First Thing Today (VIP) -- February 26, 2014

February 26, 2014 12:26 AM

Good morning!

Grain/soy markets quiet overnight... As of 6:30 a.m. CT, corn futures are trading steady to 1 cent lower, while soybeans and wheat are steady to 3 cents lower in most contracts. The U.S. dollar index is firmer this morning.

Drought cuts Parana soybean crop... Parana, Brazil's second largest soybean production state, has lost 2 MMT of soybean production to drought conditions, according to state ag officials. The state's ag department now forecasts the crop at 14.47 MMT, down from its previous estimate of 16.5 MMT.

GOP's Camp to detail tax overhaul plan today, but several hurdles ahead... Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means panel, today will unveil proposals to overhaul and simplify what he calls the "appalling tax code." Camp wants to reduce the seven individual tax brackets to two -- 10% and 25% -- and cut the top corporate income rate to 25% from 35%. The largest banks and insurers would reportedly pay a quarterly 3.5-basis-point tax on assets of over $500 billion. Many expect that section 199 deduction for manufacturing may be eliminated, and that accelerated depreciation will be lengthened. The mortgage deduction for second homes is also rumored to be on the chopping block. But the coming details face hurdles in both the House and Senate.

Drought forecasting bill sent to President Obama... The Senate on Tuesday cleared a bill that would authorize around $68 million for drought forecasting over the next five years. The measure would reauthorize through Fiscal 2018 the National Oceanic and Atmospheric Administration’s (NOAA) system for monitoring and forecasting droughts nationwide. The House passed the measure 365-21 on Feb. 10. The bill now heads to President Barack Obama for his signature. It specifies which agencies should be consulted for the National Integrated Drought Information System’s forecasts. It also requires the system to monitor the effects of droughts, including on water supplies and soil moisture, and to coordinate federal, state, regional, public, private and academic early-warning research. Under the bill, NOAA’s Office of Oceanic and Atmospheric Research would have 18 months to submit a report to Congress detailing how information generated by the system is used in drought policy planning and response activities, and how its research, monitoring and forecasting abilities can be improved. According to NOAA, drought-related losses average nearly $9 billion annually in the United States. Losses from the 2012 drought were estimated at $30 billion to $35 billion, mostly attributed to crop damage.

DOT orders pre-testing Bakken crude... The Department of Transportation (DOT) took special actions on both oil train shipments and airline accidents, as it ordered oil shippers to test Bakken crude before loading into rail tank cars and levied a $500,000 fine on South Korea's Asiana Airlines for not providing sufficient family support after the deadly July crash of an airliner at San Francisco. In the case of oil shipments, the DOT issued an emergency order imposing the new Bakken crude testing requirement. It also bars use of the lowest-rated tank cars for loading oil that carries a Class III hazmat classification, which is a lower-risk rating than the Class I and II cargoes that already require a tougher tank car to haul it. Until further notice, the DOT said, Class III crude oil shipments will not qualify to use the lower-rated Packing Group III equipment. The order on oil shipments follows agreement by major freight railroads to take a series of voluntary steps to reduce risks of hauling crude oil. They agreed to conduct extra track inspections on oil train corridors, slow oil trains in some high-population zones, deploy more wayside detectors to check for wheel bearing problems on tank cars and either add special end-of-train braking units or put a locomotive at the back of an oil train to curb the telescoping of loaded tank cars in the event of a derailment. Both the railroad pact last Friday and the DOT emergency order on oil shipping changes come just ahead of a hearing today on rail safety at a House Transportation subcommittee.

Beef movement slows... As wholesale beef values climb, packers are moving less product, signaling retailers are again starting to balk at high prices. Choice boxed beef prices were 68 cents higher Tuesday while Select boxed firmed $1.31, but movement was light at only 116 loads on the day. Cash cattle prices are expected to rise from last week's $144 to $145 trade in the Plains, but if movement remains slow, packers may not extend cash bids as much as anticipated by some as cutting margins are deep in the red.

Pork cutout charges higher... The pork cutout value was $1.27 higher yesterday, pushing the carcass price to $99.59. Importantly, movement picked up to 406.14 loads, calming some of our concerns that the rally in pork prices was curbing retailer buying interest. Retailer demand will eventually slow, but for now there's enough movement for packers to keep pushing product prices higher.

Overnight demand news... Taiwan purchased 60,000 MT of U.S. corn. Japan received no bids in a tender to buy 120,000 MT of feed wheat and 200,000 MT of feed barley.


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