First Thing Today (VIP) -- March 12, 2014

March 12, 2014 12:54 AM

Good morning!

Beans sharply lower overnight... As of 6:30 a.m. CT, soybean futures are trading 22 to 30 cents lower in old-crop contracts and around 10 cents lower in new-crop contracts, corn futures are mostly 1 to 2 cents lower and wheat futures are 2 to 5 cents higher. The U.S. dollar index is modestly higher this morning.

Sequester already factored into farm program payments... Farm and conservation programs would see nearly $1 billion in reductions in FY 2015 due to the 7.3% sequester required under the 2011 budget agreement, according to the White House. An Office of Management and Budget report outlines $18 billion in sequester reductions to mandatory programs -- no sequester of discretionary spending is required this year or fiscal 2015 because of the two-year budget agreement passed by Congress in December. Under the FY 2015 sequester, the Farm Service Agency's spending authority would be cut by $511 million and its borrowing authority would be reduced by $200 million. Programs handled by the Natural Resources Conservation Service would be trimmed by $281 million. The Section 32 program that is used to prop up commodity prices through purchases of surplus products would be reduced by $82 million, the report shows. Salaries and other expenses at the Animal and Plant Health Inspection Service would be cut by $21 million. The Conservation Reserve Program (CRP), however, is exempt from any sequestration reductions. Contacts note that budget estimates should have already taken the sequester reductions into account. That is reflected in the Congressional Budget Office scoring of the new farm bill -- it will save $16.6 billion over 10 years and a total of $23 billion when the sequester is factored in.

Republicans win closely watched Florida special election... Republican David Jolly won Tuesday’s high-stakes race to replace his former boss, the late GOP Rep. C.W. Bill Young of Florida, in Congress. The Republican nominee defeated Democrat Alex Sink 49% to 47%. Libertarian candidate Lucas Overby took 5%. Jolly’s win means Democrats still must pick up a net of 17 seats to capture control of the House in November -- a high hurdle. Of note, both parties used the special election as a test for their messages ahead of the midterm elections.

House clears bill to exempt farms with no spill history from oil spill rules... Farms that store less than 10,000 gallons of fuel and have no history of oil spills would be exempt from complying with federal oil spill regulations under a bill (HR 311) passed by voice vote March 11 by the House. Under the measure, farms with no history of oil spills and with an aggregate storage capacity of no more than 10,000 gallons would be exempt from the requirements of the Environmental Protection Agency spill prevention, control and countermeasure (SPCC) rule of 2009. However, farmers who have a history of oil spills, who store oil or oil-based products in individual tanks of at least 10,000 gallons and possess storage capacity to hold at least 42,000 gallons still would be required to have professionally certified spill-prevention plans. Farms with no history of spills, but still possessing the individual storage capacity of at least 10,000 gallons, would be allowed to self-certify. Based on information from the Environmental Protection Agency (EPA), the Congressional Budget Office (CBO) estimated that enforcing the SPCC rule at farms under current law will cost $2 million over the next five years. Enacting this bill would exempt the majority of farms from complying with the rule and also would require EPA to amend the SPCC rule for farms and develop guidance and outreach material to educate stakeholders. CBO expects that the resources necessary to support the existing rule over the next five years would instead be used to implement the measure.

Russia ups grain export forecast... Russia's Agriculture Minister Nikolai Fyodorov now says he expects the country to export 22 MMT of grain in 2013-14 (July-June), according to Interfax news agency. That's 2 MMT higher than the ag ministry's previous forecast.

France raises wheat, corn stocks forecasts... FranceAgriMer raised its 2013-14 French wheat ending stocks forecast to 3.2 MMT from 2.85 MMT previously, primarily on a cut to expected exports. The French farm office lowered its export forecasts within the EU and outside the bloc by 100,000 MT each. Wheat stocks at the end of the current marketing year are now expected to be 9% higher than 2012-13. FranceAgriMer also raised its 2013-14 corn ending stocks forecast to 2.9 MMT from 2.8 MMT previously.

Wholesale meat prices surge to record highs... Choice boxed beef prices surged $2.57 Tuesday, pushing to a record $241.47. That topped the previous record posted in late January by nearly $1.50. The pork cutout value surged $2.91 yesterday, rising to a record $116.46. That's now around $5.00 above the previous record posted in late June of last year. While boxed beef movement has slowed amid the record price rally, retailer pork demand has remained strong as pork is still cheap compared to beef.

Overnight demand news... Global grain traders say French wheat is likely to replace Black Sea wheat if tensions slow shipments in the region. Morocco purchased up to 400,000 MT of milling wheat last week from multiple sources, including Russia and Ukraine.


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