Grain markets post diverse reactions to USDA data on Friday

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Corn futures posted a surprisingly strong advance early Friday, with wire services 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. Spillover losses from the soybean market may also have depressed prices. That increase very likely caused the subsequent corn futures slide. March corn ended the week 1.75 cents lower, at $7.09/bushel, while December slipped 3.25 cent to $5.6425.

Soybean futures also showed signs of modest strength before the USDA released its late-morning reports Friday, then fell sharply soon thereafter. The drop was rather shocking since the USDA cut the predicted U.S. carryout and balanced an anticipated increase in Brazilian production with a reduction to its Argentine forecast. Traders were seemingly expecting a more supportive report. Whatever the cause, the Friday afternoon breakdown may hold significant negative implications for the short-term outlook. March soybeans closed 34.25 cents lower, at 14.525, Friday afternoon, while March soyoil dropped 0.42 cents to 51.44 cents/pound, while March meal plunged $15.3 to 422.3/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 not sustain the subsequent rally suggests the market could struggle over the short term. March CBOT wheat futures settled just 0.25 cents higher, at $7.5625/bushel at the end of the Chicago session, while March KCBT wheat edged 1.25 cents lower to $7.9975, and March MGE futures fell 2.50 cents to $8.3625.

Cattle futures proved generally weak early Friday morning, then accelerated downward. Many in the cattle industry were probably expecting a cash market advance, so news that Great Plains feedlots were selling their animals at prices steady to slightly below the quotes seen last week very likely sparked the midday drop. Persistently weak beef quotes may have undermined bullish confidence as well. April cattle had fallen 1.40 cents to 130.12 cents/pound at the Friday afternoon close, while August dropped 1.13 cents to 126.47. Meanwhile, March feeder cattle dove 2.20 cents to 145.00 cents/pound, and August tumbled 2.25 cents to 156.70.

Hog futures proved generally weak 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 somewhat, but recent cash and wholesale price losses suggest short-term prospects are not very promising. The ongoing drop in cattle cannot be boosting hog industry confidence either. April hogs had dipped 0.52 cents to 86.45 cents/pound as the closing bell rang, while June inched 0.10 cents lower to 94.50.

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