Grain, livestock markets continue to respond to USDA reports

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Corn futures continued their bullish reaction to the December 11 release of USDA data. Their sharp upward revision in forecasts U.S. feed usage and a lower 2012-13 carryout probably powered the advance despite increased estimate of 2012 U.S. corn production and the substantially reduced export forecast. Bulls may also have been somewhat pleased with the weekly increase in corn export inspections. The short-term price outlook may depend upon technical considerations. That is, after topping chart resistance associated with its 10-day moving average over the weekend, March futures apparently encountered strong selling around its 40-day moving average today. March corn was trading 15 1/4 cents to $7.24 around midsession Monday, while December had edged 1/4 cent higher to $5.77 1/4.

CBOT soybean futures reacted rather poorly to the USDA data released last Friday, which probably reflected the negative nature of the domestic numbers. However, international traders seemed to be much more impressed with the 470,000 tonne reduction in the USDA forecast for ending-2013 global soybean carryout. The markets had risen strongly in Sunday night-Monday morning, then accelerated upward in reaction to news that China had bought 120,000 tonnes of beans for delivery in the current crop year. The resulting penetration of their 10-day moving averages probably sparked follow-through gains as well. March beans were trading 35 1/4 cents higher at $14.09 1/2 just before the lunch hour, while March soyoil had jumped 1.28 cents to 50.52 cents/pound and March meal was up $7.5 to $411.8/ton.

News that the USDA estimate of 2012 winter wheat plantings had fallen well short of industry forecast, as well as its cut to U.S. 2013 wheat carryout apparently boosted wheat futures last Friday and again today. The weekly export inspections result had little apparent impact upon the market. Concerns about the potential size of the winter wheat crop due to persistent drought over the Great Plains are reportedly offering support for U.S. wheat futures as well, although many traders are seemingly jumping upon the bullish bandwagon after the nearby contracts topped technical resistance over the weekend. March CBOT wheat leapt 16 1/4 cents to $7.71/bushel in Monday morning action, while March KCBT wheat jumped 17 1/4 cents to $8.24 1/4 and March MGE futures climbed 10 1/2 cents to $8.55 3/4.

Live cattle futures lost considerable ground last week due to surprising cash weakness at that time. And while some may be worried about the underlying supply/demand situation, most are probably anticipating growing tightness through the first quarter. That may partially explain the modest gains posted in Monday morning activity at the CME. Bulls may also be reacting to the concurrent jump in grain and soy complexes, since those imply commensurate increases in feed costs to the livestock industry. February cattle were actually unchanged at 130.60 cents/pound this morning, while April gained 0.20 cents to 134.75.

Anticipation of short-term strength cash and/or wholesale strength may have boosted February lean hog futures in early-week trading, although the bounce seems rather premature in the wake of last developments experienced last week. That is, we would prefer to see evidence of seasonal wholesale strength before becoming interested in sponsoring the long side of the market. Deferred futures were very likely responding to the prospect of increased feed costs implied by the grain and soybean gains being posted this morning. February hogs rose 0.60 cents to 84.80 cents/pound by mid-morning, while June futures had inched 0.12 cents higher to 96.62.

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