The corn market completed its third consecutive weekly loss Friday afternoon, with slow exports and tumbling soybean values persistently undercutting domestic prices. The size of the recent decline has sparked some ideas that demand will rebound at current levels, so it will be very interesting to see how the market performs next week. The looming holiday season reportedly sparked a good deal of short covering/book squaring Friday, with soybeans leading the way higher. Technicians will very likely be watching closely to see if the March future sustains its late-week rebound from its early-July chart gap, since such a move might prove surprisingly robust. March corn ended the week 4 1/2 cents higher at $7.01/bushel, while its December counterpart rose just 1 1/2 cents to $6.05 1/4.
January soybean futures plunged $1.06/bushel from its Monday morning high to its Thursday low; thus, few in the industry would deny the market was oversold at the end of the Thursday CBOT session. Neither could they have been particularly surprised by the Friday morning rebound as bears took profits ahead of the holiday season. The early strength likely stemmed from talk of firming basis bids and the Thursday bounce from the $14.00 level. The late gains seemingly imply more of the same next week, especially if bearish traders undertake more book squaring. However, we would warn that there is a significant possibility that beans will resume their decline in early 2013, since stable prices might form a sizeable bear flag continuation pattern. January beans jumped 26 1/4 cents to $14.35/bushel Friday; January soyoil climbed 0.94 to 48.85 cents/pound and January meal rose $7.4 advance to $435.1/ton.
Wheat prices rebounded in concert with corn and soybeans Friday morning, with short covering also playing a substantial role in the advance. A statement by a major German grain trading firm indicating that U.S. wheat is most competitively priced on the international markets at this time may have sparked some buying as well. Conversely, having the March CBOT contract drop below the psychologically important $8.00 level Thursday may prove a major hindrance to short-term rally attempts. Indeed, despite relatively supportive conditions, wheat futures ended the week in decidedly mixed fashion. Pragmatic traders are likely to view the late weakness as signaling vulnerability to further losses. March CBOT wheat settled just 3/4 cent higher at $7.91 1/4, whereas March KCBT wheat slipped 1 3/4 cents to $8.42 and March MGE futures sank 1 1/4 to $8.82 1/2 per bushel.
After proving unable to sustain their Wednesday breakout on Thursday, cattle futures traded in a decidedly mixed manner on Friday. We blame choice cutout losses seen during the week for a major portion of the late decline, but must also cite broad financial market weakness for a significant portion of the drop. Bullish traders were rather obviously hoping for a supportive Cattle on Feed report from the USDA Friday afternoon, but the relatively large result for November feedlot placements (at 94% of last year) topped most forecasts. The December 1 feedlot population exceeded expectations as well. Thus, live cattle futures will probably begin next week under downward pressure. February live cattle futures rose 0.07 cents to 133.57 Friday, but April slipped 0.07 cents to 137.32 cents/pound.
The winter storm that swept the Central Plains Thursday created substantial logistical problems for the hog and pork industry, which was apparently a major reason prices remained firm in late-week trading. The ultimate impact of the storm, if any, is not clear. Transportation problems certainly could tighten market-ready hog and pork supplies at this point, but they also raise the potential for a backlog of animals on farms. In addition, traders are having to balance potential year-end cash and wholesale weakness against the strong possibility that swine values will surge in early 2013. They apparently opted for a more bullish take as Chicago trading wound down for the week. Position squaring could affect the market next week, but we suspect traders will remain optimistic unless the cash and wholesale markets prove remarkably poor. February hogs surged 0.45 cents to 86.90 cents/pound at Friday’s close, while the June contract gained 0.30 cents to 100.65.
Cotton once again seemed to be competing with soybeans for acreage across the Southern U.S. Friday, as exemplified by the fact that is surged to its highest close since mid-September as bean futures rebounded strongly from losses posted earlier in the week. Vigorous export business has played a major role in the cotton market lately, but we suspect technicians are also climbing aboard the bullish bandwagon, because the ongoing advance has been very well behaved. That is, the March future has not fallen significantly below its 10-day moving average since mid-November. We tend to expect more of the same over the short term, especially if the other crop markets sustain rebounds from recent losses. March cotton ended the week by rising 0.35 cents to 76.18, while December advanced 0.29 to 78.52 cents/pound.