First Thing Today (VIP) -- January 2, 2014

January 2, 2014 12:45 AM


HOLIDAY TRADING SCHEDULE... There was no overnight trade due to the New Year's holiday. Grain markets will resume trading at 8:30 a.m. CT on Thursday, while livestock markets will reopen at 9:05 a.m. CT. Sharp gains in the U.S. dollar index could weigh on the grain and soy markets today. The release of the Weekly Export Sales Report will be delayed to Friday thanks to Wednesday's holiday.

CHINA'S FACTORY ACTIVITY SLOWS... Two surveys have indicated that China's manufacturing sector slowed in December, with the official PMI falling to 51 from 51.4 in November and the HSBC print slipping to 50.5 from 50.8. New export orders disappointed in both readings, while employment contracted further in the official index. Meanwhile, China's National Development & Reform Commission (NDRC) has for the first time given local governments public permission to issue bonds in order to refinance debt and avert defaults. The move highlights the government's balancing act of trying to manage ballooning debt without causing a sharp deceleration in growth. It follows audits that showed that local-government debt has surged 70% to almost $3 trillion in less than three years.

GAS PUMP PRICES HIT LOWEST AVERAGE LEVEL SINCE 2010... The price of regular gasoline dropped to an average of $3.49 a gallon in 2013 from $3.60 in 2012, the AAA says, making last year the cheapest since 2010. The association predicts pump prices will fall another five cents this year as well. The fall comes amid a sharp rise in production, with output increasing 4.3% to 9.72 million barrels a day in the week ended Dec. 20. The cheapest gasoline last year was in South Carolina, where the average cost was $3.24, while the most expensive was in California, where the price was $3.89.

CORN THE DOWNSIDE LEADER IN THE GSCI FOR 2013... Corn was the worst performer for 2013 of the 24 commodities that make up the S&P Goldman Sachs Commodity Index (GSCI). The corn market has dipped 40% since the start of the year, thanks in large part to the U.S. producing its largest corn crop on record. The index as a whole posted slight losses for the year and ended 2013 at 632.29 points, which is down 2.2% from Dec. 31, 2012.

DDG PRICES DROP AFTER CHINESE REJECTION... Dried distillers grains (DDG) prices have dropped $30 per ton from the week prior to $190 per ton in the Mississippi River market following China's rejection of 2,000 MT of DDGs last week. The country made the rejection due to the presence of MIR 162 (Syngenta's Agrisure Viptera), a GMO trait the country has not yet approved. More such rejections are expected. The country has also rejected 545,0900 MT of U.S. corn the last two months of 2013.

SECOND H7N9 HUMAN BIRD FLU CASE IN TAIWAN... Taiwan has confirmed a second case of the H7N9 bird flu in humans. The man affected by the virus is a resident of China's southeast province of Jiangsu and had been touring Taiwan with a group. No one else from the group has yet displayed any symptoms, according to Taiwan's Center for Disease Control. China is dealing with several cases of both the H7N9 and H19N8 strain of bird flu.

USDA: SUGAR SURPLUS IS NOW CONTROLLED... The U.S. sugar surplus is now under control, USDA said in a statement Tuesday. Therefore, it does not expect to sell sugar at bargain prices for conversion to biofuels or livestock feed for the first part of 2014. USDA plans to take another look at the sugar supply situation ahead of April 1, which is when law requires that it decide whether to use the Feedstock Flexibility Plan, which permits the sale of sugar for nonfood usage. In 2013, sugar growers forfeited 3981,875 MT of sugar as collateral on USDA loans due to low prices.

BEEF GAINS & STRESSFUL WEATHER LIFT CASH EXPECTATIONS... Cash cattle trade has yet to begin, but expectations are for at least steady prices compared with last week's record-setting trade. While showlist estimates are heavier this week, cold temps and snow have stressed cattle in northern feedlots and will make producers wary of transporting livestock. Also, boxed beef market has improved this week. On Tuesday, Choice cuts rose 94 cents and Select firmed 95 cents and movement picked up notably to a decent 176 loads.

ON WATCH FOR SEASONAL LOWS... Lean hog futures enjoyed some mild short-covering to wrap up 2013, but the market remains in a downtrending pattern. To halt the slide, the product and cash markets must show definitive signs that they are working on seasonal lows. The pork market delivered an impressive performance Tuesday; if strength continues, this could lift the cash and futures markets. The pork cutout firmed 37 cents and movement surged to 632.24 loads Tuesday. Packers could pay up for market ready hogs again today as bitter cold will make producers unwilling to transport hogs.

OVERNIGHT DEMAND NEWS... Taiwan tendered for 54,800 MT of U.S. milling wheat.

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