Corn and wheat prices continue to struggle

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Corn futures continued their early-week losses Wednesday and again in early Thursday morning trading. The recent drop was apparently prompted by an announcement that a large South Korean firm had made a large purchase of South American and South African corn and excluded product from the U.S. This news apparently renewed concerns among domestic traders that greatly elevated quotes for North American product are strangling export demand. The weakening of Gulf basis bids yesterday may also have undercut the Chicago market. Still, one has to wonder how much more downside the market has over the short term, since nearby futures have now declined for six consecutive days. March corn was down 1 1/4 cents to $7.24 1/2, while the December 2013 contract slipped 1/2 cent to $6.25 1/4.

After having defied the generally bearish trend in the agricultural markets in Wednesday afternoon trading, nearby January CBOT soybean futures inched higher again overnight. Earlier in the week traders reportedly sold the market in response to improved weather forecasts over the major South American growing regions. We suspect talk that soggy areas won’t in Argentina won’t dry out that much over the next two weeks supported the market yesterday and again in early morning electronic trading. Chicago prices may also have firmed in reaction to news that processors had boosted basis bids, thereby implying improving cash markets here in the U.S. January soybeans rose 1/4 cent to $14.73 3/4 per bushel. January oil bounced slightly (0.07 cents) to 49.61 cents/pound and January meal added $0.1 $452.1/ton overnight.

The wheat market was still suffering from the bearish consequences of the Tuesday morning WASDE report from the USDA yesterday. The latest round of futures losses may also have come in response to increased estimates for the E.U. wheat crop and Continental export prospects. The net result was price declines to their lowest levels since Independence Day. And while wheat market fundamentals did not change appreciably overnight, futures moved generally higher in Wednesday night trading. Actually, the bounce wasn’t terribly surprising, since the markets were likely somewhat oversold. Moreover, the March CBOT contract settled just above technical support associated with its 200-day moving average Wednesday, which seems likely to spark a short-term bounce. March CBOT wheat rose 1 1/4 cents to $8.13 1/4 per bushel; March KCBT wheat advanced 2 1/2 to $8.67 3/4, while March MGE futures slipped 1 cent to $9.03.

Cattle futures bounced from their weak Wednesday close in overnight trading. That was rather surprising given trader disappointment with the decline suffered by choice beef cutout, since they were almost surely hoping for a sustained upward surge in wholesale values, which in turn might have powered country cattle prices higher. The market probably reacted to the delivery situation in early-Thursday trading. That is, all the delivery notices retendered for the first and second times were demanded Wednesday afternoon, thereby indicating that packers are still ready, willing and able to take cattle if the price is right. The market may continue rising in anticipation of a cash market bounce later today or Friday. February cattle futures climbed 0.32 cents to 132.12, while the April contract advanced 0.25 to 136.00 cents/pound in overnight action.

Despite a dearth of supportive fundamental news Wednesday, CME lean hog futures bounced strongly from recent losses. Traders reportedly expect a traditional improvement in demand and slowing supplies in early 2013 to push the whole hog and pork complex higher. Fund buying reportedly exaggerated the advance. However, bulls have to keep the potential for considerable short-term weakness in mind, since the anticipated first-quarter rally might be forced to start from substantially lower levels if conditions worsen during the waning days of 2012. The sizeable drop in pork cutout values Wednesday afternoon may have exacerbated such concerns. Still, February hogs rose 0.15 cents to 85.80; June slipped 0.05 cents to 100.00 cents/pound in overnight electronic trading.

Cotton futures appeared to be following through upon their bullish reaction to the WASDE report in midweek trading. The USDA’s suggestion that China will purchase the bulk of its 2012 crop for its national reserve, thereby reducing supplies available to its domestic mills, added to the bullish atmosphere. In contrast to the weakness experienced by the grain markets lately, the recent cotton advance may have put prices in overbought territory. Those considerations, as well as overnight weakness in the grain, metal and energy complexes may have exaggerated the slippage suffered overnight. March cotton fell 0.37 cents, to 74.75 cents/pound and the December 2013 contract dipped 0.32 to 77.90 cents/pound.

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