Stock losses and dollar strength depressed grain futures

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Corn futures fell rather sharply Thursday despite persistent soybean firmness. The winter storm blanketing the Central Plains with snow and news that the International Grains Council had boosted its estimate of 2012-13 global corn production by 5.0 million tonnes probably weighed upon prices. We would also point out that the equity markets fell rather substantially, whereas the U.S. dollar rose to highs not seen last September. Neither of those moves is conducive to grain price strength since they hold negative demand implications for the domestic and export markets, respectively. March corn ended the day having fallen 10.0 cents to $6.905/bushel, while December dropped 8.0 cents to $5.535.

Nearby soybean futures managed a modest rise Thursday, but the deferred contracts and oil declined. Talk of firm cash prices across the Midwest reportedly supported the March and May contracts. Speculation that logistical problems with the huge Brazilian crop will force international buyers to continue buying U.S. beans later in the year than previously thought reportedly encouraged bulls as well. Meal demand may also be proving surprisingly robust, which would explain nearby futures gains in that pit and concurrent oil weakness. March beans closed 5.0 cents higher, at $14.8775 Thursday afternoon, while March soyoil had fallen 0.76 cents to 51.31 cents/pound, whereas March meal gained $4.0 to $437.6/ton.

Wheat futures fell to fresh 8-month lows Thursday, with traders rather obviously reacting to the snow blanket being dropped on large portions of the Plains from the Panhandle region into Iowa. This could substantially increase production prospects for the coming winter wheat harvest. As with corn, the combination of stock market weakness and U.S. dollar strength may have depressed prices as well. March CBOT wheat futures plunged 17.25 cents to $7.2125/bushel by the Thursday afternoon close, while March KCBT wheat dove 20.0 cents to $7.5725, and March MGE futures dropped 14.0 cents to $8.0675.

After posting a sizeable reversal Wednesday night, live cattle futures apparently resumed their downtrend Thursday. We wonder if the livestock markets are suffering from ongoing talk about the anticipated government sequester. The packing industry could be forced to completely shut down (due to the requirement for USDA inspection of all meat production) if it occurs. We think this is highly unlikely, but we cannot completely rule it out either. Midday slippage in beef cutout values did not help the situation. April cattle fell 0.47 cents to 127.75 cents/pound as the CME pit session wound down Thursday, while August lost the same amount, ending at 125.05. Meanwhile, March feeder cattle slid 0.10 cents to 140.62 cents/pound, and August had fallen 0.47 cents to 153.32.

Hog futures proved quite weak again Thursday. Concerns about the impact of the mooted government sequester may also have been affecting the swine and pork complex. On the other hand, the latest cash and wholesale news was not supportive. Traders saw no quotes concerning hog trading in the Western Corn Belt, but those east of the Mississippi River had fallen rather sharply. The noon pork report called ham prices steady to 2.0 cents lower, which did not improve sentiment in the CME pit either. April hogs dropped 0.60 cents to 82.35 cents/pound Thursday afternoon, while June fell 0.70 cents to 91.65.

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