Although the USDA lowered its projected 2012-13 corn carryout forecast slightly to 117.6 million tonnes or 13.6% of annual usage, CBOT futures declined modestly after the WASDE report was released this morning. That probably reflected the fact that the Agriculture Department raised its estimate of Chinese production by 8 million tonnes, thereby suggesting they’ll be buying little U.S. corn in the coming months. Traders may also have been disappointed by the minimal 0.5 million-tonne reduction in its forecast for the Argentine crop despite the planting problems Argentine farmers are reportedly have encountered lately. Corn is apparently following wheat lower as that market reacts to the bearish USDA numbers. March corn slipped 2 1/2 cents to $7.27 1/2 per bushel, while the December 2013 future was down 5 1/2 cents at $6.31 1/4.
The WASDE report held few surprises for soybean traders, with only a minimal shift in forecast ending stocks and no change to anticipated 2013 production out of South America. And yet, Chicago futures fell rather substantially in the immediate wake of the report. Given last week’s bean gains it now seems apparent that traders were hoping for a reflection of crop damage potentially being done by recent Argentine rains and/or forecasts for more of the same during the days ahead. The fact that the USDA lowered the price estimate for the beans and products may also be a contributing factor. The bearish wheat data and its reaction to the news probably weighed upon beans and corn as well. January soybeans were down 5 3/4 to $14.69/bushel, January soybean oil down 0.86 to 50.29 cents/pound and January meal had risen $2.5 to $447.3/ton by later morning.
As had seemed to be demanded by recent export totals, the USDA cut its wheat export forecast for the third consecutive month on the WASDE report. The 50 million-bushel reduction went straight to projected ending stocks, which rose to 754 million bushels. This easily topped our industry-high forecast, thereby exaggerating its impact upon the futures markets. The negative aspects of the domestic news were also exacerbated by the global numbers, where world production was revised upward by 3.7 million tonnes and usage cut by 1.2 mmt. These easily topped private forecasts, which very likely amplified their negative impact upon prices. March CBOT wheat had fallen 25 1/4 cents to $8.23 1/2 per bushel by late morning, while its KCBT and MGE counterparts dove 22 3/4 to $8.80 1/2 and 16 1/2 $9.10 1/2, respectively.
Wire service sources cited fund buying and short covering for the morning surge posted by live cattle futures. The WASDE report almost surely had little real impact, since the USDA made only a small revision to its 2013 forecasts. The more likely reason for the strong advance stemmed from the wholesale market, where choice cutout had jumped 2.27 cents (to 196.32 cents/pound) on the USDA midday report. Rumors anticipating the beef advance probably played a big role in the morning price spike. Bulls are probably counting upon a cash rebound from last week’s surprising drop later this week. The combination of concurrent equity index gains and U.S. dollar losses likely provided support as well. February live cattle had jumped 1.62 cents to 131.90 cents/pound, while the April contract was up 1.47 to 135.57 cents/pound.
Given the bullish leadership exhibited by the cattle market, it wouldn’t have been terribly surprising to see hog futures advancing as well. In fact, the cattle news did seem to be pulling the swine market higher despite less than supportive short-term fundamentals. The cattle gains seemingly supported the deferred swine contracts as well, although one might just as easily argue that today’s grain and soy weakness will translate into reduced feed costs and greater cattle and hog supplies by the middle of next year. The losses suffered by the nearby hog contracts probably reflect the ongoing seasonal decline in cash hog and wholesale pork values, with today’s 3.0-cent drop in ham prices very likely weighing heavily upon short-term sentiment. On the other hand, bullish traders may be looking for buying opportunities if/when the traditional December ham breakdown runs its course. February futures had inched 2 points higher to 83.95 cents/pound, while the June contract was up 0.15 cents to 98.55 cents/pound.