Corn traders are keeping a close eye upon weather developments over the corn and soy growing areas of South America at this point. Prospects of persistent dryness in that region are rather obviously supporting prices. However, these weather situations do not play out quickly, which sometimes seems to leave traders twiddling their thumbs while awaiting fresh developments. That certainly seemed to be the case Tuesday morning, when corn futures hardly seemed to move. This lack of movement may persist until the weekly Export Sales reports are released Thursday morning. March corn had edged 1/4 cent higher, to $7.29 1/2 in late-morning activity, while December had slipped 2 cents to $5.88 per bushel.
Reports of rising soybean basis levels across the Corn Belt apparently boosted the CBOT market Tuesday morning, since traders interpreted the shift as indicating comparative supply tightness at recent price levels. That is, elevators are having to boost bids in order to get farmers to draw down their inventories. Talk of potential problems transporting the huge South American crop to the coasts and to customers may also have supported prices, but we do not put a great deal of faith in such arguments. Ultimately, the potential for renewed Argentine dryness in the wake of anticipated weekend rains probably set the stage for the latest futures surge. March beans had climbed 5 cents to $14.52 3/4 late Tuesday morning, while March soyoil rose 0.12 cents to 52.01 cents/pound and March meal gained $2.4 to $422.7/ton.
While the persistent drought over winter wheat fields across the U.S. Southern Plains remains a supportive factor, the Tuesday morning wheat advance seemed to be powered by talk of the export situation. For example, Algeria reportedly bought 500,000-600,000 tonnes of durum wheat from Canada and the U.S. over the past week. Moreover, instead of exporting excess production in the coming weeks and months, Russia is rumored to be preparing to buy grain from the EU. From a pragmatic standpoint, wheat futures are simply acting well, which is probably attracting additional buying. March CBOT wheat futures advanced 4 1/4 cents to $7.83 1/2 just before lunchtime, while March KCBT wheat surged 5 3/4 cents to $8.38 1/2 and March MGE futures edged 1 1/2 cents higher to $8.68/bushel.
Cattle futures spiked upward in response to bullish news on the January 25 Cattle on Feed report and on weekend reports that Japan will soon ease restrictions on its beef imports from the U.S. Bullish traders are almost surely expecting much more of the same from this point, since cattle slaughter and beef production routinely decline to annual lows in March, whereas retail industry demand for the grilling season start accelerating in late winter and/or early spring. However, the wholesale market has persistently proven unsupportive of bullish ideas. For example, after rising quite modestly on Monday, cutout values gave back those gains Tuesday morning. That may largely explain the weakness also experienced by CME futures in early trading. February cattle had fallen 0.35 cents to 128.60 cents/pound around midsession, while April was down 0.15 cents to 133.27.
The big Monday cattle rally probably pulled CME lean hog futures upward as well, although bulls in the swine pit could also point to the discount built into nearby hog futures with just over two weeks before the February contract expires. However, the cash hog and wholesale pork markets are not cooperating very well with those in the bullish camp. For example, after having climbed consistently since mid-December, the CME lean hog index seems set to slip 0.09 cents to 88.42 cents/pound when officially quoted Wednesday morning. Direct country markets posted lower quotes again this morning, although the latter preliminary figures are not reliable. In the end, we are not confident the hog market gain rally all that substantially in the absence of bullish leadership from the cattle/beef complex. February hogs had slipped 0.10 cents to 87.07 cents/pound just before the lunch hour, whereas June futures had climbed 0.60 cents to 98.25.