First Thing Today (VIP) -- February 1, 2013

February 1, 2013 12:35 AM



FIRMER TONE TO KICK OFF FEBRUARY... Grain and soy futures are higher to start the new month. As of 6:30 a.m. CT, corn futures are trading 3 to 5 cents higher, soybeans are 4 to 13 cents higher, Chicago and Kansas City wheat are 4 to 5 cents higher and Minneapolis wheat is 2 to 3 cents higher. The U.S. dollar index is under pressure this morning.

RFS BATTLE CONTINUES BETWEEN API AND BIOFUELS, EPA... The fight between the biofuels industry and oil-and-gas lobby group the American Petroleum Institute (API) is at it again following EPA's release Thursday of 2013 targets. Of note: EPA raised how much cellulosic biofuel -- made from non-edible feedstock -- it expected refiners to blend this year as part of the renewable fuel standard. EPA set the mark at 14 million gallons of cellulosic biofuel, up from about 8.65 million gallons last year. The new figure pleased the biofuels industry, but did not satisfy API. Biofuels groups say the goal reflects new production coming online, while API says EPA’s projection is still too ambitious, as just about 21,000 gallons of cellulosic biofuel were produced last year. The industry is concerned its members will be forced to buy credits if enough cellulosic fuel is not produced, as has been the case in the past. API wants Congress to repeal the rule and is weighing other court challenges as well.

SENATE VOTES TO SUSPEND DEBT CEILING FOR THREE MONTHS... As expected, the Senate approved legislation Thursday to suspend the debt ceiling until May 19. Several Republicans joined most Democrats in voting for the the measure that passed 64-34. The measure now moves to President Obama, who will sign it as soon as it hits his desk.

GRAIN IMPORTS KEY FOR CHINA, WORLD MARKET...China should continue to strive for high self-sufficiency in grain production, but also needs to import grains to meet building domestic demand and therefore shouldn't impose further curbs on food imports this year, according to the director of the Chinese Communist Party's top policy making body for rural affairs. The official says Chinese imports of grain would support both the domestic and global market, but maintaining a high self-sufficiency rate in grains is "China's contribution to the world's grain security."

CHINESE CRUSHERS DRAWING DOWN PORT STOCKS OF SOYBEANS... China National Grain and Oils Information Center forecasts first quarter Chinese soybean imports at 11.6 MMT, down 13% from imports of 13.26 MMT during the first three months of last year. While soybean imports are expected to decline, crusher demand is strong amid favorable margins and robust seasonal demand for soyoil and soybean meal. As a result, the state-run think-tank sees soybean stocks held at Chinese ports falling to around 4 MMT by the end of the first quarter from about 5 MMT currently.

MODEST JOBS GROWTH EXPECTED... The U.S. economy is expected to have added 160,000 non-farm payrolls in January, according to the average guess of economists polled by Reuters. That would be a very modest uptick from the 155,000 jobs added in December. The unemployment rate is forecast to be steady at 7.8%.

CATTLE INVENTORY REPORT TO SHOW CONTRACTING HERD... USDA's twice-yearly Cattle Inventory Report this afternoon is expected to confirm the U.S. cattle herd continues to contract, with all cattle and calves guessed at 98.2% of year-ago. The annual calf crop is guessed at 97.9% of year-ago. Someone will be surprised by beef replacement heifers number as there's a wide range of guesses from 92.1% to 103% of year-ago for that category.

BOXED BEEF MARKET STILL SEARCHING FOR A LOW... Boxed beef prices were 77 cents (Select) to $1.44 (Choice) lower Thursday as retailers continue to search for a price that sparks increased buying interest. While movement isn't poor, it's going to take improved movement at higher prices before there are indications of a short-term low.

PORK MARGINS DEEP IN THE RED AGAIN... Price action in the cash hog and pork product markets has driven packer cutting margins back deep into the red after they briefly poked above breakeven earlier this week. Despite the highly negative margins, cash hog bids are expected to be steady to firmer to close out the week as inclement weather is making it hard for plants to get animals to town.

OVERNIGHT DEMAND NEWS... South Korea purchased 35,000 MT of Australian wheat and 55,000 MT of Ukrainian feed wheat. Yemen bought 45,000 MT of Indian wheat.

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