PRICE PRESSURE OVERNIGHT... Grain and soy futures are being pressured by forecasts calling for better rain chances in Argentina and a firmer U.S. dollar. As of 6:30 a.m. CT, corn futures are trading around 5 cents lower, soybeans are 9 to 13 cents lower, Chicago wheat is 3 to 6 cents lower, Kansas City wheat is 3 to 4 cents lower and Minneapolis wheat is 1 to 4 cents lower. The U.S. dollar index is sharply higher this morning.
HIGHLIGHTS OF CBO ASSUMPTIONS ON AG… In Tuesday's "Evening Report," we noted the overall CBO updated projections for the budget. As for agriculture, CBO sees U.S. corn carryover for 2013-14 climbing to 1.852 billion bu. on a crop of more than 14 billion bu., with soybean carryover surging to 281 million bu. as production bests 3.3 billion bushels. Corn plantings in the budget would hit 97 million acres in 2013 with soybean plantings at 77 million acres. An average U.S. corn yield of 161.5 bu. per acre is assumed by CBO along with a 43.5 bu. per acre yield on soybeans. For wheat, CBO expects plantings for 2013 to reach 57 million acres while production is expected to decline despite the uptick in acres as the average yield is seen at 45.5 bu. per acre in 2013.
CBO PRICE ASSUMPTIONS... Given the supply fundamentals, CBO expects corn prices to average $4.51 per bu. for the 2013 crop and remain below $5 for the rest of the budget period -- through the 2023 crop year. For soybeans, CBO expects prices at $11 per bu. in 2013 and being under that mark for 2014-2021, rising back to $11 or more for 2022 and 2023. Wheat prices are forecast at $7.05 for 2013 crop, and declining to $5.81 per bu. in 2014 before climbing to just above $6 per bu. in 2018 and beyond. Cotton prices are forecast in a relatively tight range of around 68 cents per pound for 2014 and beyond after declining to 67.95 cents for the 2013 crop year.
JAPAN EXPECTED TO USE MORE CORN, LESS WHEAT IN 2013-14... Japan relied more on wheat and less on corn for feed needs in 2012-13 due to tight U.S. corn supplies. But traders anticipate Japan sharply reducing feed wheat purchases in 2013-14 (March-February) and moving back to more corn in feed rations. The likely benefactors of such a switch would be Argentina, Brazil and Ukraine. Traders anticipate Japanese feed wheat purchases will drop to 700,000 MT in 2013-14 from 1.2 MMT in 2012-13. The Japanese government will set its 2013-14 grain import targets in March.
INDIA TO DISCUSS WHEAT EXPORTS THURSDAY... India's cabinet is meeting Thursday to discuss the possibility of freeing up additional government wheat stocks for export as the country prepares for new-crop arrivals, according to the country's farm minister. Recent rains have improved crop prospects and India is expected to produce a bumper crop this year. As we reported yesterday, India has sold only 1.76 MMT of wheat onto the global market since July 1 and is actively seeking ways to ramp up exports.
BOXED BEEF MARKET FLASHING SIGNS OF A LOW... The boxed beef market followed up Monday's solid performance with additional strength yesterday. Boxed beef prices were 71 cents (Select) to $1.57 (Choice) higher and packers moved a decent 183 loads of product. With the product market flashing signs of low, traders are anticipating steady to firmer cash cattle prices in the Plains despite highly negative packer cutting margins.
PORK PRICES FALLING... The pork cutout value plunged $1.62 Tuesday following a $1.03 drop on Monday. With pork prices falling sharply, packer demand for cash hogs is easing as cutting margins are well below breakeven. As a result, cash hog bids are expected to be steady to lower across the Midwest today.
OVERNIGHT DEMAND NEWS... Syria tendered for 100,000 MT of optional origin soft milling wheat. Japan made no purchases in a tender for 120,000 MT of feed wheat and 200,000 MT of feed barley due to a lack of bids.