The Thursday morning Export Sales report seemed supportive of the short-term corn outlook, since the USDA total topped most forecasts. Bulls were also point to firming cash quotes across the Midwest, arguing that ethanol industry demand is improving. However, the weather models implied better rainfall chances over Southern Brazil and Argentina next week, which kept a lid on prices all day. Conversely, those same models shifted toward a drier outlook when Thursday night-Friday morning runs were made. That almost surely explains the moderate gains posted at that time. March corn gained 4 cents to $7.44 1/2 in overnight activity, while December rose 2 3/4 cents to $5.93 3/4 per bushel.

The Export Sales report indicated strong soybean sales last week, thereby more than offsetting weak product totals. However, the increased potential for rainfall over large areas of the major South American soybean producing areas undercut the legume market. On the other hand, CBOT futures took back those losses in the early morning hours of Friday, because the weather models indicated reduced precipitation chances next week. At issue is whether a blocking ridge of high pressure dominates the skies over Southern Brazil and Argentina or moves west and leaves the door open for rain. At best, improved moisture conditions could boost South American grain and soy production significantly, whereas heat and dryness might do the opposite. We expect weather news to continue dominating the soybean complex for several more weeks. March beans surged 13 cents to $14.81 1/2 per bushel in early morning electronic action, while March soyoil climbed 0.47 cents to 53.33 cents/pound and March meal advanced $3.0 to $429.4/ton.

The weekly USDA Export Sales report probably disappointed wheat traders, since the result came in toward the lower end of industry expectations. And while the drought over the U.S. Southern Plains remains a pivotal factor for the wheat outlook, Thursday losses in corn and soybeans very likely weighed upon wheat futures as well. Indeed, the domestic situation apparently changed little overnight, which strongly suggests the early-morning gains posted at the various wheat exchanges resulted from spillover buying. Still, the global situation remains very tight, as indicated by European speculation that surging Russian wheat and flour prices will cause that country to cancel import duties and spark an influx of grain. Nevertheless, weather news seems likely to dominate short-term trading. March CBOT wheat futures lifted 4 1/2 cents to $7.84/bushel in pre-dawn trading, while March KCBT wheat jumped 4 1/4 cents to $8.42 and March MGE futures gained 3 cents to $8.68/bushel.

Cattle futures posted a surprisingly weak reaction to news that the cash markets had posted a 3-cent surge this week. We suspect market-ready feedlot supplies are surprisingly liquid at this point, thereby undercutting producer leverage when bargaining with beef packers. Moreover, persistent demand weakness, as signaled by slumping cutout values, is pressuring the packing industry. An old trader axiom holds that a market that cannot rally on good news often proves vulnerable to larger losses, so we are wary of the short-term cattle outlook despite fundamental and seasonal factors suggesting prices will surge to record highs by early spring. February cattle edged one tick lower to 127.60 cents/pound early Friday morning, while April slipped 0.05 cents to 132.75.

Direct hog markets rose substantially Thursday, thereby encouraging CME swine traders previously confounded by their inability to sustain advances through much of late January. Bulls may also have been reacting to talk of belated ham strength, since the leg muscle market traditionally rallies during the run-up to Easter. Bears can reasonably point to concurrent beef weakness as potentially capping hog and pork gains, but having the February close strongly suggests bullish momentum is building. That fact that it pushed above a short-term downtrend line also seemed significant. The loss posted by pork cutout values Thursday afternoon probably limited the follow-through gains posted overnight. February futures rose 0.10 cent to 87.70 cents/pound in early-morning action, while June slipped 0.02 cents to 98.07.

The Thursday morning Export Sales report seemed rather bearish for ICE cotton futures, since the latest sales total, at 131,300 bales, fell 39% and 44% below comparable week-ago and four-week average totals, respectively. However, after reacting badly soon thereafter, cotton traders apparently proved quite amenable to more optimistic arguments. The fact that buying from countries other than China remained robust seemed particularly compelling. The subsequent rebound greatly limited the daily decline, which in turn made bearish efforts to force prices lower rather difficult again Thursday night. Industry insiders suggest short-sellers remain over-committed to the market and seem likely to be forced to exit those positions at higher prices over the short run. As long as Chinese officials stick with their program of building domestic stockpiles to stunning sizes, the cotton outlook seems rather promising. March cotton slipped 0.06 cents to 82.89 cents/pound Thursday night, while December fell 0.59 cents to 80.56.