Commodity sector weakness sank ag markets Thursday

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The ag markets, including corn fell in reaction to demand concerns Thursday morning. That is, talk that the Fed will slow its buying of U.S. financial instruments, depressing the equity markets and boosting the U.S. dollar. Conversely, the latest Chinese data suggests disappointing economic weakness in that country. All these developments seem negative for commodity demand. Thus, corn futures are weak, with talk of hot, dry weather looming in late June and early July also mitigating. July corn dropped 4.0 cents to $6.7825/bushel by late Thursday morning, while December tumbled 8.75 cents to $5.6175.

Despite ongoing weather concerns, the soy complex also reacted badly to the financial markets. With the latest forecasts seeming less threatening than those seen Wednesday, concerns about a reduced 2013 crop are less keen. Moreover, the soybean, oil and meal markets are also quite susceptible to diminished demand if future economic conditions, especially those in China, prove less favorable. July soybean futures dove 16.5 cents to $15.065/bushel around midsession Thursday, while July soyoil plunged 0.85 cents to 48.50 cents/pound, and July soymeal sank $5.7 to $447.9/ton.

Wheat futures also suffered amidst the wide commodity breakdown posted Thursday morning. Ultimately, broader demand issues can undercut markets badly. However, the golden grain markets posted a surprising comeback before lunchtime. The bounce at least partially reflected renewed concerns about the U.S. winter wheat crop, as well as the limited size of spring wheat production in the absence of favorable summer weather. Bulls also cited persistent hopes for short-term Chinese buying. July CBOT wheat slipped 0.25 cent to $7.065/bushel just before midday Thursday, and July KCBT wheat rallied 3.0 cents to $7.4275, while July MGE futures advanced 2.5 to $8.16.

Slumping financial markets also weighed upon cattle futures Thursday morning. As with so many commodities, the potential combination of U.S. dollar strength and reduced economic growth in the U.S. and overseas typically translates into diminished demand on both the domestic and international fronts. When combined with the seasonal weakness experienced lately, it was hardly surprising to see cattle futures suffer as well. August cattle declined 0.52 cents to 119.87 cents/pound just before lunchtime Thursday, while December skidded 0.42 cents to 125.85. August feeder cattle futures stumbled 0.50 cents to 144.15 cents/pound and November slumped 0.30 to 150.05.

Hog futures proved less vulnerable to the broad commodity drop experienced Thursday. That is, extreme seasonal strength in both the cash and wholesale sectors, as well as considerable upward momentum in Chicago prices, boosted the CME swine contracts Thursday morning. Talk of the damage being done by PEDV disease may also be supporting swine values. July hog futures rose 0.20 cents to 100.17 in Thursday morning trading, while December gained 0.10 cents to 82.50.

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