Ag markets diverged rather significantly Monday

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Favorable weather forecasts undercut corn futures Monday. Beautiful weather is expected to dominate the Corn Belt during the next two weeks, which bodes well for the current corn crop. When combined with the disappointing result on the weekly Export Inspections report, it was not terribly surprising to see corn futures under significant pressure to start the week. September corn futures dropped 3.25 cents to $5.4075/bushel at the Monday close, while December lost 2.75 cents to $4.98.

The shortage of old crop soybeans boosted the complex to start the week. Despite the bearish implications of favorable weather forecasts for late July, the extreme tightness of the old crop situation sent soybean and meal prices sharply higher again Monday. The oil market again seemed to suffer from the prospect of aggressive industry crushing for meal. The Export Inspections data seemingly had little impact. August soybean futures jumped 29.5 cents to $15.2025/bushel in trading late Monday morning, while August soyoil skidded 0.09 cents to 45.41 cents/pound, and August soymeal leapt $20.00 to $502.4/ton.

Wheat futures turned lower in concert with corn Monday. After following soybeans higher Sunday night, the wheat markets proved relatively weak as Monday passed. The spring wheat losses very likely reflected favorable short-term weather forecasts for the northern Plains. Meanwhile, the surprising size of the winter wheat harvest and the prospect of a record corn crop may have depressed the Chicago and Kansas City contracts. September CBOT wheat fell 4.75 cents to $6.5975/bushel as trading wound down Monday, while September KCBT wheat sagged 3.25 cents to $7.02 and September MGE futures slid 3.75 cents to $7.4675.

Cattle futures rose temporarily in the wake of the latest COF report. Traders were seemingly encouraged by the USDA Cattle on Feed report last Friday, but proved unable to sustain the early bounce. The fact that cash prices were steady-weak last week probably weighed upon the market, as did fresh wholesale weakness. August cattle settled 0.10 cents lower at 121.87 cents/pound late Monday morning, while December declined 0.37 cents to 128.35. August feeder futures rallied 0.67 cents to 152.92 cents/pound in reaction to the corn price drop, while November gained 0.62 cents to 158.77.

The slow decline in cash hog prices is apparently encouraging CME bulls. The CME index remains at a substantial premium to Chicago prices, and the slow rate of the seasonal decline seems to be encouraging traders in nearby futures. Accelerating losses at either the cash and/or wholesale level could change the situation, but traders seem cautiously optimistic at this point. August hog futures rallied 0.65 cents to 97.12 cents/pound late Monday afternoon, while December crept up 0.07 cents to 82.30.

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