Mostly weaker tone this morning... As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 2 to 4 cents lower in old-crop contracts and steady to firmer in new-crop contracts, SRW wheat is 1 to 2 cents lower, while HRW and HRS wheat futures are mixed with a slight downside bias. The U.S. dollar index is firmer this morning.
USDA Outlook Forum starts today near Washington, DC… The annual session offers the first look at the 2014 crop season by USDA analysts based on current conditions. The baseline projections released last week used November conditions as a starting point and already last week, USDA Chief Economist Joe Glauber said the acreage numbers released today will be different from those in the baseline projections. Glauber will deliver remarks this morning and usually previews the acreage portion of the upcoming crop year outlook. The details of the supply/demand picture usually come Friday morning from USDA analysts. The acreage expectations are now for USDA to signal corn plantings will be less than 93.5 million acres and soybeans will be more than 78 million acres -- the levels that were contained in the baseline figures. Also today, the Outlook for U.S. Agricultural Trade will be released. Some expect the FY 2014 forecast to be raised based on data for the first three months of Fiscal 2014 being the strongest first three months in terms of the value of U.S. ag exports that has been seen.
Already talk of logistic problems around Brazilian port... Brazil's record soybean crop is not yet one-third harvested and there are already reports of logistic problems coming from the area around the Port of Santos, Brazil's largest grain port. In addition to the poor road conditions Brazilians face every year in getting their crop from fields to ports, there are reports of truck backlogs around Santos. The Brazilian government implemented new rules for driver hours and a system for trucks entering ports in hopes of cleaning up some of the major congestion problems the country experienced at harvest time last year, but early reports are not favorable as truckers seem to be showing a general disregard for the new rules.
China wants to maintain self-sufficiency for staple grains... China will maintain its policy of self-sufficiency for the staple grains of wheat, rice and corn to ensure grain security in the country, according to an ag ministry official. An earlier report had indicated China was forecasting grain production below forecast consumption levels, but the official says that outlook was referring only to cereal grain output, not total grain production.
China's manufacturing sector continues to slow... HSBC's preliminary purchasing managers index (PMI) for February dropped to a seven-month low of 48.3 from a final reading of 49.5 in January, signaling China's vast manufacturing sector is contracting. Employment is down, along with domestic demand, while export orders are up slightly but still below the contraction threshold.
Crop insurance payouts pass $10.7 billion… Indemnities under the federal crop insurance program moved to $10,719 billion as of Feb. 17, nearly becoming the second highest yearly total on record, according to Risk Management Agency (RMA) data. Payouts for 2012 remain the high-water mark for the program at $17.430 billion with 2011 at $10.865 billion. Corn still leads payouts on all crops for 2013 at $4.912 billion, with the loss ratio at 1.05. Payouts for wheat stand at $2.245 billion with a loss ratio of 1.13. Soybeans still stand as the third largest payout level for 2013 crops, now at $1.087 billion with a loss ratio of 0.44. The program’s overall loss ratio (total premiums paid compared to total payouts) is at 0.91.
Camp to release tax code reform plan next week, but overhaul faces big hurdles... House Ways and Means Chairman Dave Camp (R-Mich.) next week will unveil a plan to overhaul the nation’s tax code by the end of the 113th Congress -- the equivalent of a Hail Mary pass. On Wednesday, Camp told GOP members of the committee that he would, next week, release a "comprehensive discussion draft" of a tax code rewrite. Odds of passing tax reform this year -- even in a lame-duck session of Congress -- are low. Camp's former Senate counterpart and ally, Democrat Max Baucus of Montana, is now U.S. ambassador to China. The new Senate Finance Committee is now Sen. Ron Wyden (D-Ore.). Wyden previously said he plans to make his top priority the several dozen tax provisions that expired at the beginning of 2014, and to pursue broader tax changes after that. One key element for tax reform is presidential leadership and support. President Barack Obama has called for overhauling the corporate tax code by eliminating tax preferences, discouraging income shifting to foreign countries and lowering the top rate to 28%; he has not called for similar changes in the individual code. A former chairman of the House Ways and Means Committee, retired Rep. William Thomas (R-Calif.), said at a recent conference that one of the rules of thumb in tax legislation is that a broad rewrite of the code is not possible unless the House and the president are of the same political party. Camp already has outlined many of his goals for reform through three discussion drafts on certain sections of the code. He also has proposed ways to move toward a more territorial system, for instance, to make tax code Section 179 expensing permanent and to expand the use of the cash method of accounting for small businesses.
Weekly export sales delayed... Due to Monday's holiday, USDA's release of export sales data for the week ended Feb. 13 is delayed until Friday morning.
Beef price recovery continues... Wholesale beef prices continued this week's price recovery yesterday as Choice boxes were $1.86 higher and Select boxes firmed 77 cents, while packers moved a respectable 167 loads of product on the day. The boxed beef strength combined with lighter showlist numbers has traders looking for firmer cash cattle prices compared to the mostly $142 to $143 trade in the Plains last week.
Pork cutout drops... The pork cutout value dropped $1.03 Wednesday as all cuts except butts were lower. Given recent price strength, a setback isn't too alarming, but with the cutout in the mid-$90s, we are watching for potential topping action in the product market.
Overnight demand news... Exporters reported no tenders or purchases.