Corn futures posted a surprisingly strong advance early Friday, with wire service citing position squaring and persistent South American weather concerns for the rise. However, the USDA Supply/Demand and Crop Production released at 11:00 AM CST forecast U.S. ending corn stocks for the 2012/13 crop year at 632 million bushels, where traders were looking for a result around 618. That increase very likely caused the subsequent corn futures slide. March corn was trading just 3.0 cents higher, at $7.1375/bushel in late-morning trading, whereas December had slipped 1.0 cent to $5.655.

Soybean futures also showed signs of modest strength before the USDA released its late-morning reports Friday, then reversed to the downside rather dramatically soon thereafter. The drop was rather surprising since the USDA cut the predicted U.S. carryout and balanced an anticipated increase in Brazilian production with a reduction to its Argentine forecast. It may simply be that traders were expecting a more bullish report. Whatever the cause, the breakdown may hold significant negative implications for the short-term outlook. March soybeans had fallen 12.50 cents to 14.745 late Friday morning, while March soyoil dropped 0.35 cents to 51.49 cents/pound, while March meal sank $5.5 to 432.1/ton.

The Friday morning wheat rally prior to the release of the widely anticipated USDA reports suggested traders were expecting bullish results. In fact, they got them, with the most outstanding figure being the surprising cut in the forecast U.S. 2012/13 carryout. The USDA left its predicted export total unchanged, but boosted the forecast for domestic feed usage. The fact that bulls could sustain only a portion of the positive market reaction to the news suggests the market could struggle over the short term. March CBOT wheat futures were trading 5.50 cents higher, at $7.6175/bushel around noon, while March KCBT wheat was unchanged at $8.075, and March MGE futures had inched 0.75 cents higher to $8.40.

Cattle futures proved generally weak early Friday morning, then accelerated downward. Many in the cattle industry are probably expecting a cash market advance later today, but the lack of futures strength earlier in the week, as well as persistently weak demand may be undermining that confidence at this point. The late-morning report indicating a sizeable drop in beef cutout values probably sent prices lower around midsession. April cattle had fallen 0.90 cents lower to 130.62 cents/pound just before lunchtime, while August dropped 0.75 cents to 126.85. Meanwhile, March feeder cattle dove 1.55 cents to 145.65 cents/pound, and August tumbled 1.72 cents to 157.22.

Hog futures were quite mixed in late-week trading. The fact that the CME lean hog index will probably continue its recent advance next Monday probably supported the expiring February contract, whereas recent wholesale price losses very likely weighed upon spring futures. The deferred contracts may have been reacting to the increased feed costs implied by the morning corn and wheat rally. April hogs had slipped 0.15 cents to 86.37 cents/pound by mid-session, while June rose 0.10 cents to 94.70.