Ag futures seemed to bounce from oversold levels Monday
Monday morning USDA news indicating that private exporters sold 102,2000 tonnes of corn for 2013 delivery over the weekend probably played a sizeable role in the moderate gains posted by the yellow grain market in early-week trading. The reaction may have been exaggerated by ideas that recent losses had been overdone by year-end position liquidation and pessimism about export prospects. And while the sales news seemed quite supportive, the result of the weekly Export Inspections report stated the latest total below forecasts, thereby suggesting the export situation remains precarious. The concurrent U.S. dollar decline was somewhat encouraging, since that lowered the comparative cost of U.S. grain. Ultimately, grain and soy complex trading could be subdued and/or choppy this week, since the USDA is set to publish major production and supply/demand news late Friday morning (1/11). March corn rose 4 1/4 cents to $6.84 1/2 Monday, while December gained 3 cents to $5.74 3/4 per bushel.
Pessimism about prospects for U.S. soybean exports has recently weighed rather heavily upon the grain and soy complexes. Moreover, soybean futures ended last week badly due to an increased 2012 production estimate from a private firm published Friday. The annual production total and expected ending-2013 stockpiles will almost surely be a major topic of conversation amid CBOT trading this week, since the USDA will release its latest estimates Friday morning (1/11). Given the bearish nature of recent soybean developments, including growing optimism about the size of the forthcoming South American crop, it would have been easy to anticipate continued losses Monday. But that was hardly the case, with nearby futures ending the Chicago session over 18 cents higher. The rise may have been largely driven by the simple fact that futures were relatively oversold in the wake of the December breakdown. March beans ended their Monday session 20 cents higher, at $13.87 1/4 per bushel, while March soyoil surged 0.15 cents to 50.05 cents/pound and March meal jumped $9.2 to $408.2/ton.
The weekly Export Inspections report proved more favorable to the short-term wheat outlook than for corn or soybeans, since the result, at 13,400 tonnes topped pre-report forecasts in the 9,000-12,000 tonne range. In addition, the nearby wheat contracts seem more technically oversold than do their CBOT counterparts. However, recent news that India may force stored product from its stockpiles onto the international market may bode ill for the wheat outlook, as might also be the case with improved precipitation forecasts for winter wheat pastures across the Southern Plains. Those may explain the limited nature of wheat gains posted Monday. March CBOT wheat climbed 3 cents to $7.50 1/4 per bushel; March KCBT wheat gained 3 cents to $8.07 1/2 and March MGE futures surged 4 3/4 cents to $8.45 3/4 per bushel.
Despite likely industry disappointment with cash cattle trading last Friday, when prices ranged between 128.00 and 128.50 cents/pound, CME traders pushed nearby futures slightly higher Monday morning. The fact that packers got few takers at the higher levels may have discouraged some, but others in the cattle/beef industry may be expecting a wholesale price advance to push country cattle prices higher. That is, prospects for moderately improved beef demand and seasonally slowing production could push the wholesale market significantly higher during the coming weeks, which in turn might boost fed cattle prices substantially. On the other hand, nearby futures are already anticipating considerable first-quarter strength, so a cash advance is already required to support nearby futures at current levels. February cattle rose 0.05 cents to 133.00 cents/pound on the day, but April slipped 0.07 cents to 136.70.
Lean hog futures are also trading at substantial premiums to cash equivalent values as the swine industry anticipates a seasonal advance through mid-February. That is, pork demand traditionally improves after the first of the year, while hog supplies and pork production decline from early-winter highs. The mixed nature of Monday morning trading suggests the industry is wondering whether the implicitly bullish forecasts being made by nearby futures are justified. Much may depend upon the strength, or lack thereof, exhibited by fed cattle prices during the coming weeks. The technical situation also seems rather clouded. February hogs advanced just 0.07 cents to 86.40 cents/pound, whereas the June contract slipped 0.20 cents to 98.55.
Ideas that the USDA will modestly reduce its estimate for the 2012 U.S. cotton crop seemed to boost white fiber prices at the ICE Monday. Wire service reports also cited concurrent slippage suffered by the U.S. dollar, since a weaker greenback lowers the relative cost of American products. The strong March futures bounce from technical support associated with its 40-day moving average very likely sparked fresh buying as well. But while the situation seems supportive of further short-term gains, traders may also be reluctant to sponsor the long side of the market ahead of the Friday morning USDA reports. March cotton advanced 0.65 cents to 75.70 cents/pound Monday, while December edged just 0.11 cents higher to 79.21 cents/pound.