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First Thing Today (VIP) -- March 4, 2014

06:13AM Mar 04, 2014

Good morning!

Corn and wheat lower, soybeans mixed... As of 6:30 a.m. CT, corn futures are trading 3 to 4 cents lower, soybeans are mixed with old-crop contracts favoring the upside, SRW and HRW wheat futures are mostly 6 to 7 cents lower and HRS futures are steady to 4 cents lower. The U.S. dollar index is mildly weaker.

World markets recover, grains drop as Ukrainian tensions ease... Global equity markets have rallied from sharp losses yesterday, while gold, oil, wheat and corn futures have weakened following what could be interpreted as a de-escalation of tensions by Russian President Vladimir Putin, who ordered some military units back to their bases after a training exercise that began last week. Some of the drills took place near the border with Ukraine, exacerbating fears about a possible Russian invasion of its neighbor. At a press conference, Putin said his country has no need to use force against Ukraine but retains the right to consider all its options, and it has no intention of annexing Crimea.

President Obama this morning will unveil his Fiscal Year 2015 budget proposals... The recommendations have been selectively issued over the past few weeks, so no major surprises are expected. They will include a push for a hike in the minimum wage, and Obama's belief that immigration reform is ahead. While the proposals will honor the spending caps set in the December budget deal, it will offer lawmakers an option for adding $56 billion if Congress can come up with other savings by ending some tax breaks and making other cuts. The $56 billion in new discretionary spending would pay for a proposed "opportunity, growth and security initiative" aimed at the creation of institutes to promote manufacturing, energy efficiency, expanding apprenticeships and universal pre-kindergarten education. His budget requests also will feature new proposals such as a major expansion of the Earned Income Tax Credit for childless workers and proposals to pay for these efforts via closing tax loopholes that do not reward work or help the economy. Of note, the White House will call for around $300 billion in new spending over four years on infrastructure projects such as roads and bridges, something it would pay for partly through a revamp of the tax code.

China in talks to buy Noble's grain arm... COFCO, China's largest grain trader, is in talks to potentially buy Noble Group's agribusiness arm, sources familiar with the talks told Reuters. China is trying to grow its presence in the global grain trade business with a goal of greater food security. COFCO bought a 51% stake in Dutch grain trading firm Nidera last week.

Ukraine sees more grain exports... As we reported in Evening Report yesterday, Ukraine has exported 24.7 MMT of grains since the beginning of July. The country's ag ministry said today it expects to export 8.7 MMT of grain through June. That would imply 2013-14 grain exports will be 33.4 MMT, which is 900,000 MT higher than its prior forecast.

HRW wheat conditions continue to deteriorate... According to state reports, the condition of the HRW wheat crop declined further in Kansas, Oklahoma and Texas through February. The Oklahoma crop saw the largest increase in the percentage of crop rated "poor" to "very poor" compared to a month-ago. State statisticians now put 31% of the Oklahoma crop in the bottom two categories, a gain of seven percentage points from last month. Kansas now has 22% in the bottom two categories, a gain of two percentage points; and Texas has 45% in the bottom two categories, an increase of five percentage points from month-ago. Click here for state tables.

Lucas predicts U.S. will lose COOL case at WTO... During a recent interview with Oklahoma Farm Report, House Ag Chairman Frank Lucas (R-Okla.) said he will likely hold hearings on the country-of-origin labeling (COOL) issue and on California’s animal welfare regulations that take effect next year. On COOL, Lucas predicted the U.S. would lose the pending case against the USDA rule brought by Canada and Mexico at the WTO. USDA argues that the new rule would bring the labeling program into compliance with the WTO’s initial decision in the case. "I’m not an attorney, but I have a difficult time believing we’ll win," Lucas said. "We’ll probably lose the second one as we lost the first one. But the committee will look at that and be prepared for whatever the response needs to be." A WTO panel is expected to a deliver a confidential interim report in the case to the governments June 20, with a final report due July 22.

Surge in wholesale beef prices continues... Wholesale beef prices sharply extended recent gains, with Choice boxes surging $3.79 and Select boxes gaining another $4.69 Monday. Packers moved 145 loads of product on the day, which wasn't too poor considering current prices. The cash and product markets are showing no signs of topping, but traders appear content to keep April live cattle futures well below the cash market, suggesting they sense a short-term top will come at some point relatively soon.

Pork cutout extends gains... The pork cutout value was $1.03 higher yesterday to extend the recent price rally. At $105.17, the cutout value is historically strong, but pork is still cheap compared to beef. And while packers moved only 220.43 loads of product yesterday, there are no real signs of a retailers balking at current high prices.

Overnight demand news... Japan is seeking 111,779 MT of U.S. and Canadian wheat in its weekly tender.