Improved South American rain prospects weighed on grain futures

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The weekly Export Sales report seemed supportive of the short-term corn outlook, since the 253,400-tonne total came in toward the upper end of forecasts in the 150,000-300,000 tonne range. That seemingly enabled futures to rebound toward unchanged levels around mid-morning. However, weather news reemerged as the driving factor affecting crop futures later in the morning, since the latest forecast models imply the pressure ridge previously expected to dominate the skies over Southern Brazil and Argentina now looks likely to form over Chile or the Eastern Pacific. Thus, the improved prospects for South American rainfall next week apparently weighed upon corn and soybean futures in late morning trading. March corn slipped 1/4 cent to $7.40, while December fell 2 1/4 cents to $5.90 3/4 per bushel.

The Export Sales report for the soybean complex might easily have been construed as being moderately bullish, since strong bean sales probably more than offset weak product totals. The USDA stated the weekly sales total at 1.253 million tonnes, whereas pre-report forecasts had peaked at 850,000. However, soybean traders were diverted by the latest results of the major weather models, which suggested recent worries about emerging South American dryness were overdone. That is, the high pressure ridge previously expected to block rainfall over the corn and soybean growing areas of Southern Brazil and Argentina will apparently form well to the west, thereby opening the door to precipitation over that region. The soy complex turned sharply lower as a result. March beans were down 14 3/4 cents, at $14.64 per bushel, late Thursday morning, while March soyoil dipped 0.15 cents to 52.45 cents/pound and March meal sagged $6.0 to $426.7/ton.

Although the winter wheat situation still seems rather dire at this juncture, the USDA Export Sales report apparently caused traders to forget those conditions for the moment. It stated the weekly sales total at 387,900 tonnes, whereas traders were expecting something between 350,000 and 550,000 tonnes. The result was not that bad when viewed in that context, but it looks rather poor when compared to the previous weekly total (at 647,500). That news, along with the concurrent losses in the corn and soybean markets almost surely dragged wheat futures downward as well. March CBOT wheat futures had declined 4 cents to $7.83 just before lunchtime Thursday, while March KCBT wheat dropped 1 1/4 cents to $8.39 1/2 and March MGE futures dipped 2 1/4 cents to $8.66 3/4 per bushel.

Cattle futures posted a surprisingly weak reaction to Wednesday morning news of cash trading 3 cents higher than benchmark levels reached last week. Still, given the persistent strength exhibited by the cattle/beef complex since late 2010, CME traders were probably prepared to push nearby futures significantly higher. We tend to blame persistent wholesale weakness for their inability to do so, especially after seeing the 1.24-cent drop suffered by choice cutout Thursday morning. The fact that fed cattle exiting feedlots outweigh their counterparts from early 2012 by over 20 pounds/head may also be playing a role in the ongoing futures weakness. Whatever the cause, a market that cannot rally on good news often proves vulnerable to larger losses, which may bode ill for the late-winter outlook. February cattle had edged 0.07 cents higher, to 128.07 cents/pound around midsession Thursday, while April rose 0.20 cents to 133.12.

Although direct market quotes from the Eastern Corn Belt indicated significant weakness Thursday morning, larger Western Corn Belt gains probably encouraged CME swine traders. Bulls may also have been reacting to talk of belated ham strength. That is, the leg muscle market had recently proven rather flat in the wake of its big holiday breakdown. However, grocers may finally have begun buying hams for planned features for Easter weekend sales, since hams were called 3 cents higher on the midday USDA pork report. A sustained seasonal advance in ham values could do a great deal to boost hog prices as well. February hogs had gained 0.77 cents to 87.87 cents/pound late Thursday morning, while June futures had risen 0.30 cents to 98.37.

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