Although the USDA lowered its projected 2012-13 corn carryout forecast slightly to 117.6 million tonnes or 13.6% of annual usage, CBOT futures declined modestly after the WASDE report was released Tuesday morning. That probably reflected the fact that the Agriculture Department raised its estimate of Chinese production by 8 million tonnes, thereby suggesting they’ll be buying little U.S. corn in the coming months. Traders may also have been disappointed by the minimal 0.5 million-tonne reduction in its forecast for the Argentine crop despite the planting problems Argentine farmers are reportedly encountering lately. Corn is apparently following wheat lower as that market reacts to the bearish USDA numbers. March corn slipped 2 1/2 cents to $7.27 1/2 per bushel, while the December 2013 future was down 9 cents at $6.28 1/4.

The WASDE report held few surprises for soybean traders, with only a minimal shift in forecast ending stocks and no change to anticipated 2013 production out of South America. Chicago futures fell rather substantially in the immediate wake of the report, possibly due to the fact that the USDA lowered its price estimate for the beans: the bearish wheat data and the sharply negative reaction posted by those markets probably weighed upon beans as well. However, the nearby contracts came back later in the day, possibly in reaction to news that China had made a sizable purchase of U.S. beans and/or a report that Argentine crushers are already low on bean stocks with the harvest still months away. January soybeans closed 3 3/4 cents lower at $14.71/bushel, January soybean oil dove 0.96 to 49.89 cents/pound whereas January meal rose $3.6 to $447.5/ton on the day.

As had seemed to be demanded by recent export totals, the USDA cut its wheat export forecast for the third consecutive month on the WASDE report. The 50 million-bushel reduction went straight to projected ending stocks, which rose to 754 million bushels. This easily topped our industry-high forecast, thereby exaggerating its impact upon the futures markets. The negative aspects of the domestic news were also exacerbated by the global numbers, where world production was revised upward by 3.7 million tonnes and usage cut by 1.2 mmt. These easily topped private forecasts, which very likely amplified their negative impact upon prices. March CBOT wheat fell 25 3/4 cents to $8.23/bushel on the day, while its KCBT and MGE counterparts plunged 30 1/4 to $8.73 and 16 to $9.11 1/2, respectively.

Wire service sources cited fund buying and short covering for the morning surge posted by live cattle futures. The WASDE report had little real impact, since the USDA made only a small revision to its 2013 forecasts. The more likely reason for the strong advance stemmed from the wholesale market, where choice cutout had jumped 2.27 cents (to 196.32 cents/pound) on the USDA midday report; rumors to that effect probably played a big role in the morning price spike. Bulls may now be counting upon a cash rebound from last week’s surprising drop later this week. The combination of concurrent equity index gains and U.S. dollar losses likely provided support as well. February live cattle jumped 1.67 cents to 131.95 cents/pound, while the April contract was up 1.42 to 135.55 cents/pound.

Given the bullish leadership exhibited by the cattle market, few traders could have been terribly surprised to see hog futures advancing as well. In fact, the cattle news did seem to be pulling the swine market higher despite less than supportive short-term hog and pork fundamentals. The cattle gains seemingly supported the deferred swine contracts as well, although one might just as easily argue that today’s grain and soy weakness will translate into reduced feed costs and greater cattle and hog supplies by the middle of next year. The subdued gains posted by the nearby hog contracts probably reflect the ongoing seasonal decline in cash hog and wholesale pork values, with the midday 3.0-cent drop in ham prices very likely weighing heavily upon short-term sentiment. On the other hand, bullish traders may be looking for buying opportunities if/when the traditional December ham breakdown runs its course. February futures rose 0.22 cents higher to 84.20 cents/pound, while the June contract surged 0.65 cents to 99.10 cents/pound.