Crop, livestock markets diverged Wednesday morning

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Talk of South American rainfall apparently undercut CBOT corn Wednesday morning. Although ag interests are probably reluctant to trade aggressively ahead of Friday’s big USDA reports, most grain and soy markets turned lower this morning. Forecasts for widespread rainfall over fields in Brazil and Argentina could substantially help their crops and boost production. The negative futures reaction could have surprised few in the industry. March corn futures fell 6.75 cents to $4.1925/bushel late Wednesday morning, while May tumbled 6.25 at $4.275/bushel.

Prospects for large South American crops are depressing the soy complex. As in the corn pit, the potential for late-week rainfall over needy Brazilian and Argentine acres could substantially boost their forthcoming crops, with the resulting supply surge holding bearish implications for the price outlook. In addition, a quarterly report from Monsanto implied an increase in U.S. production later this year, thereby seeming to exaggerate losses in deferred futures. March soybeans dropped 4.75 cents to $12.7125/bushel just before lunchtime Wednesday, while March soyoil sank 0.47 cents to 37.46 cents/pound, but March soymeal gained $0.2 to $416.0/ton.

Wheat markets followed corn and beans lower. Talk of frost damage to U.S. wheat fields is diminishing, which may partially explain the Wednesday morning weakness infecting the wheat markets. Traders were probably reacting to concurrent losses in the corn and bean markets as well. Conversely, surprising strength in spot values seems to be supporting the Minneapolis market. March CBOT wheat futures dove 6.75 cents to $5.9575/bushel around mid-session Wednesday, while March KCBT wheat futures sagged 2.25 cents to $6.43, but March MWE futures moved up 3.25 to $6.34.

Rising beef prices are again supporting cattle futures. Rising cash and wholesale prices played a big role in the recent advance, with Tuesday’s CME dip being an exception. Thus, today’s resurgence wasn’t terribly surprising, since beef cutout values rose strongly again yesterday. February cattle futures rallied 0.42 cents to 136.95 cents/pound by late Wednesday morning, while April futures surged 0.62 to 136.97. Meanwhile, March feeder cattle futures advanced 0.55 cents to 168.37 cents/pound, and May ran up 0.42 to 169.80.

Wholesale strength may be boosting CME hogs as well. Hog traders are expecting a sizeable seasonal advance in cash and wholesale prices over the next six weeks. Pork cutout jumped Tuesday afternoon, which seemingly caused traders to pay less attention to concurrent cash slippage. February hogs rose 0.32 cents to 85.85 cents/pound in late Wednesday morning action, while June climbed 0.37 to 101.00.

Estimates of reduced Chinese imports are undercutting cotton futures. Statements indicating Chinese cotton acreage and production will decline this year sparked early-week gains. However, an officer with a large U.S. exporter argued Tuesday night that Chinese imports will also drop as they end their big stockpiling programs. ICE prices are suffering as a result. March cotton slumped 0.67 cents to 84.00 cents/pound just before noon (EST) Wednesday, while July cotton lost 0.63 cents to 83.65.


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