First Thing Today (VIP) -- November 15, 2012

November 15, 2012 12:38 AM


MIXED TONE OVERNIGHT... As of 6:30 a.m. CT, corn futures are trading around 1 to 2 cents higher, soybeans are down 3 to 7 cents and wheat futures in Chicago, Kansas City and Minneapolis are trading roughly 2 to 4 cents higher. The U.S. dollar index is favoring a firmer tone this morning amid euro-zone concerns.

STRATEGIE GRAINS TRIMS EU WHEAT PRODUCTION... Strategie Grains lowered its 2012-13 wheat production estimate by 0.2 MMT to 122.7 MMT. The firm says it lowered its output estimates for the U.K. and Finland as well as for Australia, Argentina, southern Russia and the U.S. It pegs world wheat stocks for 2012-13 at 159 MMT, which is down sharply from year-ago levels. Strategie Grains also raised its 2012-13 corn production estimate for 2012-13 by 0.7 MMT to 53.6 MMT, but it said it expects world prices to rise this winter as demand will outpace supply.

EURO-ZONE SLIPS INTO ANOTHER RECESSION... The European Union's statistics office, Eurostat, reports that economic output in the euro-zone declined 0.1% in the third quarter after a 0.2% drop in the second quarter. Two consecutive quarters of contraction signal the bloc fell into recession in July through September. This is the second recession since the financial crisis in 2009. Germany and France, the two largest economies in the euro-zone, each grew 0.2% in the third quarter, but fiscal troubles in Italy, Spain and Greece outweighed their growth. A big surprise was a 1.1% economic decline for the triple-A rated Netherlands.

FOMC MINUTES REVEAL VIEW MORE ASSET PURCHASES NEEDED... While the Federal Open Market Committee (FOMC) left policies unchanged at its October meeting, minutes of the session revealed a "number" of FOMC members believe more asset purchases will be needed in early 2013 as "Operation Twist" winds down at the end of 2012.

Interestingly, some FOMC members thought their current policies had increased demand for "riskier" financial products. This now puts a focus on the Dec. 11-12 FOMC session in terms of additional asset purchases and whether the FOMC will change their communication strategy relative to whether they will use markers for unemployment and inflation to signal when rates will rise or stick to calendar-related guidance.

ECONOMIC HEADWINDS TRIM RISK APPETITE... With the euro-zone now in a double-dip recession, the fiscal cliff looming at year-end for the U.S. and skirmishes between Egypt and the Israel gaining more attention from the oil world, commodity traders are increasingly unwilling to add risk or focus on market fundamentals. Federal Reserve Chairman Ben Bernanke's comments at a a confab hosted by Operation Hope today will be closely monitored for any signs the Fed is considering more stimulus measures.

RUSSIA GRAIN EXPORTS EXPECTED TO DWINDLE... Russia's Grain Union yesterday said it expects the country's grain exports in November to slow to 1.5 MMT and for December exports to slow to 1 MMT, which compares to October grain exports of 2.2 MMT. The Union says dwindling domestic stocks and higher prices will deprive Russia of its competitive edge on the global wheat export market.

WEEKLY EXPORT SALES REPORT DELAYED... Due to Monday's government holiday, export sales data for the week ended Nov. 8 is delayed until Friday morning.

CASH CATTLE NEGOTIATIONS DELAYED... Packers have yet to establish initial cash cattle bids in the Plains, delaying the start of cash cattle negotiations for the week. As a result, active cash cattle trade isn't expected until Friday -- likely after USDA's Cattle on Feed Report Friday afternoon. Cash sources are expecting steady to weaker cash cattle prices compared with week-ago as packer margins are well below breakeven, they are buying for a holiday-shortened slaughter schedule next week and showlist numbers are up from last week.

ANOTHER SHARP DROP IN THE PORK MARKET... The pork cutout value plunged another $2.55 Wednesday, marking the fourth straight day of price declines. During that span, the cutout value is down $5.39. Despite the sharp drop in pork product prices, packer margins remain solidly above breakeven. But sharply falling pork prices will keep pressure on the cash hog market, especially with a holiday-shortened kill schedule next week and given plentiful market-ready hog supplies.

OVERNIGHT DEMAND NEWS... Japan bought 195,008 MT of milling wheat in a weekly tender from the U.S. and Canada. Taiwan bought 68,200 MT of U.S. wheat. South Korea purchased 139,000 MT of optional origin feed corn overnight.

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