First Thing Today (VIP) -- September 28, 2012

September 28, 2012 01:34 AM


MOSTLY WEAKER AHEAD OF USDA REPORTS... As of 6:30 a.m. CT, corn futures are trading 3 to 8 cents lower, soybeans mixed, Chicago wheat 3 to 6 cents lower, Kansas City wheat 4 to 6 cents lower and Minneapolis wheat mixed. The U.S. dollar index is holding near unchanged this morning after favoring the downside overnight.

JAPANESE BUYERS URGE U.S. TO LIMIT CORN-FOR-ETHANOL USE... Six Japanese corn buyers sent a letter to USDA Sec. Tom Vilsack earlier this month, urging the U.S. to cut back on its use of corn for ethanol production due to tight supplies. The letter stated, "This (price rise) has put great pressure on Japanese industries to seek alternative sources of corn and substitute feed grains. This can potentially lead to a long-term loss of export market share for U.S. producers. We believe it is in the United States' national interest, as well as Japan's interest ... that the playing field of the corn trade be leveled by waiving the RFS for at least two years in order to insure adequate recovery of stocks and market access."

SEPT. 1 GRAIN STOCKS, FINAL 2012-CROP WHEAT ESTIMATES OUT THIS MORNING... Traders expected USDA's Quarterly Grains Stocks Report to show corn stocks at 1.126 billion bu., soybean stocks at 132 million bu. and wheat stocks at 2.281 billion bu. as of Sept. 1. The Sept. 1 corn and soybean stocks will be final 2011-12 carryover. In the Annual Small Grains Summary, the average pre-report guesses for wheat production are: all wheat at 2.270 billion bu.; all winter wheat at 1.677 billion bu.; other spring wheat at 507 million bu.; and durum at 86 million bushels.

U.S. COTTON INDUSTRY SEEKS U.S. GOV'T HELP ON EXPORT SALES DEFAULTS... Representatives of the U.S. cotton industry met with U.S. government officials to seek their help on what they say are sales of 4 million bales of cotton worth nearly $1 billion that are in default or at risk of default. Officials from the U.S. industry said Bangladesh, Indonesia, Thailand and Vietnam have defaulted on millions of dollars in contracts and called on U.S. officials to pressure foreign governments to make sure buyers live up to their obligations.

EUROPE SEEKS TRADE SANCTIONS AGAINST U.S.; LIST COULD INCLUDE AG PRODUCTS... The European Union on Thursday announced it is seeking $12 billion worth of annual trade sanctions against the U.S. because it failed to abide by a World Trade Organization ruling governing subsidies to aircraft giant Boeing involving the Defense Department and NASA contracts. The U.S. already won a separate case that found European member states illegally subsidized Airbus. Any WTO-approved sanctions could include some U.S. farm exports.

QUARTERLY HOGS & PIGS REPORT OUT THIS AFTERNOON... Traders expect the report to show the U.S. hog inventory is slightly larger than year-ago, but that high feed costs could lower hog numbers down the road via reduced farrowing intentions. The average trade guesses put All Hogs & Pigs at 100.7%, Kept for Breeding at 99.9%, Kept for Marketing at 100.8% and the June-August pig crop at 100.2% of year-ago levels.

BOXED BEEF PRICES CONTINUE TO SLIP... Pressure on boxed beef prices hasn't been sharp this week, but Choice and Select cuts have declined each day. While that signals the product market is correcting, movement has been solid. If packers don't have to aggressively lower boxed beef prices to attract retailer demand, the downturn in cash cattle prices and live cattle futures will be short-lived.

PORK CUTOUT FIRMS AGAIN... The pork cutout value was $1.16 higher Thursday, extending the week-plus recovery in pork prices. But while pork prices are on the rise, they haven't been keeping pace with gains in the cash market, resulting in a tightening of packer margins. Packers' ability to keep margins in the black will be key to how long the price recovery lasts in the cash hog market and lean hog futures.

OVERNIGHT DEMAND NEWS... Taiwan purchased 50,550 MT of U.S. wheat. Japan bought 22,748 MT of wheat -- 9,680 MT of Australian wheat, 12,500 MT of Canadian wheat and 568 MT of French wheat.


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