First Thing Today (VIP) -- November 1, 2013

November 1, 2013 01:48 AM
 

GOOD MORNING!

QUIET OVERNIGHT ACTION FOR GRAINS... Corn futures did not stray far from unchanged during the overnight hours and as of 6:30 a.m. CT futures are around a penny lower. Similar action is taking place in the SRW market, with most contracts around 3 cents lower. HRW wheat is down 3 to 6 cents, while HRS wheat is mixed. Soybean futures favored the upside overnight, but the market is currently trading low-range and mixed, with deferred contracts favoring the upside. Strength in the U.S. dollar index is favoring market bears as traders prepare for the weekend.

INFORMA TO ISSUE NOVEMBER CROP REPORTS THIS MORNING... Informa Economics will issue its November crop reports at 10:30 a.m. (CDT). The U.S. crop report will contain updated production forecasts for corn, soybeans and cotton.

ODDS INCREASING THAT COOL CHANGE COULD BE PART OF FINAL NEW FARM BILL... The initial farm bill conference made clear that key lawmakers from both chambers want to alter country-of-origin labeling (COOL) language, with a possible repeal of the program. The development quickly led to supporters and opponents of COOL refocusing their attention on the topic. The COOL requirements, released by USDA on May 23, require labels on meat to specify each production step where the animal was born, raised and slaughtered. The rules were aimed at complying with an adverse World Trade Organization (WTO) decision that found the earlier COOL rules discriminated against foreign products. The complainants in that dispute, Canada and Mexico, are not satisfied with the revisions and have threatened retaliation. A statement by Rep. Frank Lucas (R-Okla.), the chairman of the farm bill conference committee, suggests that Lucas is open to amending the COOL regulations. Meanwhile, Senate Agriculture Chairwoman Debbie Stabenow (D-Mich.) identified the COOL policy as a key issue involved in farm bill negotiations. Also, Sen. Pat Roberts (R-Kan.) voiced support of a House provision that was under development and expected to be a repeal clause for COOL. COOL has already led Tyson Foods to cancel orders of Canadian cattle, citing added costs. The effects of COOL are expected to add costs at every stage from cow-calf producers to consumers.

FOOD-STAMP PAYMENTS SET TO DROP TODAY... The amount that people can receive in food stamps is due to fall today following the expiration of a 13.6% increase in the program that the government introduced in 2009 as part of its stimulus plan. That increase, as well as the great recession, has helped send spending on the Supplemental Nutrition Assistance Program to a record $78.4 billion in the fiscal year ending Sept. 30. Retailers could feel the pinch. For example, sources say 18 cents of every dollar spent at Wal-Mart for groceries is food stamp benefits. Meanwhile, further cuts in food stamp funding are expected if the farm bill conferences reaches an agreement on this sensitive topic.

DAIRY POLICY REMAINS A CONTENTIOUS SUBJECT IN FARM BILL... Another key issue will be a major change in dairy policy via the new farm bill. Some consumer groups told farm bill conferees that including the Senate-passed dairy policy plan that includes supply management to discourage surplus milk production could boost the retail price for consumers and increase the federal government's cost of running food aid programs. Opponents of dairy supply management had a strong backer, House Speaker John Boehner (R-Ohio), who compared the dairy supply plan to a "Soviet-style" system that would require the federal government to intervene in the marketplace. But Rep. Collin Peterson (D-Minn.), ranking member on the House Ag Committee, believes that an insurance-only approach could encourage overproduction and result in a more costly plan for taxpayers. On Wednesday, he said the leaders of the agriculture committees have been discussing possible compromises, but did not provide any details. He predicted that if there is no agreement on an acceptable alternative, then conferees would likely support the Senate bill on the issue -- a prediction not shared by other congressional sources and contacts. Still, Peterson said he has the votes and said the House approach is "unworkable and unacceptable."

As for Boehner, Peterson said that while the Speaker has strong feelings about the dairy program, he thought it unlikely Boehner would block the bill over the issue. "He has bigger fish to fry," Peterson said, according to Congressional Quarterly. But some sources believe Peterson is wrong regarding Boehner. Said one veteran contact: "People want to call the Speaker’s bluff on this then they do so at their own peril. They also thought the Speaker had bigger fish to fry last year leading up to the fiscal cliff/milk cliff negotiations when they tried to cram a 53-page new dairy program into a farm bill extension. Then the Speaker stood up and delivered a discourse on the absurdity of dairy policy and well, we know how the rest of that went. So call the Speaker’s bluff but be forewarned."

EPA HAD YET TO RELEASE INITIAL 2014 RFS VOLUME REQUIREMENTS... It is now November, and there has still been no announcement from the U.S. Environmental Protection Agency (EPA) regarding the unveiling of its initial 2014 Renewable Fuel Standard volume requirements. For months, EPA had indicated this would occur in "September 2013," but then the government shutdown gave the agency the excuse it needed to quietly move its release date October 2013, so the agency has now missed another self-imposed deadline. EPA is required by law to issue the final standard by Nov. 30, but the agency has missed that deadline in recent years, including an eight-month "miss" with the 2013 standards. There is now some conjecture the announcement may come the week of Nov. 11.

INDIA'S COTTON EXPORTS EXPECTED TO DECLINE, DESPITE RECORD CROP... India's 2013-14 cotton production is expected to rise 1 million bales from year-ago to record 37.5 million bales, but its exports are expected to decline by 1.4 million bales from year-ago to 9 million bales, according to a government official who cites lighter demand from China as the reason for the decline in exports, despite a record crop.

USDA AG ATTACHÉ LOWERS ARGENTINE CORN & WHEAT FORECASTS... A USDA ag attaché in Argentina has lowered the forecast for Argentina's 2013-14 corn production to 24 MMT, which compares to USDA's estimate for a 26 MMT. The attaché's export projection is also 2 MMT below USDA's at 16 MMT. The ag attaché also lowered its wheat production forecast for 2013-14 to 10.5 MMT, which is 1.5 MMT below USDA's latest guess, with exports expected to be around 4.2 MMT, again below USDA's 6 MMT forecast. The attaché's report cites dry weather in central and northern regions of the country for the reductions.

CASH CATTLE TRADE HANGING IN THE BALANCE... Feedlots are still hopeful they will get steady to firmer bids for cash cattle compared to last week's record prices, though packers don't appear too willing to raise bids again this week. Price action in futures could be the deciding factor. Nearby live cattle futures are signaling a short-term top could be in the works and the contract closed low-range Thursday. But yesterday afternoon's Cattle on Feed Report should be price-supportive for the lead-month contract.

HOG FUTURES SIGNALING A TOP... December lean hog futures followed Wednesday's key bearish reversal with a sharp downside day of trade yesterday. That's a relatively strong technical indication a short-term top is in place. But previous signs of a top have been negated as bullish attitudes have kept traders interested in buying breaks. If hog futures close low-range for the week, it would be a stronger sign a top is in place.

OVERNIGHT DEMAND NEWS... No export activity to report.

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