Resurrected drought worries boost crop markets on Friday

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The corn market slipped for the first time in over a week Thursday. However, it was apparently trying to resume its advance Friday morning despite a general lack of substantive news, with technical considerations greatly encouraging bullish traders. The news vacuum was interrupted when a Memphis-based analytics firm published its latest estimate for 2013 U.S. corn plantings around mid-session; they reportedly raised their forecast by 277,000 acres, which is not inconsequential. Corn futures quickly set back toward unchanged levels, then rebounded to post modest gains at the end of the day. March corn ultimately settled 3 cents higher at $7.27 1/2, while December rose 4 cents to $5.90 1/2 per bushel.

In contrast to the firmness exhibited by corn futures Friday morning, the soybean market had suffered significant losses as the noon hour approached. Anticipation of the looming South American bean harvest may have played a role in this divergence, but wire service sources also cited the long weekend as the reason many bulls were seemingly evening their positions. Some may also have been lightening up ahead of the scheduled planted acreage forecast from a prominent Memphis-based firm. They reportedly cut their bean acreage estimate by 185,000 acres, which was nominally bullish. However, Chicago prices initially reacted little to that news, but rose rather significantly later in the day. Most bean contracts rose slightly on the day, but the nearby march future actually slipped 3 1/4 cents to $14.29 1/4 by the CBOT close. March soyoil closed 0.26 cents higher, at 51.68 cents/pound, while March meal edged up $0.2 to $412.4/ton.

The wheat market seemed torn between the corn and soybean markets early Friday morning. And while a Memphis based firm did boost its forecast of spring wheat plantings by about 4%,that did little to keep wheat futures from participating in the subsequent rally. Ultimately, we suspect the persistence of Great Plains dryness, along with weather forecasts implying there is no relief in sight, sent wheat futures higher. The advance may have been exaggerated by aggressive unwinding of previously established short positions by futures funds. March CBOT wheat surged 11 1/4 cents to $7.91 1/4 per bushel at the Friday close, while March KCBT wheat advanced 6 3/4 cents to $8.43 3/4 and March MGE futures rose 4 3/4 cents to $8.74.

After having fallen sharply on negative cash news and the announcement of a Cargill plant closing Thursday, nearby cattle futures continued their slide Friday. Bullish traders would probably like to think the recent breakdown has largely incorporated the bad news, but the midday wholesale report was not encouraging. That is, packers were apparently forced to lower their asking prices for beef once again, since cutout values fell 1.18-1.84 cents from their Thursday close. The deferred contracts seemed to benefit from ideas that packers will be competing more aggressively for cattle later this year, but short-term prospects appear much less promising than they did two weeks ago. February cattle tumbled an additional 1.42 cents to 124.952 cents/pound to end the week, while April fell 0.97 cents to 129.90.

Hog futures held up relatively well in the face of big cattle losses Thursday and through much of Friday trading. Swine traders may be ambivalent about the hog and pork outlook from this point, since plunging cattle and beef prices could change industry perceptions concerning the comparative cheapness of wholesale pork. Conflicting reports concerning Friday morning cash market direction may also have limited the Chicago reaction. Those developments, as well as a lack of wholesale news prior to the Chicago close, may be the underlying reasons CME lean hog futures were widely mixed in early trading. We suspect position squaring undercut the February future at the close. The nearby contract settled 0.62 cents lower, at 85.35 cents/pound, whereas June futures inched 0.05 cents higher to 96.850.

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