Disappointing exports weighed on grains and soybeans Wednesday

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The corn market recently bounced because traders thought last week’s drop to five-month lows would spark improved export demand. Thus, futures reacted badly Wednesday when the latest Export Inspections report showed last week’s sales fell short of the week-prior total. One might reasonably argue that the price drop was too recent to have initiated the expected, reaction, but traders were also facing a negative reaction to the currency situation. That is, the U.S. dollar reached a two-year high versus the Japanese yen. This seems indicative of its relationship with several Asian currencies, so it was not terribly surprising to see the grain and soybean complexes react negatively to the news. The fact that bulls could not sustain the December 21 bounce back above the $7.00/bushel level probably inspired technical selling as well. March corn ended the day 11 1/4 cents lower at $6.93/bushel and December fell 8 1/2 cents to $5.98 1/2.

The weekly Export Inspections data seemed much more favorable for soybeans than they did for corn, since the latest figure (at 44,486 bushels) topped comparable week and year-ago totals. Moreover, the year-to-date results are far above those posted over the same 2011 period despite the substantial price increase experienced in the interim. Moreover, sizeable Christmas rains could once again delay Argentine soy plantings, thereby implying a diminished 2013 crop. Nevertheless, soybean futures fell rather substantially in the wake of the weekly inspections report. U.S. dollar strength and slippage in the equity indexes may be weighing upon the legume market. January beans fell 15 3/4 cents to $14.24/bushel, while January soyoil dropped 0.53 to 48.41 cents/pound and January meal tumbled $4.9 to $429.9/ton.

As in the corn pit, wheat traders have recently expected slumping prices to boost exports, but the weekly Export Inspections report indicated a disappointing wheat sales total as well. Negative post-Christmas financial market trends (i.e. U.S. dollar and energy price strength and equity index losses) probably depressed golden grain values. We would also point out that bulls proved unable to mount a sustained challenge of chart resistance around the $8.00/bushel level (basis March CBOT futures) over the weekend, which more than likely encouraged fresh selling. Trader interpretations of recent technical movements will probably determine their short-term bearish expectations. Some likely think the $7.75 low marked a significant turning point, whereas others may be expecting a drop all the way to $7.60. March CBOT wheat closed 11 1/2 cents lower, at $6.92 3/4, on the day; March KCBT wheat fell 18 3/4 cents to $8.25 3/4 and March MGE futures slumped 13 1/4 cents to $8.68/bushel.

After avoiding a substantial decline in the wake of last Friday’s disappointing USDA Cattle on Feed report on Christmas Eve, live cattle futures moved modestly higher Wednesday morning. Bulls are almost surely relying upon the prospect of persistently tight fed cattle supplies and robust demand from domestic and export sources for underlying strength. Having winter storms hammer the Central and Southern Plains over the past week may also favor bulls, since wintry weather is hard on feedlot cattle. Having choice cutout values post a major midday advance also seemed to provide considerable support for cattle futures. The February live cattle contract rose 0.55 cents to 133.77 cents/pound today, while April added 0.47 cents to 137.25 cents/pound.

The cotton market seemed to suffer from a dearth of fresh news over the Christmas holiday, although some might reasonably argue that the storm that marched out of the Southern Plains favored early-2013 bean plantings over cotton (due to somewhat diminished concerns about another drought next summer, which would favor bean plantings). Still, the lack of fresh information seemingly caused New York traders to focus upon technical aspects of the current situation. For example, the nearby March future pushed to three-month highs Monday and again today. That strength has been quite impressive, especially when viewed within the context of concurrent grain, soybean and equity index losses, along with the U.S. dollar advance. Its associated momentum indicators suggest the white fiber market is nearing overbought territory, but we don’t regard the latest readings as being particularly high. March cotton surged 0.66 cents to 77.06 cents/pound, while December gained just 0.23 to 79.01 cents/pound.

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.

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