Corn futures continued their recent advance Tuesday, with the supportive data released by the USDA on January 11 rather obviously playing a major role in the surge. However, other factors are also coming into play. For example, Argentine fields are reportedly drying out rapidly in the wake of heavy rains in late 2012, which might exert a great deal of stress upon shallow-rooted plants. Technicians may be buying as well, especially after nearby futures topped chart resistance associated with their 40 and 50-day moving averages (MAs) Monday night. That may have opened the door to a larger rally. March corn closed 5 1/2 cents higher, at $7.30 1/2 Tuesday, while December climbed 5 1/4 cents to $5.89 1/4 per bushel on the day.
After initially reacting rather poorly to the USDA data released last Friday, soybean futures rallied strongly on Monday and again Tuesday morning. The big cut in the global carryout forecast and the Monday announcement of a sizeable Chinese purchase probably encouraged bulls. As in the corn market, soybean traders seemed to buy beans in response to talk of increasing dryness in Argentina, where shallow-rooted plants might prove especially vulnerable to a heat wave. We would also point out that the CBOT lowered its margin requirements on grain and soy complex positions over the weekend, thereby making it easier for bulls to hold long positions. However, the late losses suffered by soybeans and meal might undercut the market rather badly during the balance of the week. March beans ended Tuesday having fallen 6 cents to $14.13 1/2. And while March soyoil surged 0.42 cents to 50.87 cents/pound, March meal tumbled $6.0 to $411.5/ton.
News that the USDA estimate of 2012 winter wheat plantings had fallen well short of industry forecasts, as well as its cut to predicted U.S. 2013 wheat carryout have boosted wheat futures since the data were released last Friday. But, weather concerns seemingly came to the fore Tuesday, since persistent dryness over the Winter Wheat Belt remains a major issue. Traders also seemed very concerned about winter kill Tuesday, especially with meteorologists predicting frigid temperatures for the Great Plains next week. The lack of snow cover over Southern Plains fields lies at the heart of the issue. March CBOT wheat jumped 16 cents, to $7.82 3/4, while March KCBT wheat surged 14 3/4 cents to $8.38 1/4 and March MGE futures climbed 13 1/2 cents to $8.66 1/4 per bushel.
The premiums built into live cattle futures illustrate the optimism pervading that market, with the industry clearly expecting tight feedlot supplies to limit 2013 production at a time when demand seemingly remains quite strong. And yet, such bullish scenarios will probably require leadership from the wholesale market, which has not lived up to those expectations recently. Indeed, cutout values slipped again Tuesday morning, thereby leaving the market teetering at a pivotal point. That is, with the nearby February contract trading just above 130 cents/pound level, it seems likely to make a substantial move in one direction or the other. A quick bounce might provoke a sharp follow-through to the upside, whereas a technical failure at that major support would seemingly open the door to another big drop. February cattle ended the Tuesday pit session having risen just 0.07 cents to 130.42 cents/pound, but April dipped 0.32 cents to 134.42.
CME traders are also anticipating seasonal strength in cash hog and wholesale pork values through mid-February, but those markets are not cooperating very well with bulls in that respect. That is, the CME lean hog index has only inched its way higher lately and remains at a modest discount to the nearby February futures price. It is expected to slip 0.05 cents to 84.59 cents/pound Wednesday. Meanwhile, pork cutout has demonstrated little strength during the first two weeks of the year. A sustained cattle market advance might also go far in boosting the hog and pork complex, but that market has not been acting very well lately either. February hogs rose one tick to 85.25 cents/pound at the Tuesday close, while June futures fell 0.25 cents to 96.60.