First Thing Today (VIP) -- January 2, 2013

January 1, 2013 11:41 PM


RISK-ON ATTITUDE TO START THE NEW YEAR... There was no overnight trade in the grain markets after Tuesday's holiday. Grain markets will reopen at 9:30 a.m. CT. Based on the bullish response in global markets to the U.S. avoiding the fiscal cliff, grain futures are expected to open the new year with a fresh wave of buying interest.

FISCAL CLIFF PACKAGE CLEARS CONGRESS, ON WAY TO PRESIDENT OBAMA... The president will sign the huge measure into law. This is the first of several mini-cliffs, as a battle will take place over efforts to deal with across-the-board cuts (sequestration), which were delayed by two months via the fiscal cliff package. Another big battle ahead: Hiking the U.S. debt limit, which has been reached. The Treasury Department is taking "extraordinary measures" to keep the U.S. government from not defaulting. Of note, the fiscal cliff package adds $4 trillion to the nation's debt over ten years.

2008 FARM BILL WAS MOSTLY EXTENDED VIA FISCAL CLIFF PACKAGE... Direct payments will be paid for 2013 crops as part of the extension. There will be no new dairy program as some groups wanted, but the extension resurrects the Milk Income Loss Contract (MILC) and traditional dairy support program. Farm-state lawmakers now will have to start over regarding a new farm bill. And some significant amendments could arise once the bill gets to the full House floor. Livestock disaster programs were authorized but were not provided mandatory funding. The SURE program was NOT extended.

BIODIESEL TAX INCENTIVE PROGRAM RETROACTIVELY EXTENDED THROUGH 2013... We've been predicting this would happen, and it did. The fiscal cliff package resurrects the tax incentive for 2012 (it had lapsed) and extends it through 2013. That came at a cost of over $2 billion.

ESTATE TAXES, BONUS DEPRECIATION AND OTHER KEY ITEMS IN FISCAL CLIFF ACCORD... The fiscal cliff agreement permanently extends the current exemption amount from the estate tax, exempting estates up to $5.12 million ($5 million indexed for inflation for years after 2011). But it increases the maximum rate to 40% -- an increase from the current 35% rate -- for estate values above the exemption amount. The measure also extends gift tax levels of a $5.12 million ($5 million indexed for inflation) exemption and a 40% top rate. In addition, it extends portability rules related to the passing of an exemption amount onto a surviving spouse. One business extender involves 50% bonus depreciation rules for property placed in service before the end of 2013 (and through 2014 for certain transportation property, as well as certain longer-lived items). This provision allows businesses to deduct from their taxes 50% of the value of that property in addition to amounts that they could otherwise claim under depreciation rules. Also extended: Section 179 of the tax code gives small-business taxpayers the option to deduct from their taxes, (i.e., "to expense") the cost of purchases, up to specified limits, in the year items are acquired, rather than recovering the costs of the items over time through depreciation.

INDIA PLANS TO EXPORT ADDITIONAL WHEAT WITHIN SIX MONTHS... The additional 2.5 MMT of wheat India's government recently freed for export will likely be sold within the next five to six months, two senior executives with one of the state-run grain trading firms told Dow Jones Newswire. Exporters are seeking to have the wheat sold before new-crop European supplies are available, according to one executive.

CHINA OFFICIAL PMI UNCHANGED IN DECEMBER... China's official purchasing managers' index (PMI) came in at 50.6 for December, matching the reading from November, which was a seven-month high. China's manufacturing sector has now posted three consecutive months of expansion (PMI readings above 50).

SOLID START FOR BOXED BEEF MARKET... Boxed beef prices were 66 to 76 cents higher Monday and packers moved a solid 175 loads of product on the day. If the boxed beef market shows strength coming out of the holidays, it would increase odds packers will raise cash cattle bids from last week's $127 trade in the Plains, as showlist supplies are thought to be lighter than week-ago.

CASH HOGS CALLED MOSTLY STEADY... Packers are expected to pay steady prices for cash hogs at most Midwest locations. But with many plants thought to be short-bought on supplies coming out of the holidays, scattered firmer cash bids are possible though negative cutting margins could limit packers' willingness to raise cash bids.

HOLIDAY DEMAND NEWS... Syria tendered for 100,000 MT of optional origin wheat.


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