CBOT futures held up well in the face of poor export sales news and sustained early-week gains through their Thursday trading session. It was rather clear that many participants in the grain and soy markets were evening up positions ahead of the Friday morning USDA Crop Production and Supply/Demand reports. Indeed, we think traders did more of the same overnight, although the futures losses indicate more bulls were exiting positions than bears. We expect little price movement prior to the 11:00 AM CST release of the USDA data, which may be followed by a dramatic reaction. March corn slipped 3/4 cent to 6.98/bushel in Thursday night action, while December edged 2 3/42 cents lower to $5.81 1/4.

Soybean futures reacted rather well to the weekly export data Thursday, but that news was quickly overshadowed by the ensuing announcement that private exporters had reported 587,500 tonnes of bean sales to China and unknown destinations earlier in the week. The resulting gains reversed rather sharply around midsession, possibly due to the concerted exit of traders unwilling to hold long positions through the release of the Friday USDA data. That phenomenon apparently continued overnight, with the whole soy complex losing significant ground. Traders may be expecting the USDA to forecast huge South American production in early 2013 when it releases its reports later this morning. March soybeans fell 12 1/2 cents to $13.67 1/4 per bushel in early Friday trading, while March soyoil dipped 0.19 cents to 49.56 cents/pound and March meal tumbled $6.3 to $399.3/ton.

Export news apparently pushed wheat futures higher Thursday morning, but those gains were seemingly reversed by widespread profit-taking by bulls ahead of the USDA data set for release late this morning. The weakness experienced through the early part of this week probably encouraged bears to stick with previously established positions, but the modest gains posted Thursday night suggest those traders are now evening up their positions as well. Wheat could prove particularly sensitive to the USDA numbers, since the usual 2012 production and supply/demand news will be supplemented by its first estimate of winter wheat seedings, which will have direct implications for the mid-year harvest. March CBOT wheat advanced 3 1/4 cents to $7.47 1/2 per bushel in pre-dawn electronic market activity, while March KCBT wheat gained 2 cents to $7.98 1/2 and March MGE futures edged 1 1/4 cents higher to $8.40 1/2.

Prospects for continued short-term weakness seemingly weighed upon CME live cattle futures Thursday, with traders apparently expecting flat early-week cash activity and the Wednesday Chicago breakdown to drag country prices lower Friday. It would be easy to assume futures are headed lower, since the nearby contracts fell below their closely-watched 50-day moving averages yesterday, but they appear to be trying to hold above the confluence of their 50 and are in danger of falling below their 100-day moving averages today. Still, the cattle market has consistently confounded bears by rallying strongly whenever the situation seemed in danger of turned negative during the past two years. February cattle slipped 0.32 cents to 131.22 cents/pound in Thursday night transactions, while April dipped 0.30 cents to 134.77.

CME lean hog futures traded in a mixed fashion Thursday, possibly due to differences in contract prices on their respective charts. That is, the nearby February future remains well above its December lows, whereas the April and June contracts have fallen to their lowest levels since October. Cash and wholesale weakness earlier this week clearly weighed upon the market during its Wednesday breakdown. Conversely, mixed country quotes and a modest wholesale advance probably supported futures Thursday night. Nearby futures seem due for a bounce, but technicians might warn of the potential for a follow-through breakdown. February hogs slipped one tick to 84.57 cents/pound as traders were arriving at the Chicago pit this morning, whereas June had risen 0.05 cents to 96.60.

Cotton traders seemed somewhat impressed with the result of the weekly Export Sales report Thursday, although wire service sources cited the concurrent breakdown being suffered by the U.S. dollar for the rise in white fiber values. Futures later seemed to turn downward in concert with the mid-morning soybean reversal, but the New York market ultimately proved able to sustain a portion of its gains through the close. Those continued in Thursday night trading, possibly due to bullish expectations for the forthcoming USDA data. Bears may also have been evening up their positions. March cotton rose 0.41 cents to 75.61 cents/pound in pre-dawn trading, but December slipped 0.09 cents to 79.00.