Corn traders are keeping a close eye upon weather developments over the corn and soy growing areas of South America, since corn in that region is probably pollinating at this point. Thus, prospects of persistent dryness are rather obviously supporting prices. However, these weather situations do not play out quickly, which sometimes seems to leave traders twiddling their thumbs while awaiting fresh developments. That certainly appeared to be the case Tuesday, when corn futures hardly seemed to move. This lack of movement may persist until the weekly Export Sales reports are released Thursday morning. March corn had edged 1/4 cent higher, to $7.29 1/2, at the CBOT close, while December had slipped 3 1/2 cents to $5.86 1/2 per bushel.

Reports of rising soybean basis levels across the Corn Belt apparently boosted the CBOT market Tuesday, since traders interpreted the shift as indicating comparative supply tightness at recent price levels. That is, elevators are having to boost bids in order to get farmers to draw down their inventories. Talk of potential problems transporting the huge South American crop to the coasts and to customers may also have supported prices, but we do not put a great deal of faith in such arguments. Ultimately, the potential for renewed Argentine dryness in the wake of anticipated weekend rains probably set the stage for the latest futures advance. March beans closed 4 1/2 cents higher, at $14.51 3/4 Tuesday afternoon, while March soyoil fell 0.18 cents to 51.71 cents/pound and March meal gained $3.4 to $423.7/ton.

While the persistent drought over winter wheat fields across the U.S. Southern Plains remains a supportive factor, the Tuesday morning wheat advance seemed to be powered by talk of the export situation. For example, Algeria reportedly bought 500,000-600,000 tonnes of durum wheat from Canada and the U.S. over the past week. Moreover, instead of exporting excess production in the coming weeks and months, Russia is rumored to be preparing to buy grain from the EU. Nevertheless, the markets apparently ran out of steam as noon approached and accelerated downward as the ringing of the closing bell loomed. Wire service reports cited profit-taking for the late drop. March CBOT wheat futures settled 2 1/4 cents lower, at $7.77/bushel, while March KCBT wheat slipped 1 1/2 cents to $8.30 3/4 and March MGE futures dropped 4 1/2 cents to $8.61/bushel.

On Monday cattle futures spiked upward in response to bullish news on the January 25 Cattle on Feed report and on weekend reports that Japan will soon ease restrictions on its beef imports from the U.S. Bullish traders are almost surely expecting much more of the same from this point, since cattle slaughter and beef production routinely decline to annual lows in March, whereas retail industry demand for the grilling season starts accelerating in late winter and/or early spring. However, the wholesale market has persistently proven unsupportive of bullish ideas. For example, after rising quite modestly on Monday, cutout values gave back those gains and more Tuesday. Indeed, one has to look back to last August to find lower quotes for choice cutout. Thus, the weakness suffered by CME futures was not terribly surprising. February cattle fell 0.68 cents to 128.27 cents/pound at the Tuesday close, while April was down 0.43 cents to 132.97.

The big Monday cattle rally probably pulled CME lean hog futures upward as well, although bulls in the swine pit could also point to the discount built into nearby hog futures with just over two weeks before the February contract expires. However, the cash markets are not cooperating well with those in the bullish camp. For example, the CME lean hog index seems set to turn downward when the official quote is released Wednesday morning. Moreover, Tuesday afternoon cash reports imply further short-term losses. On the other hand, a big surge in pork loins boosted cutout after the Chicago pit session had ended, which may bode well for the Wednesday opening. February hogs had slipped 0.07 cents to 87.10 cents/pound at the Tuesday close, whereas June futures had climbed 0.52 cents to 98.17.