After beginning the week strongly, corn futures slipped lower as the Tuesday trading session passed. Weather concerns are probably providing considerable support at this juncture, since forecasts imply the central U.S. will remain dry during the weeks just ahead. Moreover, growing dryness in Brazil and Argentina are raising questions about the forthcoming South American harvest. However, one other fact of life in recent weeks has been the poor rate of American corn exports as well as talk of slowing demand from the domestic ethanol industry. Thus, having the weekly Export Inspections report show only a modest improvement from the low figure posted last week seemed to undercut CBOT futures. March corn ended the Chicago session having risen 1 cent to $7.28 1/2; December posted a similar advance, to $5.90/bushel.

Traders were reportedly buying soybean futures in response to growing worries about prospects for the Argentine crop Tuesday. The weather over its main bean growing area recently shifted from too wet to too dry, thereby threatening to curtail yields substantially. And in contrast to the slowness of American corn sales, soybean exports have proven very strong lately. For example, the weekly Export Inspections report stated last week’s soybean total at about 48 million bushels, whereas forecasts averaged in the 35-45 million range. Talk that China will continue buying U.S. beans aggressively over the short term apparently encouraged bulls in the Chicago pit as well. March beans jumped 22 1/2 cents, to $14.51 3/4, at the end of the Tuesday CBOT session, while March soyoil jumped 0.75 cents to 52.43 cents/pound and March meal surged $7.2 to $421.6/ton.

The Export Inspections report appeared quite supportive of the short-term wheat outlook, since the stated 21.9 million-bushel result topped pre-report estimates in the 10-17 million range. Nevertheless, prices at the various exchanges turned downward Tuesday morning and ended the day substantially lower. One might blame forecasts of rainfall over the Southern Plains, but the seeming market reaction appeared greatly exaggerated. We tend to agree with wire service sources suggesting the reversal was technically driven, especially after seeing the failure by the March CBOT contract to top the pivotal $8.00/bushel level early in the day. Nearby futures may need to consolidate recent gains before making another run at that level. March CBOT wheat settled 11 1/2 cents lower at $7.79 1/4, while March KCBT wheat tumbled 13 cents to $8.30 3/4 and March MGE futures dove 8 1/4 cents to $8.64 1/4 per bushel.


Talk that Japan, our traditional number one beef customer, will soon raise the age limit (from 20 to 30 months) for U.S. cattle from which product may be imported sparked strong gains in live cattle futures Tuesday morning. That shift might make the bulk of beef from American animals eligible for the Japanese market, so this might give the cattle market a big boost if/when obstacles to this move are cleared. Bullish CME traders may also have been reacting to the Tuesday bounce in wholesale values, especially when those are compared to the losses posted last week. In addition, nearby futures were technically oversold late last week. February cattle had surged 0.77 cents to 125.72 cents/pound at the Tuesday afternoon close, while April climbed 0.67 cents to 130.37.

Just as CME lean hog futures finished last week in a mixed fashion, they behaved similarly Tuesday morning. Trader uncertainty about short-term prospects for the cash and wholesale markets is probably playing a big role in this confusion, but the manner in which the hog and pork complex might behave if the recent breakdown in cattle and beef prices persists almost surely perplexed the industry as well. Early Chicago action did not seem particularly promising either, since lean hog futures were trading in a mixed fashion despite the strong bounce posted by live cattle futures. Futures later rose moderately in probable response to firming cash quotes. The afternoon pork report also seemed supportive of the short-term outlook. However, the large pork inventory indicated by the afternoon USDA Cold Storage report may handicap bullish efforts Wednesday morning. February hogs settled 0.35 cents higher at 85.70 cents/pound Tuesday afternoon, while June futures climbed 0.02 cents to 97.27.