Fiscal cliff issues affected the ag markets again Friday

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After having followed the soybean market higher in Thursday night trading, corn futures turned lower in response to the weekly Export Sales report Friday morning. It indicated that 104,300 tonnes were sold last week, which fell far short of forecasts in the 150,000-300,000 range. Recent numbers strongly suggest U.S. corn prices are simply too high to generate much export interest. Bearish traders may also have been reacting to forecasts for benign South America weather over the next two weeks, since that could lead to significantly improved crop prospects during the months ahead. March corn edged 1/2 cent higher to $6.92, while the December 2013 contract rose 3 1/4 cents to $5.99 1/4 per bushel.

The weekly soybean sales total also disappointed Chicago traders; the USDA result, at 87,000 tonnes, came up short of predictions ranging from 100,000 to 300,000 tonnes. Thus, after having risen moderately in response to the supportive global vegetable oils situation, CBOT bean values ended the day only slightly higher. Actually, futures might have proven much weaker if not for news that China had bought 165,000 tonnes earlier this week. News of outstanding wheat exports may also have supported the soy complex. January beans ended the week having risen 3 cents to $14.21 3/4 and January soyoil jumped 0.61 to 48.90 cents/pound; however, January meal fell $2.3 to $427.5/ton.

In contrast to the discouraging corn and bean sales posted last week, the wheat total, at 1,017,000 tonnes easily topped forecasts in the 500,000-700,000 tonne range. That marked the largest weekly total in almost two years, thereby seeming to justify recent suggestions that cheap U.S. prices would ignite an export surge. As one might expect, wheat futures rallied strongly on the news. Bulls proved able to sustain only a portion of the price jump in morning trading, but firmed up after noon. Those moves may have reflected trader concerns about the so-called fiscal cliff and their reluctance to commit to fresh positions before the end of the year. March CBOT wheat advanced 4 1/2 cents to $7.76 3/4 Friday, while March KCBT wheat was gained 2 cents to $8.25 1/4 and March MGE futures climbed 3 cents to $8.67 3/4 per bushel.

Ideas that the U.S. government will do nothing to avoid going over the fiscal cliff apparently remained an issue for CME live cattle traders Friday, but they probably switched their attention to more immediate concerns later in the day. That is, only a few fed cattle had changed hands in the Great Plains earlier this week, so some sort of country market activity was likely after lunch. Wire service reports indicate that Southern Plains cattle began trading about one cent higher, at 127 cents/pound, soon thereafter. That didn’t seem supportive of premium Chicago prices, but CME values rose moderately nonetheless. February live cattle futures gained 0.52 cents, to 133.50 cents/pound, while the April future finished 0.35 cents higher at 137.20 cents/pound.

Thursday afternoon reports of cash hog strength may have supported CME swine values in overnight trading, but the advance couldn’t be sustained through the end of the week. The resulting Friday decline might be blamed on the so-called fiscal cliff negotiations, but we are also inclined to cite the large Thursday afternoon drop in pork cutout. The fact that seasonal ham losses played only a small role in the breakdown seems particularly negative. On the other hand, bullish hog traders may have been exiting sizeable positions ahead of the afternoon (2:00 PM CST) release of the USDA Hogs & Pigs report and the end of the calendar year. February hogs dove 0.65 cents to end the week at 86.45 cents/pound and the June contract settled 0.55 cents lower at 99.60.

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