Doane Advisory Services  |   January 15, 2013 resize text

Corn futures continued their bullish reaction to the January 11 release of USDA data Monday. Surprisingly tight December stocks, the sharp upward revision in forecast 2012-13 U.S. feed usage and the resulting reduction in the anticipated 2012-13 carryout probably powered the advance. The maize market continued rising Monday night, possibly due to bullish momentum, but we would also point out that a Taiwanese firm issued a tender for 60,000 tonnes of corn early this morning. The short-term outlook may depend upon the ability of the nearby contracts to sustain their early-morning push above their respective 40-day moving averages. That might signal a major shift in the recent trend. March corn had risen 3 cents to reach $7.27/bushel in the pre-dawn hours, while December had edged 3/4 cent higher to $5.84 3/4.

Although CBOT soybean futures initially reacted rather poorly to the USDA data released last Friday, traders seemed to be much more impressed with the 470,000-tonne reduction in the USDA forecast for ending-2013 global soybean carryout over the weekend. Futures rose strongly Sunday night, then accelerated upward in reaction to Monday morning news that China had bought 120,000 tonnes of beans for delivery in the current crop year. They continued rising in Tuesday morning trading, but technical resistance associated with their 40 and 50 day moving averages may act as a major obstacle to further short-term gains. March beans look set to open the CBOT pit session 8 1/4 cents higher at $14.26 1/4 this morning, while March soyoil climbed 0.28 cents to 50.73 cents/pound in early electronic action and March meal rose $1.2 to $418.7/ton.

News that the USDA estimate of 2012 winter wheat plantings had fallen well short of industry forecasts, as well as its cut to U.S. 2013 wheat carryout apparently boosted wheat futures over the weekend. Concerns about the potential size of the winter wheat crop due to persistent drought over the Great Plains seemingly offered support for U.S. wheat futures as well. The various wheat markets continued their advance in the overnight hours, possibly due to reported reductions in the 2012 Ukrainian harvest. As with corn and soybeans, forthcoming wheat market direction may depend upon the ability, or lack thereof, of nearby futures to overcome technical resistance at slightly higher levels. March CBOT wheat added 5 cents, to $7.72/bushel, to its recent advance Monday night, while March KCBT wheat gained the same amount to $8.28 1/2 and March MGE futures surged 4 cents to $8.56 3/4.

Live cattle futures lost considerable ground last week due to surprising cash weakness at that time. The short-term situation does not seem particularly promising at this juncture, since slow producer sales in late 2012 seemingly backed quite a few animals up into the January market. The recent lack of strength exhibited by choice grade beef values cannot be helping the situation either. However, the cattle market has consistently demonstrated great resilience over the past two years, so we would be very reluctant to rule out a sizeable technical rebound in the wake of the losses suffered over the past eight CME sessions. February cattle slipped another 0.25 cents to 130.10 cents/pound, while April fell 0.50 cents to 134.25.

Anticipation of short-term cash and/or wholesale strength may have boosted February lean hog futures Monday, especially when the general advance was viewed in light of industry talk indicating pork is benefiting from greatly elevated beef and chicken prices. Strong afternoon cash quotes seemingly confirmed the bullish bias common in the pit, but the afternoon pork report told a different tale, since cutout actually slipped moderately. That news almost surely sparked the overnight losses, thereby raising fresh questions about the short-term hog and pork outlook. February hogs slipped 0.05 cents to 85.17 in pre-dawn trading, while June futures fell 0.32 cents to 96.52 cents/pound.

Cotton futures reacted wildly to the USDA data Friday, since the numbers indicated sharp divergences in the U.S. and global cotton situations. That is, the Agriculture Department raised its estimate of 2012-13 U.S. cotton exports significantly and cut its forecasts for domestic production and ending stocks. Those numbers are clearly supportive of American prices and probably played a major role in carrying nearby futures higher Friday afternoon. However, USDA analysts also boosted their estimate of 2012-13 global carryout by over 2.0 million bales, which obviously holds negative implications for the world situation and for international prices. That probably explains the moderate losses suffered by cotton futures in Sunday night-Monday morning trading. March cotton slipped 0.18 cents to 75.42 cents/pound in early-morning activity, while December moved 0.39 cents lower at 78.65.

Cotton traders in the U.S. seem to be fighting those in the international markets in the wake of the January 11 USDA reports. The Agriculture Department raised its estimate of 2012-13 U.S. cotton exports significantly and cut its forecasts for domestic production and ending stocks, which seems quite supportive of the short-term U.S. outlook. However, USDA analysts also boosted their estimate of 2012-13 global carryout by over 2.0 million bales, most of which will apparently go to China. Indeed, talk of a widely anticipated sale of a small portion of that stockpile reportedly pulled New York futures downward Monday afternoon. However, bulls reasserted themselves overnight, as exemplified by the 0.45-cent March futures surge to 75.97 cents/pound; December rose 0.16 cents to 79.30 in early trading.

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