Resurgent concerns about emerging drought over major crop-growing areas of Southern Brazil and Argentina powered the grain and soybean complexes sharply higher Wednesday. Technicians were probably buying corn as well after the nearby March future seemed to use its 10-day moving average (MA) as a springboard to higher levels. Traders may have had second thoughts overnight, since a South Korean buyer snubbed the U.S. and bought European origin corn. On the other hand, the early-Thursday slippage may simply have represented general profit-taking ahead of the weekly Export Sales data to be released later this morning. March corn edged 3/4 cent lower, to $7.39 1/2 in pre-dawn activity, whereas December fell 2 1/2 cents to $5.90 1/2 per bushel.

The possibility that large areas of Argentina and Southern Brazil could experience hot, dry weather through early February drove the Wednesday soybean futures surge, with technical factors also seeming to encourage bullish interests. However, we have to wonder if the fact that the nearby March contract could not sustain its early move above its 100-day MA Wednesday afternoon and again in overnight trading played a role in the subsequent decline. We suspect that development caused much more long liquidation in the bean complex than in corn and wheat markets this morning. It will be very interesting to see how the market reacts to the weekly Export Sales report to be released later in the morning. March beans dropped 9 cents to $14.69 3/4 per bushel in early morning activity, while March soyoil slipped 0.05 cents to 52.55 cents/pound and March meal slumped $3.6 to $429.1/ton.

The persistent drought over the winter wheat fields of the U.S. Southern Plains dominated the wheat pits again Wednesday. The buoyant leadership provided by the corn and soybean markets certainly didn’t hurt the bullish cause either. Thus, few traders arriving at their desks this morning will be terribly surprised to see wheat futures also declined overnight. As with their counterparts in the corn and soybean pits, wheat market participants were probably taking profits on previously established longs ahead of the Thursday morning release of the weekly Export Sales reports. March CBOT wheat futures had declined 2 1/2 cents to $7.84 1/2 per bushel early Thursday morning, while March KCBT wheat dipped 1 1/2 cents to $8.39 1/4; March MGE futures matched that drop, seeming set to begin the Thursday pit session at $8.67 1/2.

Fed cattle traded actively across the Great Plains Wednesday, with most steers reportedly changing hands around 125 cents/pound, which represented a 3.0-cent weekly surge. In many circumstances live cattle futures would probably have spiked upward on the news, especially in the wake of losses similar to those suffered earlier this month. The fact that the nearby contracts are already trading at significant premiums to the latest cash quotes probably limited the Chicago reaction. Still, bulls could not have been happy with the lower close posted by February and April futures. We place much of the blame upon the persistent weakness exhibited by the wholesale market in recent weeks. Nevertheless, veteran traders view a futures market that cannot rally on bullish news as being vulnerable to fresh losses. Futures did rise modestly overnight, but one has to wonder if they can be sustained. February cattle climbed 0.37 cents to 128.37 cents/pound in pre-dawn trading; April matched that gain and seems set to begin the Thursday pit session at 133.30.

After declining rather substantially over the week prior, country hog prices apparently posted a strong upside reversal Wednesday. That news, along with the Tuesday afternoon wholesale report indicating pork loin values had boosted carcass values substantially, might easily have been viewed as the trigger for a fresh hog futures rally. Chicago prices did rise moderately as a consequence. However, the pork cutout gave back its Tuesday gain yesterday afternoon, with a quick reversal in loin values apparently undercutting the wholesale market once again. We have to wonder if the recent decline in beef cutout is pushing pork values downward as well. If so, that might bode ill for the late winter-early spring hog and pork outlook. Still, hog futures advanced moderately in overnight electronic activity, thereby implying there are still lots of optimists around. February hogs inched 0.07 cents higher, to 87.17 cents/pound, in the early morning hours, while June futures gained 0.40 cents to 98.47.

Bulls continued their stampeded through the cotton market Wednesday, with the March futures actually posting the highest close for a nearby contract since last June. The Chinese government program designed to support its cotton farmers, which has reportedly absorbed 85% of its 2012 domestic production is playing a major role in the bull market, especially traders doubt that product will return to the open market in the foreseeable future. One side effect of the current situation is apparently having traders ignore developments that might normally undercut prices. As a consequence, we have to wonder if overnight news that a Chinese trade association expects its 2013 plantings to fall 4.5% below those from 2012 (due to spiraling labor costs). We are inclined to expect a short-term technical setback, but the results of the results of the weekly Export Sales report will very likely set the tone for trading through the balance of the ICE session. March cotton slipped 0.31 cents to 82.65 overnight price action, while new-crop December skidded 0.26 cents to 80.85.