Grain and soy markets rose in response to the Friday USDA data

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Nearby corn futures reacted strongly to the USDA crop reports released last Friday, with a sharp upward revision in forecasts U.S. feed usage and a lower 2012-13 carryout being the headline numbers boosting the market. Prices actually set back later in the day, possibly due to the increased USDA estimate of 2012 U.S. corn production and/or its substantially reduced export forecast. Conversely, prices rallied strongly over the weekend, with Asian trading citing the big drop in December 1 corn stockpiles and the prospect of persistent drought possibly extending from the Southern Plains into the Midwest. March corn seems set to begin the Monday CBOT session having risen 13 1/2 cents to $7.22 1/4, while December rose just 2 3/4 cents to $5.79 3/4.

On Friday the USDA slightly lowered its forecast of Argentine soybean production this year, but raised its estimates for both the U.S. and Brazil. It also marginally increased its prediction of the 2013 domestic carryout, which probably sparked the bearish reaction suffered by Chicago futures immediately thereafter. However, a longer look at the larger picture over the weekend seemingly caused a substantial weekend rebound. We would particularly highlight the 470,000 tonne reduction in its forecast for ending-2013 global soybean carryout. March beans had surged 20 cents to $13.93 ¼ in Sunday night trading, while March soyoil gained 0.57 cents to 49.81 cents/pound and March meal rose $4.3 to $408.6/ton.

The USDA forecast 2012 winter wheat plantings at 41.8 million acres, which fell well short of pre-report forecasts averaging 42.6 million. The USDA also cut its projected U.S. 2013 wheat carryout figure by 38-million bushels, thereby adding to the generally bullish tone of the data. As one would expect, futures rose strongly in reaction to the data last Friday and built upon those gains in trading Sunday night and early this morning. The fact that the nearby contracts pushed above their respective 10-day moving averages may elicit follow-through gains. March CBOT wheat added 15 1/2 cents to its Friday advance (to $7.70 1/4) in overnight market action, while March KCBT wheat jumped another 14 1/2 cents to $8.21 1/2 and March MGE futures climbed 12 3/4 cents to $8.58/bushel.

The losses suffered at the country markets last week took a big toll upon live cattle prices in Chicago market, due largely to the simple fact that traders were expecting cash gains instead. The underlying implication that the underlying supply/demand situation might not be as tight as they had previously believed probably disappointed bullish traders rather badly. They were very likely bemoaning the persistent inability of choice grade beef values to mount a serious challenge of the $2.00/pound level despite the substantial production cuts experienced since last spring. Still, if grocers become more aggressive in pursuing product this week and/or packers boost their bids, cattle futures might easily repeat their 2011-12 pattern of rebounding strongly from short-term setbacks. February cattle ended last week 0.87 cents lower at 130.60 cents/pound, while April closed traded 0.47 cents lower at 134.55.

After dropping substantially around mid-week, the cash hog and wholesale pork markets proved quite mixed Thursday and Friday. For example, while cash prices fell 1-2 cents/pound on the last day of the week, pork cutout actually rose modestly. The short-term outlook could prove quite interesting, since the nearby February hogs held above their December lows, whereas the deferred contracts fell to lows not seen since October or earlier. That suggests the outlook for spring and beyond seems much less promising than it did during late fall and early winter. February hogs settled 0.23 cents lower at 84.20 last Friday afternoon, while June futures slipped 0.10 cents to 96.50.

Cotton futures reacted wildly to the USDA data Friday, since the numbers indicated sharp divergences in the U.S. and global cotton situations. That is, the Agriculture Department raised its estimate of 2012-13 U.S. cotton exports significantly and cut its forecasts for domestic production and ending stocks. Those numbers are clearly supportive of American prices and probably played a major role in carrying nearby futures higher Friday afternoon. However, USDA analysts also boosted their estimate of 2012-13 global carryout by over 2.0 million bales, which obviously holds negative implications for the world situation and for international prices. That probably explains the moderate losses suffered by cotton futures in Sunday night-Monday morning trading. March cotton slipped 0.18 cents to 75.42 cents/pound in early-morning activity, while December moved 0.39 cents lower at 78.65.

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