheat is 1 to 3 cents higher and Kansas City and Minneapolis wheat are 2 to 4 cents higher. The U.S. dollar index is sharply higher after EU fourth quarter GDP came in lower than expected and showed the bloc dropped deeper into recession.

WINTER GRAINS IN RUSSIA'S 'BREADBASKET' WORSE THAN NORMAL... The head of the state weather forecasting agency says 10.5% of winter grains in Russia's southern "breadbasket" region are in "poor" condition compared to the long-term average of around 9%. A lack of snowcover leaves winter grain crops in the region at greater risk of winterkill. The forecaster also says based on preliminary data he can't rule out the possibility of drought in the Volga region and southern regions of the European part of the country.

KEY HOUSE LAWMAKERS SAY DIRECT PAYMENTS FOR 2013 WILL NOT BE ELIMINATED, BUT COULD BE REDUCED... The Chairman and Ranking Member of the House Ag Committee said they think direct payments, which were continued for eligible 2013 crops via the 2008 Farm Bill extension, will not be eliminated as part of a deal to avoid the across-the-board cuts "sequester." However, payments could be reduced by 8% if the sequester occurs, if they are not exempt. House Ag Chairman Frank Lucas (R-Okla.) said farmers can count on those payments. "Certainty is a big part of why the direct payment program has been so important since the 1996 Farm Bill. I would like to think the policymakers who would make those decisions -- the budget people, the appropriators, the leadership in both House and Senate -- would bear that in mind as we work through all of these other challenges," he said. But Rep. Chris Van Hollen (D-Md.) planned to offer a Democratic sequester package that includes an end to the payments. Van Hollen called the payments "difficult to defend in times of record crop yields and prices." It’s the fourth time that Van Hollen has made the proposal, but most observers conclude the plan will not be accepted.

POSSIBLE MEAT INSPECTOR FURLOUGHS MAY BE TOP TOPIC AT FEB. 26 HEARING WITH VILSACK... Possible meat inspector furloughs under a coming sequester will likely be a key topic on Feb. 26 when USDA Secretary Tom Vilsack appears before the Ag Committee to discuss the rural economy. Panel Chairman Frank Lucas (R-Okla.) said he and other panel members want to know more about USDA's announcement that all Food and Safety Inspection Service (FSIS) personnel, including inspectors at slaughterhouses, could be furloughed for up to 15 days if the sequester starts March 1. Under federal law, meatpackers cannot keep their operations going unless an inspector is present. Latest word is that a plan to possibly deal with the sequester is not likely until lawmakers deal with the March 27 expiration of the continuing resolution (CR) for Fiscal Year 2013. Lucas said the furloughs of inspectors would be a break from past practices as USDA usually classifies inspectors as essential personnel not subject to furloughs. "This could have tremendous impact, whether it is the packing industry in Kansas or Iowa, a huge impact on people and consumers all over the country," Lucas said. Vilsack has previously stated that worker exemptions that exist under short-term government shutdowns do not apply under sequestration. Although the department has cut FSIS expenses to reduce the length of furloughs, Vilsack said the automatic cuts would require a higher level of savings that necessitates unpaid leave for all FSIS workers.

FIRM CUTS EU WHEAT CROP FORECAST... Private consulting firm Strategie Grains lowered its 2013 EU (including Croatia) wheat production forecast to 132.2 MMT from 133.3 MMT last month due to lower planted acreage in Britain and France. The firm raised its 2013 EU corn production forecast to 65.5 MMT from 64.9 MMT last month.

WEEKLY EXPORT SALES REPORT OUT THIS MORNING... For the week ended Feb. 7, traders expect: corn sales between 150,000 and 350,000 MT; wheat sales between 275,000 and 400,000 MT; soybean sales between 700,000 and 1.1 million MT; soymeal sales between 150,000 and 250,000 MT; and soyoil sales between 20,000 and 30,000 MT.

WAITING ON ACTIVE CASH CATTLE TRADE... After light cash cattle sales around $123 in the Central and Southern Plains Tuesday, the cash market was quiet yesterday. Feedlots that still have cattle to sell this week are still hoping to get $125 or better for supplies.

PORK CUTOUT PLUNGES... Tuesday's rise in pork prices proved to be temporary, as the cutout value dropped $2.68 yesterday. Ham prices plunged $8.92 yesterday after being solely responsible for the price strength Tuesday. With the product market still searching for a low and packer margins buried deep in the red, demand for cash hogs will remain limited.

OVERNIGHT DEMAND NEWS... South Korea purchased 108,000 MT of corn (mostly South American) and 55,000 MT of optional origin (likely Indian) feed wheat. Algeria bought at least 400,000 MT of optional origin (likely French) wheat. Jordan tendered for 100,000 MT of optional origin wheat. Bangladesh tendered for 50,000 MT of optional origin wheat.


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