Ag markets diverged significantly on Wednesday

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Corn futures were probably set to bounce in the wake of recent declines, so it was not terribly surprising to see yellow grain prices rise after the weekly Energy Information Administration report Wednesday morning. It indicated that U.S. ethanol production surged 2.5% last week, thereby implying increased demand for corn. Producers have also limited farm sales at the lower prices experienced lately, which provided price support as well. May corn gained 1.0 cent to $6.395/bushel at hits Wednesday close, while December rose 5.25 cents to $5.28.

Tight spot markets and a positive basis continued supporting soybean futures Wednesday morning. However, reported unwinding of soybean/corn spreads and technical selling of the nearby contracts apparently dragged bean futures downward. That was rather surprising, especially when viewed within the context of the large canola acreage reduction forecast by Statistics Canada (their version of the USDA) and the bullish soyoil reaction. Wire service sources cited selling ahead of active shipments from South America for the price weakness. May soybeans fell 15.75 cents to $14.04/bushel late Wednesday afternoon, while May soyoil surged 0.59 cents to 49.18 cents/pound, and May meal dipped $5.3 to $406.4/ton.

News that Statistics Canada had raised its forecast of Canadian wheat this spring apparently depressed wheat futures Wednesday. Talk of increased production in Europe and Australia did not help the bullish cause either. Conversely, news that the frost that hit the Southern Plains Tuesday night was quite severe apparently supported the Kansas City market for hard red winter wheat. May CBOT wheat closed 5.75 cents lower, at $6.9175/bushel Wednesday, while May KCBT wheat edged up 1.75 cents to $7.39 and May MGE futures advanced 2.5 cents to $8.1775.

Ideas that warming weather will boost demand for beef, as well as the wholesale strength early this week seemed to spark fresh buying in cattle futures Wednesday. Cattle traders are very likely looking for short-term cash strength, despite the dip experienced by choice cutout around noon. The discounts built into summer futures probably encouraged buying as well. June cattle climbed 1.25 cents to 122.07 cents/pound late Wednesday afternoon, while December leapt 1.22 cents to 127.47. May feeder cattle futures jumped 1.70 cents to 141.30 cents/pound, while August soared 2.50 cents to 150.80.

Despite divergent indications concerning country hog prices Wednesday morning, hog futures rallied in concert with cattle. As in the cattle pit, anticipation of a spring demand surge almost surely powered the futures advance. The fact that the most-active June contract smashed through chart resistance associated with its 40-day moving average probably exaggerated the early rise. May hog futures settled 0.77 cents to 88.60 cents/pound late in the Wednesday CME session, while the June contract surged 1.42 cents to 91.00.

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