Crop markets continued Wednesday afternoon slide overnight

Bullish cattle traders are almost surely hoping for a quick CME futures rebound, especially when viewing the severity of the early-January breakdown. However, their plans were sabotaged again Wednesday, when the conflict over potential Russian restrictions upon U.S. red meat came to light once again. Russia has emerged as a large buyer of American beef, so any restrictions they might impose upon imports of U.S. product have the potential to undercut cattle prices somewhat. The situation was not helped by slipped wholesale prices again yesterday, or by news that a few fed cattle had changed hands at 122 cents/pound. That represents a steady-lower cash quote, which is hardly conducive to bullish futures ideas. Still, the fact that Chicago prices rose slightly Wednesday and again in overnight trading was rather impressive. February cattle seem set to begin the Thursday Chicago session 0.27 cents to 126.05 cents/pound, while April may open 0.12 cents higher at 130.57.

Talk that Russia may impose temporary restrictions on imports of U.S. meat due to the use of ractopamine depressed deferred CME lean hog futures Wednesday, which very likely reflects the fact that the growth promotant is widely used by the U.S. swine industry. Having the proposed ban delayed until early February seemed to leave the nearby February contract largely unaffected, with hopes for seasonal strength apparently supporting the nearby future. Sizeable cash gains, especially in the Western Corn Belt, as well as a modest afternoon rise in pork cutout appeared to boost futures again overnight. The fact that recent gains by the CME lean hog index have left the February future at a discount to the cash equivalent is almost surely providing support as well. February hogs advanced 0.52 cents to 86.50 cents/pound in overnight electronic trading, while June futures added 0.40 cents to 97.30.

Cotton futures posted another strong advance Thursday, which marked its seventh consecutive daily increase. Traders continue thinking the Chinese government inventories built up by their aggressive purchases of the past few months will not come back onto the market anytime soon, thereby rendering the short-term supply/demand situation quite tight. However, technical market aspects may come to the fore during the days ahead, due largely to the overbought nature of ICE futures at this point. That is, its 14-day RSI suggests March cotton is overbought. In addition, a candlestick chartist might easily construe its Wednesday price action as having formed a classic ‘hanging man’ reversal pattern. Thus, we would not be terribly surprised by a short-term setback. March cotton fell 0.42 cents to 80.06 cents/pound in overnight activity, while December slipped 0.08 cents to 79.69.