Active position-squaring made for uneven commodities

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After having followed the soybean market higher in Thursday night trading, corn futures turned lower in response to the weekly Export Sales report. It indicated that 104,300 tonnes were sold last week, which fell far short of forecasts in the 150,000-300,000 range. Recent numbers strongly suggest U.S. prices are simply too high to generate much export interest. Bearish traders may also be reacting to forecasts for benign South America weather over the next two weeks, since that could lead to significantly improved crop prospects during the months ahead. March corn slipped 3/4 cent to $6.90 3/4 per bushel in late-morning trading, whereas the December 2013 had risen 2 1/2 cents to $5.98 1/2.

The weekly soybean sales total also disappointed Chicago traders; the USDA result, at 87,000 tonnes came up short of predictions ranging from 100,000 to 300,000 tonnes. Thus, after having risen moderately in response to the supportive global vegetable oils situation, CBOT bean values were only slightly higher in late morning trading. Actually, futures might have proven much weaker if not for news that China had bought 165,000 tonnes earlier this week. January beans were quoted just 1/4 cent higher, at $14.19 around mid-session, while January soyoil was up 0.48 to 48.77 cents/pound and January meal had fallen $2.5 to $427.3/ton.

In contrast to the disappointing corn and bean sales posted last week, the wheat total, at 1,017,000 tonnes easily topped forecasts in the 500,000-700,000 tonne range. That marked the largest weekly total in almost two years, thereby seeming to justify recent suggestions that cheap U.S. prices would ignite an export surge. As one might expect, wheat futures rallied strongly on the news. However, bulls proved able to sustain a portion of the price jump, possibly due to concerns about the so-called fiscal cliff and trader reluctance to commit to fresh positions before the end of the year. March CBOT wheat had pared its gain to 3 3/4 cents to $7.76/bushel later in the morning, while March KCBT wheat was just 1 cent higher, at $8.24 1/2, and March MGE futures had risen 1 1/4 to $8.66.

Ideas that the U.S. government will do nothing to avoid going over the fiscal cliff apparently remains an issue for CME live cattle traders, but they have almost surely switched their attention to more immediate concerns at this point. That is, only a few fed cattle have changed hands in the Great Plains this week, so some sort of activity will probably occur this afternoon. Given expiring December futures quotes over 129 cents/pound, the Chicago might prove vulnerable to a sharp setback if country prices don’t live up to that standard later in the day. Still, cattle traders clearly remain optimistic about the early 2013 outlook. February live cattle futures gained 0.22 cents, to 133.35 in midmorning activity, but the April future had actually slipped one tick to 136.85 cents/pound.

Thursday afternoon reports of cash hog strength may have supported CME swine values in overnight trading, but the advance couldn’t be sustained through the end of the week. The Friday morning slide might be blamed on the so-called fiscal cliff negotiations, but we are also inclined to cit the large Thursday afternoon drop in pork cutout. The fact that seasonal ham losses played only a small role in the breakdown seems particularly negative. On the other hand, bullish hog traders may be exiting sizeable positions ahead before January 1. February hogs slipped 0.12 cents to 86.90 cents/pound in mid-morning trading, while the June contract tumbled 0.35 cents to 99.80.

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