Grain, livestock markets ended the week rather poorly

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The weekly USDA Export Sales report stated the weekly corn export total at just 49,100 tonnes, whereas pre-report forecasts were in the 200,000-350,000 tonne range. The Christmas holiday almost surely depressed the total, but the USDA figure implies a near boycott of U.S. corn by export customers. After holding up rather well in the face of that news, futures moved sharply lower in wake of news that a Memphis-based consulting firm boosted its final estimate for the 2012 U.S. corn crop. That foreshadows next Friday’s (1/11/13) scheduled release of numerous USDA reports concerning the agricultural markets. The fact that the nearby contracts fell to fresh six-month lows at the end of the week also seems to imply potential for further technically-based losses in the short term. March corn ended the week 9 cents lower at $6.80 1/4, while December plunged 15 1/2 cents to $5.71 3/4 per bushel.

U.S. soybean sales reached 434,900 tonnes last week, which came in at the upper end of the forecast range. However, futures performed rather poorly in the wake of the report, probably due to news that the USDA attache in Brazil had boosted the unofficial forecast of its forthcoming soybean crop by about 2.0 million tonnes. The losses were reinforced by the subsequent release of an updated 2012 production estimate from a Memphis-based consulting company; the data weren’t terribly surprising, but certainly did not encourage market bulls either. March futures are now threatening to drop below their November lows, which in turn might precipitate a larger decline. March beans settled 20 1/4 cents lower at $13.67 1/4 per bushel, while March soyoil was down 0.80 cents to 49.90 cents/pound and March meal posted a modest $5.2 loss to $399.0/ton.

Wheat traders could not have been happy with the weekly Export Sales result either, since the USDA figure, at 152,200 tonnes, fell well short of expectations in the 350,000-550,000 range. A portion of the shortfall might be blamed upon disruptions associated with the Christmas holiday, which might explain the muted reaction posted by wheat futures. Still, having the March CBOT contract end the week below the psychologically important $7.50 level seems to presage continued losses. On the other hand, the fact that nearby futures have reached deeply oversold levels may be setting the stage for a substantial rebound in the near future. Traders may need to see signs of improved export demand before they will be willing to aggressively pursue the long side of the wheat market. March CBOT wheat dropped 8 1/4 cents to $7.47 1/4 Friday, with March KCBT and MGE futures losing 7 3/4 cents and 7 cents to $8.04 1/2 and $8.41 per bushel, respectively.

Bullish cattle traders seemed disappointed that significant cash trading had failed to develop before the Friday afternoon CME close, which would partially explain the modest futures losses posted as pit trading wound down. The industry probably expects fed cattle to change hands around 129 cents/pound across the Great Plains this evening, thereby at least partially justifying the premiums built into nearby futures. Ultimately, persistent country gains and/or a wholesale breakout to record highs might be required to push the February and April contracts beyond their Thursday peak, but that is not guaranteed. February cattle declined 0.90 cents to 132.90 cents/pound Friday, while April lost 0.55 cents to 136.77 cents/pound to end the week.

Thursday afternoon reports indicating sizeable gains in cash hog and wholesale pork values very likely played a substantial role in boosting nearby futures Friday morning. Strong gains by the various pork cuts seemed quite impressive, thereby offering additional support. However, traders reportedly became much less persuaded of the wholesale outlook later in the day, which along with the cattle reversal, would go far in explaining the late slide in swine values as well. The premiums already built into Chicago prices also make it rather hard to sustain rallies, since the CME lean hog index remains several cents below the nearby contracts (and far below the bullish forecasts implicit in deferred futures). February hogs ended the week having slipped 0.17 cents to 86.22 cents/pound, while June futures lost 0.20 cents to 98.75 at the close.

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