Markets were mixed in Monday night trading

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Monday news that private exporters sold 102,200 tonnes of corn for 2013 delivery over the weekend probably played a sizeable role in the moderate gains posted by the yellow grain market yesterday. That information was followed overnight that South Korea had bought 315,000 tonnes of corn since Friday, with a portion of those purchases coming from Cargill. The fact that the bulk of the sale was sourced overseas probably accounts for the muted reaction in CBOT corn futures this morning, since it suggests U.S. product is still too expensive for international buyers. March corn inched 1/4 cent higher to $6.85 3/4 overnight, while December fell 2 cents to $5.72 1/2 per bushel.

Ideas that recent losses were significantly overdone apparently sparked the Monday rebound in CBOT soybean futures. Technicians may also have been impressed with the early bounce from just above the $13.50 level (basis March), due in part to the fact that the market had seemingly pivoted around that point last spring. However, in the absence of supportive fundamental news Monday afternoon and evening, the bean market slipped in overnight trading. Industry observers particularly cited the prospect of near record crops in South America during the coming weeks and months. March beans had slipped 1 cent to $13.87 1/2 per bushel in early morning action, with March soyoil rising 0.08 cents to 50.04 cents/pound and March meal dipping $0.2 to $408.7/ton.

The weekly Export Inspections report proved more favorable for wheat than for corn or soybeans, since the result topped pre-report forecasts. Moreover, the news probably reinforced ideas that recent price declines will provoke strong international demand for relatively cheap U.S. wheat. Technicians are reportedly expecting continued short-term gains as well, especially after momentum indicators reached deeply oversold levels last week. However, those in the industry must keep the Friday USDA reports in mind, since those will not only include the usual supply/demand and the 2012 spring wheat production estimate, it will also represent the first definitive estimate of winter wheat plantings, so the result could cause a sharp reaction in 2013 futures. March CBOT wheat climbed 3 1/2 cents to $7.54 3/4 per bushel in Tuesday morning electronic trading, while March KCBT wheat gained 4 1/2 cents to $8.12 and March MGE futures advanced 3 1/4 cents to $8.49 3/4.

Despite likely industry disappointment with cash cattle trading last Friday, nearby futures rose slightly Monday morning. That probably reflected industry hopes for seasonal strength since traders are likely anticipating a combination of seasonal supply reductions and improved retail industry buying for planned early-February beef features. However, midday reports that wholesale prices had declined rather significantly seemingly undercut the market. The fact that Southern Plains producers sold limited numbers of cattle last week may also have proven discouraging, since it implies the remaining animals will increase market-ready supplies this week. Futures gave back their modest Monday gains in overnight activity. We suspect forthcoming wholesale price shifts will play a big role in pricing cattle futures over the short run. February cattle fell 0.12 cents to 132.87 cents/pound overnight,while April dipped 0.20 cents to 136.50.

Questions about the size of premiums already built into lean hog futures seemed to cause mixed trading in the CME pit Monday, with the February contract rising slightly, while the highly priced June contract slipped. Mixed country prices and relatively flat pork cutout values may also have given traders little guidance about short-term market direction. Still, there are solid fundamental reasons for thinking the hog and pork complex will rally over the next 4-5 weeks, which probably explains much of the modest increase posted in Tuesday morning activity. February hogs had advanced 0.27 cents to 86.57 cents/pound in pre-dawn trading and June climbed 0.20 cents to 98.75.

Ideas that the USDA will modestly reduce its estimate for the 2012 U.S. cotton crop seemed to boost white fiber prices at the ICE Monday. Wire service reports also indicate the industry is anticipating 2013 cotton plantings to fall to extremely low levels, thereby substantially limiting production prospects next fall. Those considerations probably powered the early week rally. However, futures fell rather sharply in Monday night activity, possibly due to the fact that nearby March has not been able to close above its 10-day moving average since it broke down on December 28. Concurrent soybean losses may have weighed upon prices as well. March cotton fell 0.67 cents to 75.04 cents/pound in early morning action, while December dove 0.70 cents to 78.71 cents/pound.

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