First Thing Today (VIP) -- November 13, 2013

November 13, 2013 12:33 AM


QUIET OVERNIGHT SESSION... Corn futures traded in a very narrow range on either side of unchanged overnight and the market is mixed with an upside bias as of 6:30 a.m. CT. Buying and selling interest was also limited in the soybean market overnight and the market is also narrowly mixed with nearbys favoring the downside. Wheat futures are also choppy in all three flavors. Outside markets are also subdued, with the U.S. dollar index and crude oil futures hovering around unchanged.

SOME FED SPEAKERS KEEP TALKING TAPER... Dallas Fed President Fisher on Tuesday said in Australia that the tapering of asset purchases by the Fed needs to happen since the longer they continue, the more of a risk they pose. That stance is not a shift from the colorful Fed member who is not a voter until 2014. Atlanta Fed President Lockhart gave mixed signals, noting that the decision by the Fed to taper wouldn’t be made based on just one factor like unemployment and said that tapering "ought to be on the table" at the Dec. 17-18 FOMC session. Still, he stated that Fed policy would remain highly accommodative well into the future. Minneapolis Fed’s Kocherlakota spoke in favor of maintaining the asset buys as tapering them in the "near term would be a drag on the already slow rate of progress in the economy toward the committee’s goals." In addition, he said the current conditions under a goal-oriented approach would actually require more stimulus be applied to the economy. Kocherlakota becomes a voter in 2014.

HOUSE PANEL SUMMONS EPA'S MCCARTHY TO EXPLAIN WATER ACT DRAFT JURISDICTION RULE... Environmental Protection Agency (EPA) Administrator Gina McCarthy will defend the agency's draft proposed Clean Water Act jurisdiction rule before the House Science, Space, and Technology Committee on Nov. 14. House Science Committee Chairman Lamar Smith (R-Texas) said that he had summoned McCarthy to testify after reviewing the draft proposed rule, which the EPA and the U.S. Army Corps of Engineers sent Sept. 17 to the White House Office of Management and Budget for interagency review. If the draft rule is approved, Smith said, "it would allow the EPA to regulate virtually every body of water in the United States, including private and public lakes, pond, and streams."

WINTER WHEAT CCI RATINGS IMPROVE... When USDA's weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale), the HRW crop improved 5 points to 369, while the SRW crop firmed 2 point to 380. Kansas led gains for the HRW wheat crop while Illinois saw the most improvement for the SRW wheat crop.

CME GROUP LOWERS INITIAL MARGINS FOR SOYBEAN & WHEAT SPECS... CME Group lowered initial margins for speculators in soybean futures by 17.1% to $3,915 per contract. The exchange also lowered initial margin requirements for wheat speculators by 17.5% to $2,228 per contract.

CHINESE WHEAT IMPORTS TO HIT HIGHEST LEVEL SINCE 1995... China will import 8 MMT of wheat in 2013-14 -- the highest in nearly 20 years, according to China National Grain and Oils Information Center (CNGOIC). This is a 500,000 MT increase from the group's previous projection. China has dealt with stressful weather in its major production areas this year, which is thought to have left as much as 20 MMT of its wheat crop unfit for human consumption. CNGOIC says China has already bought 4.5 MMT of wheat from the U.S. and Australia. It expects U.S. wheat exports to the country this marketing year to reach 4.3 MMT thanks to low U.S. SRW wheat prices.

UPSIDE REVISIONS TO AUSSIE WHEAT CROP... One of Australia's largest grain handlers, CBH Group, edged up its 2013-14 wheat production estimate for the country by 100,000 MT to 26 MMT and it noted the potential for more increases to its projection. Recent favorable rain in the western and southern Australian wheat belts have encouraged a number of private crop watchers to up their estimates. However, the CBH Group did say it expects lower protein content for the crop.

FARM OFFICE UPS GRAIN ENDING STOCKS FOR FRANCE... FranceAgriMer raised its soft wheat production estimate for 2013-14 by 1.32 MMT to 36.94 MMT, which resulted in a 200,000 MT increase in its ending stocks outlook to 2.9 MMT. But the farm office left its export forecast unchanged at 11.2 MMT. The agency trimmed its corn production estimate from 15.38 MMT to 15.15 MMT. But FranceAgriMer raised its 2013-14 corn ending stocks estimate from 2.7 MMT to 2.95 MMT, citing increased competition from Ukraine.

RUSSIA EXPECTS UNCHANGED WHEAT HARVEST, DESPITE ACREAGE DROP... Russia's ag minister says the country plans to harvest the same amount of wheat this year as the last, despite an 8% reduction in winter grain acres. The minister says Russia anticipates a 90-MMT grain harvest, including 50 MMT of wheat.

CHINESE COTTON RESERVE AUCTIONS MAY BE IMMINENT... China may start to sell its huge cotton reserves as early as this week, with release date estimates ranging from Nov. 15 to Nov. 20, trade sources told Reuters. The country holds around 10 MMT of cotton -- more than half of the world's cotton stocks -- thanks to its three-year stockpiling program. This pressured cotton futures yesterday as it would reduce Chinese demand for U.S. supplies. Sources indicate the initial sales will likely be from the 2011 crop, signaling it will be of "mediocre" quality.

SOFTER BEEF PRICES SPUR IMPRESSIVE MOVEMENT... A surge in boxed beef movement to 267 loads yesterday on a 53-cent decline in Choice boxed beef values to $202.26 per cwt. and a $1.20 slide in Select cuts to $188.54 per cwt. signals strong demand coming out of the Veterans Day holiday. This could improve cash cattle prospects this week, though higher showlist estimates adds a fair amount of uncertainty. December futures are at more than a $1.50 to the bulk of last week's cash action, which could result in more light profit-taking today.

PORK MOVEMENT SURGES... A 51-cent decline in the pork cutout value due to a decline in hams and loins led to impressive movement of 679.76 loads yesterday. Strong packer profit margins are giving them incentive to keep kill lines full. But building supplies have kept the cash market mostly steady to lower this week, which has, in turn, pressured futures. Average hog weights in Iowa and southern Minnesota rose 1.1 lbs. the week ended Nov. 9.

OVERNIGHT DEMAND NEWS... Japan tendered for 10,390 MT of feed barley and 129,445 MT of U.S., Canadian or Australian wheat. Tunisia made no purchase in its tender for 92,000 MT of durum wheat.

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