First Thing Today (VIP) -- January 30, 2013

January 30, 2013 12:39 AM
 

GOOD MORNING!

SOYBEANS RALLY ON SOUTH AMERICAN WEATHER... Soybean futures enjoyed strong followthrough buying thanks to heat and dryness expected for Argentina and southern Brazil ahead of the weekend. This has, in turn, lifted grain futures. As of 6:30 a.m. CT soybeans are hitting new session highs with gains of 17 to 23 cents, while corn futures are mostly 5 to 8 cents higher. Wheat futures are seeing slightly lighter gains around 3 to 4 cents in Chicago and Kansas City, while Minneapolis wheat is 5 to 7 cents higher. The U.S. dollar index is favorably lower this morning.

OBAMA FY 2014 BUDGET WILL COME IN EARLY MARCH... The 2014 budget proposals from President Obama are due by law on Feb. 4, but it looks like the administration will be a few weeks late. That has been the rule rather than the exception for this administration. The White House blamed its budget delay on the uncertainty about revenue and spending created by the fiscal cliff negotiations. When the proposals come out, it will be interesting to see if Obama continues to cut crop insurance funding like his proposals the prior two years.

UPDATE ON CME TRADING HOUR SHIFT... The CME Group will not likely go with a halt of trading during USDA reports as the IntercontinentalExchange (ICE) says it will not halt trade for USDA reports -- a "condition" the CME Group put on that possibility that we outlined in "Evening Report." The shift in trading hours to a yet-unknown period has prompted the question of whether USDA will again adjust report release times. Our contacts advise there's no consideration of anything yet, especially since the eventual trading hours are not yet known. And even once those trading hours are known, sources indicate it's not clear that USDA would shift report release times.

FOMC MEETING CONCLUDES TODAY... The first Federal Open Market Committee (FOMC) meeting of 2013 concludes today and there isn't expected to be any policy change by the Fed. What traders will watch for in the post-meeting statement is whether there is any further clarification of when the Fed may opt to curtail its asset purchases. Minutes from the December meeting revealed that as a point where FOMC members differed. But the economic data since the December meeting really hasn't shifted the outlook a great deal. Thus, the Fed is expected to maintain its $85 billion bond buying program each month to keep long-term interest rates low and to renew its pledge to keep short-term interest rates low (0% to 0.25%) until the unemployment rate falls to 6.5%.

RUSSIAN GRAIN PRODUCTION & EXPORT UPDATE... Russia's head weather forecaster says the country's winter wheat plantings are in worse shape than average with 9.5% of the crop in "poor" condition, which compares to 8% on average for 2007 through 2011 and 12% in that category for 2012. Meanwhile, the news agency Interfax cites the country's ag ministry as saying Russia may export 15 MMT to 20 MMT of grain in 2013-14, as this year's production is expected to recover to 95 MMT. This compares to harvest of 70.7 MMT the year prior and expectations for grain exports of 14 MMT for the year.

BOXED BEEF MARKET CONTINUES TO SEARCH FOR A LOW... Softer boxed beef prices yesterday, with Choice cuts down 72 cents and Select cuts down $1.32, signal the market is still working to find a level where supply and demand are well balanced. Nevertheless, the premium futures hold to the cash hog index and much tighter showlist estimates this week should help feedlots get at least steady cash cattle prices compared with last week's $122 to $124 trade.

WINTER STORM EVENT TO DISRUPT HOG TRANSPORTATION... Cash hog bids were mostly steady yesterday as packers toed the line as they worked to improve negative profit margins. But seasonally tightening supplies and another transportation-disrupting winter storm event in the Midwest overnight could force them to raise bids again today. The product market improved notably yesterday, with the pork cutout value rising 95 cents and movement improving to 115 loads. This pulled packer profit margins to near breakeven.

OVERNIGHT DEMAND NEWS... Japan canceled a simultaneous-buy-and-sell tender for 120,000 MT of feed wheat and 200,000 MT of feed barley, citing a lack of buyers and sellers. South Korea's Major Feedmill Group bought 55,000 MT of optional origin feed wheat. India's state-run trading company issued an international tender to sell or export 50,000 MT of wheat and 60,000 MT of milling wheat. Ethiopia issued a tender for 35,000 MT of milling wheat. Syria bought 100,000 MT of soft milling wheat, likely from the Black Sea region.

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