First Thing Today (VIP) -- February 15, 2013

06:24AM Feb 15, 2013
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CORRECTIVE BOUNCE OVERNIGHT... As of 6:30 a.m. CT, corn and soybean futures are trading mostly 2 to 5 cents higher, Chicago and Kansas City wheat are 4 to 6 cents higher and Minneapolis wheat is 3 to 4 cents higher. The U.S. dollar index is firmer this morning.

FORECASTER SAYS WE MAY BE SETTING UP FOR ANOTHER DROUGHT YEAR... Roger Pulwarty, director of NOAA's National Integrated Drought Information System, warned the Senate Ag Committee that atmospheric conditions appear to be "setting up for a very similar level of drought" as last year in the Midwest and West. The heat and low rainfall last summer was due to a high pressure area that persisted over the central part of the country, he said. Meanwhile, USDA Chief Economist Joe Glauber says that while much of the nation’s winter wheat acreage as well as hay acreage and grazing lands remain under drought, conditions have improved in the eastern Corn Belt and spring-planted crops could be large enough to relieve pressure on feed supplies. He told the Senate Ag Committee that 59% of the winter wheat acreage is under drought conditions; 43% is in areas rated as being in extreme or exceptional drought conditions. Still, corn yields should return to normal, trendline levels, assuming precipitation is adequate this spring, he said. "This should help relieve feed prices."

ARE VILSACK, STABENOW OVERREACHING ON FOOD SAFETY, FARM BILL ISSUES?... Some say USDA Secretary Tom Vilsack and Senate Ag Chairwoman Debbie Stabenow (D-Mich.) are toting their political party line a bit too much when it comes to budget-related food safety issues (Vilsack) and budget-related farm bill issues (Stabenow). Vilsack has warned that across-the-board furloughs are likely in the meat inspection area should the March 1 sequester go forth. Some say he has flexibility but is touting the White House line to put pressure on Republicans to offset the coming $85 billion in cuts. Stabenow has provided some details of the farm spending provisions in the Democratic plan to avert the budget sequester. The plan would save a net $27.5 billion over 10 years by eliminating direct payments to farmers while reviving expired disaster assistance programs and other programs left unfunded by this year’s farm bill extension. But House Ag Chairman Frank Lucas (R-Okla.) sees the farm bill issue far differently. "Farmers and ranchers want to be a part of the solution to the fiscal crisis we face in this country," Lucas said in a statement. "And, the House Agriculture Committee demonstrated that commitment to being a part of the solution when we passed a comprehensive, balanced farm bill that cut more than $35 billion from all of agricultural spending, including the farm safety net, conservation programs, and reforming the SNAP program. We made those reforms in the context of a comprehensive, five-year farm bill that ensured we still met the food and fiber needs of all Americans. The Senate’s approach of taking away our investment in rural America without addressing the hole it will create is not balanced and not acceptable." What Stabenow now needs to address is if the Democratic plan goes through (which it will not), then what is the farm safety net for 2013 crops because Congress has shown no speed when it comes to getting a new farm bill past the goal line.

ANOTHER STRONG CRUSH REPORT EXPECTED... NOPA members are expected to report January soybean crush of 160.6 million bu., based on the average pre-report guess. If realized, that would be up marginally from the December crush pace of 159.9 million bu. and 12.5% greater than year-ago. Strong domestic and export demand for soy products, especially soybean meal, remains the catalyst for the aggressive crush pace. Soyoil stocks are guessed at 2.713 billion pounds.

CORE CORN BELT FARMLAND VALUES CONTINUE TO RISE... Farmland values in the core of the Corn Belt continued to rise in the fourth quarter of 2012 and may climb even further given strong farmer incomes, according to the Federal Reserve Bank of Chicago, which serves all of Iowa, most of Illinois and Indiana, along with parts of Wisconsin and Michigan. The bank indicates the price of "good" farmland was up 16% from year-ago during the fourth quarter and prices rose 7% from the previous quarter. Seventy-one percent of bankers in the district expect farmland values to hold steady in the first quarter of this year, while 28% expect farmland prices to rise.

BOXED BEEF MARKET CONTINUES TO SPUTTER... Boxed beef prices were 15 cents lower (Choice) to 28 cents higher (Select) and packers moved only 146 loads of product Thursday. Lackluster product movement signals retailer demand for beef remains limited despite more than a $10 decline in Choice boxed beef prices since the beginning of the year. Until beef demand improves, buying interest in cattle futures will remain limited.

LIMITED DEMAND FOR CASH HOGS... Packer interest in buying cash hogs will remain limited amid highly negative margins and with some plants closed Monday for Presidents Day. As a result, cash hog bids will remain under pressure across the Midwest.

PRESIDENTS DAY TRADING SCHEDULE... Grain and livestock markets will observe normal trading hours today ahead of the extended holiday weekend. Markets and government offices are closed Monday, Feb. 18 for Presidents Day.

OVERNIGHT DEMAND NEWS... Brazil purchased 100,000 MT of U.S. HRW wheat. Japan purchased 96,538 MT of wheat in its weekly tender, including 61,568 MT of U.S. supplies. South Korea bought 25,100 MT of Australian wheat. Libya tendered for 25,000 MT of optional origin feed barley and 25,000 MT of optional origin soybeans.