A Wednesday morning report indicating U.S. ethanol produced last week at its lowest level in 2 1/2 years caused corn futures to reverse in the wake of gains over the preceding week. The market later came back to finish the day slightly higher; wire service sources cited persistent U.S. dryness and emerging dehydration of Argentine areas for the bounce. However, futures reversed again overnight despite a dearth of news concerning the yellow grain. Still, concerns about persistent dryness over the Central U.S. and Argentina seem likely to continue offering significant support for prices. March corn slipped 2 cents to $7.29 1/4 in early morning trading, while December fell 3 cents to $5.89 1/4 per bushel.

Talk of increasing dryness in Argentina, where shallow-rooted plants might prove especially vulnerable to a heat wave, apparently provided continuing support for soybean futures Wednesday. Technical strength apparently helped power the surge. The fact that the March future was trading above its 40 and 50-day moving averages (MAs) probably inspired considerable buying. However, the advance seemed to lose momentum overnight, especially in light of news that India had imposed a tariff on palm oil imports, which rendered soybean oil that much more attractive. The early-morning slide in that market does not inspire confidence. March beans fell 5 3/4 cents to at $14.30 3/4 in pre-dawn electronic trading, while March soyoil dipped 0.28 cents to 51.03 cents/pound and March meal lost $1.8 to $417.3/ton.

After also performing well in the wake of the January 11 USDA reports, wheat futures also seemed to lose their upward momentum early this morning. Overnight news that India had offered 200,000 tonnes for export conflicted with word that a South Korean firm rejected all offers at its recent 70,000-tonne tender. Ukraine reportedly plans to increase its 2013 wheat imports about 300,000 tonnes (43%), but that wasn’t terribly surprising when viewed within the context of their poor 2012 crop. Ultimately, the Thursday morning weakness may bode ill for short-term prospects, although the mid-morning release of the weekly Export Sales reports could change the situation once again. March CBOT wheat slumped 1 3/4 cents to $7.83 1/4 in overnight electronic activity, while March KCBT wheat declined 2 1/4 cents to $8.40 1/4 and March MGE futures dipped 1 3/4 cents to $8.69 3/4 per bushel.

Feedlot operators across the Great Plains took 1-2 cents per pound less for their cattle Wednesday than they had last week, which had to be a major blow to bullish interests anticipating a quick reversal of recent weakness. Instead, the large Chicago losses that resulted from that news seemed to represent the start of another downward leg on the charts. Having the nearby February contract fail to hold above major technical support at the 130-cent level may also hold major negative implications for the mid-winter outlook. Thus, it was not at all surprising to see cattle futures slip again in early morning trading. February cattle had fallen 0.30 cents to 128.22 cents/pound as the sun was coming up over Chicago, while April had slipped 0.22 cents to 132.47.

Hog futures held up relatively well in the face of the Wednesday cattle breakdown. Differences in their respective cash situations probably account for the disparity, since afternoon USDA reports indicated Corn Belt hog prices at steady-higher levels. Pork prices also rose moderately on strength from pork loin values. Seasonal cash and wholesale gains may support the swine market over the next few weeks, but such hopes might prove forlorn if the long bull market in cattle prices has truly ended. February hogs rose 0.25 cents to 85.40 cents/pound in early-morning action, whereas the June contract was unchanged at 96.65.

The big Wednesday cotton surge may have reflected growing talk that the ongoing Chinese cotton stockpiling program is forcing its textile mills to import cotton and yarn from competitors, since the government buying has rendered domestically produced fiber much less competitive than in the past. Indeed, a wire service story addressing that situation may have boosted ICE futures again in early morning trading. March cotton seems likely to begin the New York trading day 0.09 cents higher, at 77.42 cents/pound, while December may move up 0.10 cents to 79.34.