First Thing Today (VIP) -- November 9, 2012

November 9, 2012 12:31 AM


CHOPPY, QUIET PRE-REPORT TRADE OVERNIGHT... As of 6:30 a.m. CT, corn futures are trading 1 to 2 cents higher, soybeans 5 to 10 cents lower, Chicago and Kansas City wheat narrowly mixed and Minneapolis wheat fractionally lower. The U.S. dollar index is firmer this morning after trading both sides of unchanged overnight.

NOVEMBER CROP REPORTS OUT THIS MORNING... USDA's Crop Production and Supply & Demand Reports will be released at 7:30 a.m. CT. Based on the average pre-report guesses, traders expect USDA to lower its corn crop estimate to 10.629 billion bu. and raise its soybean crop estimate to 2.891 billion bushels. Carryover projections are expected to rise to 635 million bu. for corn, 133 million bu. for soybeans and 666 million bu. for wheat.

JAPAN BUYING U.S. CORN AS BRAZILIAN SHIPMENTS DELAYED... Delays of up to two months on corn shipments out of Brazil have forced Japanese buyers to turn to U.S. corn to fill needs. Export sources tell Dow Jones newswire Japan has purchased at least 500,000 MT of U.S. corn for January through March shipment as 900,000 MT of Brazilian corn scheduled to be shipped to Japan from July through September have been delayed by heavy port congestion. Meanwhile, Japan purchased 21,200 MT of U.S. feed barley, the country's first purchase of U.S. barley in two years.

CHINESE INFLATION EASES FURTHER... China's consumer price index (CPI) declined to 1.7% over year-ago in October compared to a 1.9% increase in September. Food prices rose 1.8% over year-ago, while non-food prices were 1.7% higher. Declining inflationary pressure gives the People's Bank of China room to further ease monetary policy, but with economic activity picking up, most economists expect China to hold off on additional monetary policy easing for now.

CHINESE 2012 GRAIN PRODUCTION RECORD-LARGE... Chinese grain production grew for a ninth consecutive year in 2012, according to Ag Minister Han Changfu. Without giving a specific figure, he says grain production was around 150 MMT more than in 2003 when the country produced 430.7 MMT of grain. Meanwhile, Han says, "The next five to 10 years are a key period for the development of China's agriculture sector -- with production factors like land, water and labor getting tighter. Agricultural production is facing greater risks -- natural risks, market risks, security risks -- and it is entering a period of high investment, high costs and high prices." Han indicated China plans to continue encouraging aggregation and mechanization of farms in order to stave off problems caused by decreasing acreage and a declining rural workforce.

SEN. COCHRAN MAY BE NEW GOP RANKING MEMBER ON SENATE AG COMMITTEE... Sen. Thad Cochran (R-Miss.) may be the new ranking member on the Senate Ag Committee next year, some sources note, unless he is given an unlikely waiver to continue to be the ranking member on the Senate Appropriations panel. But Cochran has reached the limit established and if not given a waiver, he would have seniority over Sen. Pat Roberts (R-Kan.), the current ranking member on the Senate Ag Committee. Nothing is official, but the possibility of a major change in the Ag panel's leadership exists. It would be key because Cochran favors the House approach to a new farm bill -- giving farmers a choice between revenue assurance or target/reference prices, whereas Roberts has been a staunch opponent of target prices. The timeline for a new farm bill is still murky.

CBO DETAILS IMPACTS OF 'FISCAL CLIFF' COSTS... The nonpartisan Congressional Budget Office (CBO) on Thursday detailed the costs of not dealing with the so-called "fiscal cliff" -- the package of expiring tax cuts and tax extenders, along with across-the-board cuts scheduled to take effect Jan. 2. CBO had already estimated that going over the cliff would spark a recession, while simply voiding the tax and spending increases would add trillions to the debt. But the new study breaks down the costs and benefits of allowing various parts of the fiscal cliff to remain in place. It finds that unemployment would rise from 7.9% to 9.1& by the end of 2013 if the nation went over the cliff. Republicans note the report estimates that preventing tax hikes set to kick in on Jan. 1 will add or save 1.8 million jobs next year. Democrats note that allowing tax rates to rise for households with annual incomes above $250,000 but extending rates for other people would save 1.6 million jobs -- nearly as many as if all the rates were extended. The CBO report says extending all the Bush-era rates and patching the Alternative Minimum Tax would help the economy expand by an additional 1.4% by the beginning of next year. Doing that but allowing the top tax rates to rise would add only 1.3% to the GDP, an "effect nearly as large" as extending all the Bush cuts, CBO states. Avoiding the spending cuts in the automatic sequestration would boost GDP by .75%, CBO said, while extending the expiring payroll tax cut and unemployment benefits would add another .75%. Doing all of the above boosts GDP by 3 percentage points by the end of 2013. Avoiding the cliff altogether would add 3.4 million full-time-equivalent jobs, the report estimates. Just extending the payroll tax and unemployment benefits -- as some Democrats are advocating --would add 800,000 jobs. Preventing the cliff would also expand the deficit. The report says it would add $503 billion to the deficit in 2013 and $682 billion in 2014.

WAITING ON CASH CATTLE TRADE... Cash cattle expectations perked up a little yesterday when packers raised cash cattle bids to $125 in the Plains. But it would be a surprise if packers pay better than steady prices compared with last week's $126 to $127 trade in the Plains given highly negative cutting margins and greater available supplies.

PORK MARGINS IMPROVING... The pork cutout value was 99 cents higher Thursday and packers moved a solid 80.25 loads of product on the day. In combination with steady to weaker cash hog bids, that pushes packer cutting margins deeper into the black. Despite the strong margins, demand for cash hogs will remain limited as pork plants are well bought ahead and slaughter-ready supplies are plentiful.

OVERNIGHT DEMAND NEWS... Taiwan tendered for 68,200 MT of U.S. wheat. India tendered to export 125,000 MT of wheat.


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