The grain and soy markets ended last week rather poorly, due in part to downward momentum, weak export sales and a rise in 2012 crop estimates from a private source on Friday. The industry will know more when the USDA releases its final 2012 production estimates this Friday (1/11). The late-week losses gave the agricultural markets a decidedly negative drift to start the new year, especially since numerous futures contracts reached fresh six-month lows as a consequence. However, modest corn gains in Sunday-night trading may mark the start of a sustained rebound, because many bulls had exited large long positions before the year-end holiday season. March corn rose 4 1/4 cents to $6.84 1/2 in early morning activity, while December edged 1/2 cent higher to $5.72 1/4 per bushel.

Talk of robust demand boosted Chinese soybean prices in early-morning trading, which probably explains a significant portion of the CBOT soybean gains posted in Sunday night and Monday morning action. The rise looks quite impressive when considers recent downward price momentum and continued talk of surging South American yield prospects. On the other hand, the bi-weekly commitments of traders report indicated Friday that large speculators had cut their bullish soybean holdings to an 11-month low, thereby suggesting considerable upside potential if/when the market finds solid technical support. March beans advanced 8 cents to $13.75 1/4 per bushel in overnight electronic dealings, while March soyoil edged 0.08 cents higher to 49.98 cents/pound and March meal rose $2.5 to $401.5/ton.

The weekly Export Sales data also weighed rather heavily upon the wheat market, as did the generally bearish tone of the private crop estimates published around noon Friday. Moreover, it looks as if a storm system will drop significant rainfall upon the Southern Plains this week, which might improve the winter wheat production outlook considerably. And yet, wheat futures also rose in early-week trading. The strength exhibited by corn and soybeans is probably supporting wheat as well. Technicians may also be buying in anticipation of a rebound from substantially oversold levels. March CBOT had risen 3 3/4 cents to $7.51 as traders were arriving at the exchanges this morning, while March KCBT and MGE futures gained 4 1/4 cents and 3 1/2 cents to $8.08 3/4 and $8.44 1/2 per bushel, respectively.

Bullish cattle traders seemed disappointed that significant cash trading had failed to develop before the Friday afternoon CME close, which would partially explain the modest futures losses posted as pit trading wound down. Traders were likely expecting fed cattle to change hands around 129 cents/pound across the Great Plains Friday evening, which may bode rather ill for their Monday morning opening, since most quotes came in slightly below that level. That is, wire service sources indicate that 128 cents/pound was the norm in the Southern Plains, while Nebraska animals reportedly traded around 128.50. Thus, we tend to expect a weak opening later this morning. February cattle declined 0.90 cents to 132.90 cents/pound Friday, while April lost 0.55 cents to 136.77 cents/pound to end the week.

Although Friday afternoon reports concerning the cash hog and wholesale pork markets were generally favorable, CME swine futures ended the week having slipped modestly. Premiums already built into Chicago prices may have made it rather difficult to push them higher, since the CME lean hog index remains several cents below the nearby contracts (and far below the bullish forecasts implicit in deferred futures). Still, bulls seem likely to benefit from the traditional seasonal country market advance during the first six weeks of the year. February hogs ended last week having slipped 0.17 cents to 86.22 cents/pound, while June futures lost 0.20 cents to 98.75 at the close.

Cotton futures seemed to decline in concert with the grain and soy complexes last Friday. As pointed out in the past, cotton and soybeans routinely compete for acreage across the Southeast most years, so price shifts in the latter market often exert considerable influence over in the former early in the year. That didn’t seem to be the case in late 2012, since cotton rose substantially in the face of sizeable soy losses in recent weeks. Their recent divergence resumed in early morning trading, with beans rising and cotton declining. The latter move seems particularly surprising since the market was boosted by talk of robust Chinese imports during the coming weeks and by a technical bounce from major support last Friday. Traders may simply feel cotton has to do more to consolidate its December surge before it can resume that advance. March futures slipped 0.17 cents to 74.86 cents/pound in pre-dawn action, whereas the December contract edged 0.08 cents higher to 79.18 cents/pound.