After generally stalling on Tuesday, the grain and soy complexes surged in the early hours of Wednesday morning. Soybeans led the way upward, but the corn gains posted were also impressive, with the nearby contracts rising 7-8 cents/bushel. No obvious news was powering the advance, but we strongly suspect the latest update of the weather models pointed to renewed heat and dryness over Southern Brazil and Argentina next week. Given the amount of acreage dedicated to corn and beans in that region, as well as the possibility that a significant portion of the affected corn plants will be pollinating, it is not terribly surprising to see futures take off to the upside once again. March corn jumped 6 3/4 cents to $7.36 1/4, in early morning activity, while December had climbed 4 1/2 cents to $5.91 1/2 per bushel.

Soybean futures led an early morning rally in the grain and soybean complexes, with the nearby bean contracts jumping over 20 cents in pre-dawn trading. The prospect of returning hot, dry weather across Southern Brazil and Argentina next week apparently powered the rise. The weather news might not be so critical in more normal times, but the tightness of global supplies in the wake of the 2012 U.S. drought makes the South American harvest key to the global supply outlook. The fact that nearby futures seemed to decisively push above pivotal moving average (MA) support/resistance levels may exaggerate the strength seen today. March beans spiked 17 1/4 cents to $14.69 early Wednesday morning, while March soyoil surged 0.37 cents to 52.08 cents/pound and March meal advanced $6.4 to $430.1/ton.

The wheat market is being only indirectly affected by South American weather, but is contending with persistent dryness over the U.S. Southern Plains. Actually, a significant portion of that region is expected to be covered with light snow today, but that will do little to alleviate the long-term drought. Indeed, meteorologists expect little precipitation over the Winter Wheat Belt during the coming weeks. That likely explains the manner in which wheat futures followed the corn and bean markets higher this morning. March CBOT wheat futures had risen 3 1/2 cents to $7.80 1/2 overnight, while March KCBT wheat climbed 3 1/4 cents to $8.34 and March MGE futures gained 5 1/2 cents to $8.66 1/2 per bushel.

After spiking upward on Monday CME live cattle futures gave back a significant portion of the gain on Tuesday. The underlying supply of feedlot animals remains very tight and seems likely to diminish even farther since the annual low in cattle slaughter traditionally arrives in March. However, the market apparently faces demand issues in the current environment, as exemplified by the fact that choice beef cutout fell to a five-month low yesterday. And despite the announced closure of a Cargill packing plant earlier this month, beef packing margins remain in the red. Thus, cattle futures currently appear unlikely to retest the early January highs. Futures were mixed in overnight trading, but both the February and April cattle contracts rose 0.10 cents to 128.37 and 133.07 cents/pound, respectively.

After benefiting greatly from strength spilling over from the cattle and beef complex in recent months, the hog market seems to be suffering from diminished support these days. For example, the nearby February hog contract has actually been trending downward since mid-November. Bulls were hoping its discount to the CME index would pull it upward as it approached expiration, but recent cash losses appear to be pulling the benchmark cash quote downward. Optimists also have to be disappointed with overnight market action as well, since Tuesday afternoon wholesale report indicated that a big jump in pork loin values had boosted cutout substantially. The subsequent Chicago losses seemingly imply considerable underlying weakness. February hogs had slipped 0.22 cents to 86.87 cents/pound in pre-dawn trading, whereas June futures edged 0.07 cents higher to 98.25.

Cotton futures surged upward again Tuesday despite a general lack of pertinent news. Traders downplayed talk of tight deliverable supplies against the main Chinese futures exchange, calling the market contrived. Wire service reports gave a great deal more credence to a so-called golden cross formed Tuesday, when the 50-day moving average (MA) for March futures pushed above its 200-day MA. We should point out that the early surge and subsequent decline seemed to form a tweezer top on its daily candlestick chart, which might presage a short-term test of underlying chart support. Bulls seemed undeterred in overnight trading. March cotton rallied 0.28 cents to 82.67 cents/pound in the early morning hours, but its December counterpart slipped 0.23 cents to 80.95.