First Thing Today (VIP) -- March 18, 2013

March 18, 2013 01:37 AM


RISK-OFF ATTITUDE TO START THE WEEK... Investors are dumping risky assets in favor of safe-havens to start the week as a bailout deal by Cyprus is rattling markets. As of 6:30 a.m. CT, corn futures are trading 3 to 6 cents lower, soybeans are 9 to 15 cents lower, Chicago wheat is 4 to 9 cents lower, Kansas City wheat is 2 to 6 cents lower and Minneapolis wheat is 1 to 5 cents lower. The U.S. dollar index is sharply higher this morning.

BUDGET ISSUES, FEDERAL RESERVE EVENTS KEY FOCUS THIS WEEK IN WASHINGTON... Budget matters continue to be the focus in Congress this week, while the economic calendar is laced with several Federal Reserve events. The Senate must first consider amendments to the continuing resolution (CR) that would fund the federal government before a current stop-gap measure expires March 27. The House and perhaps the Senate will consider their competing and considerably different FY 2014 budget resolutions. The 2013 trade agenda is the topic of a Tuesday Senate Finance Committee hearing. The House Ag Committee on Wednesday will mark up several bills related to swaps regulation and the Commodity Futures Trading Commission (CFTC). After the close of business, Congress departs for the Easter recess, with the Senate returning April 8 and the House April 9. The biggest economic item of the week will be the two-day Federal Open Market Committee meeting on Tuesday and Wednesday, and the accompanying updated economic forecasts and quarterly press conference by Fed Chairman Ben Bernanke. The focus will be on whether there are any indications on how soon the Fed may stop or scale back its stimulus efforts.

ARGENTINA AVOIDS KILLING FREEZE... Areas of central Argentina dipped into the mid- to low 30s over the weekend, which led to spotty frost, but temps didn't drop far enough to prematurely end the growing season, as some had feared. Temps will remain much below normal the first half of this week, although the risk of a killing freeze have passed.

RUSSIAN GRAIN CROP COULD BE AS LOW AS 80 MMT... Russian grain production is expected to rebound sharply from last year's drought-cut output, but the recovery may not be as strong as some are expecting. Russian Deputy Ag Minister Ilya Shestakov told Interfax news grain production could be as low as 80 MMT this year, which would mean exports of 14 MMT. He says the forecast for production of 95 MMT and exports of 20 MMT are a best-case scenario used to help determine intervention grain purchases.

VILSACK AGAIN NOTES BARRAGE OF AG-RELATED CUTS COMING DUE TO SEQUESTER... Sequestration-related budget cuts are likely to hit farmers and rural communities across the country, warned USDA Secretary Tom Vilsack in a telephone interview last week with the Peoria JournalStar newspaper. One of the key USDA-related sequester cuts is meat inspector furloughs. "That means an 11-day furlough for food safety workers. That means for 11 full days those (meat packing) plants can’t produce," he said. "We’ll try to space those days out, starting in July and ending in August or September," said Vilsack. Vilsack said the furlough will also impact plant workers and the U.S. food supply. "It will also affect producers who might not be able to get the premium they were used to getting," he said. It could get worse, warned Vilsack. "The Senate is considering a continuing resolution that could add a 2.5% cut to the USDA budget. That would mean additional furlough days for USDA employees," he said. While neither Vilsack nor the Obama administration has asked Congress for sequester flexibility, he said he does not have the ability to prioritize or "move things around" due to sequestration rules. "Statutorily, I have no capacity to adjust things. Food inspection is no more or less important than other operations," he said. "I have senators writing me letters to solve the problem but they offer no money or the flexibility to do so," said Vilsack.

BEARISH ATTITUDES IN CATTLE MARKET... Live cattle futures plunged last Friday, ending the week below the cash cattle market. That signals attitudes are bearish and limits the upside to short-covering. Traders must have their demand concerns eased before they actively pump money into the long side of the market.

CASH HOGS CALLED STEADY/WEAKER... Packer demand for cash hogs is expected to be limited to start the week as most plants are bought ahead on slaughter needs for the week and margins are tight. As a result, cash hog bids are expected to be steady to weaker across the Midwest as packers work to improve margins.

WEEKEND DEMAND NEWS... Jordan tendered for 100,000 MT of optional origin milling wheat and 100,000 MT of optional origin feed barley.


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