CORN: The long string of closing gains came to an end for corn on Thursday when year-end fund selling overwhelmed continued stress on South American corn, particularly in Argentina. Commodity trading funds sold off 5,000 contracts on Thursday after net buying for the previous eight trading sessions averaged 6,750 contracts per day. Trade volume has been light all week due to it being a holiday-shortened week and the sudden shift to selling instead of buying by the funds overwhelmed what little new buying we had today now that some rain is in the forecast for Southern Brazil. At the close, March corn was down 4 ½ cents at $6.38, while new crop December closed just 1 ½ cents lower at $5.82. When you consider that funds unloaded 5,000 contracts today, those losses are pretty minor; especially when you consider that corn futures have rallied about 60 cents in the eight days prior to today.

SOYBEANS: Soybean futures prices opened just a bit lower Thursday, then climbed to the plus side briefly, but then back to the loss column to close with double digit losses after an 8-day run of gains. Improving forecasts for rain in Southern Brazil for this weekend triggered the profit-taking and then Trading Funds piled on, reversing course after buying for eight straight days an average of 5,000 contracts daily. Today, those same funds were net sellers of 7,000 contracts in year-end profit-taking. But the weather stress in Brazil and Argentina is severe and what little rain is forecast for Brazil over the weekend is not going to do much more than put the yield deterioration on pause for a couple days. There’s not much more rain in the longer-term forecast. Nonetheless, at the close, January beans were down 10 ¾ at $11.87 ½, March down 11 at $11.97 and new crop November beans down 4 ½ at $12.00 ½.

WHEAT: Wheat futures closed lower Thursday as Trading Funds sold off 2,000 contracts after buying and average of 2,000 contracts in each of the past eight trading sessions. There is little new news to provide price direction to the wheat market. As we suspected yesterday, year-end short covering by funds suddenly stopped. And worse yet, in something unexpected, they turned into net sellers when even corn futures ended their 8-day streak of gains with wheat rallying on the coat-tails of corn at best. The fundamentals for wheat remain bearish, particularly for soft red winter wheat traded at the CBOT, where March futures close 6 ¼ cents lower at $6.45 while KCBT March closed 1 ¼ cent lower at $6.98 and MGE March closed 8 cents lower at $8.55.

CATTLE: U.S. cattle futures couldn’t hold on to early gains on Thursday and closed lower. The opening gains came on encouraging news for the domestic demand outlook, with statistics suggesting an improvement in the unemployment outlook and also some encouraging news in new housing starts. The DJIA also got a lift today from some encouraging news on the Euro-crisis when Italy managed to issue its latest round of debt offerings at lower-than-expected interest rates. But the good news ended there because packer margins are still deeply negative. As of yesterday they were a negative $39.35 per cwt., far worse than the negative $7.45 processors faced a week earlier. At the close, February cattle were down .85 at $122.30; April down .70 at $126.15. Feeder cattle futures closed lower as well, with March feeders down .55 at $149.80; April down .75 at $150.70.

HOGS: Hog futures closed sharply lower Thursday, as packers cut cash hog prices due to slow wholesale pork demand and adequate inventories for Saturday's estimated 250,000-head slaughter. Export sales of pork have become a critical element of overall demand and the export outlook, particularly to Europe, looks very iffy at best given the ongoing European financial crisis. It didn’t help that Wednesday’s action created a downside reversal on charts and likely stimulating some new selling on technical grounds as well. And then, on top of it all, this is year-end and many traders and funds exit positions routinely at the end of the month, the quarter and the year and today and tomorrow bear the burden of all three. At the close, February hogs were $1.50 lower at $84.05; April $1.15 lower at $87.80, and June $1.425 lower at $95.30.

COTTON: Cotton prices closed sharply mixed on Thursday. They opened higher as expected, but then quickly sold off to post losses by midsession, but then old crop contracts came back again to close with solid gains while new crop contracts closed with significant losses. Cotton prices posted big gains on Wednesday turning most technical signals positive. I think we saw some year-end profit-taking by midday, but the technical action brought buyers back towards the end of trading. The higher trend in the dollar is a negative for the export outlook, however, so current strength is probably little more than a year-end “bear market rally” and not the beginning of a new bull market for cotton. At the close, March was up 95 cents at $91.63, while new crop December cotton closed $1.11 lower at $87.82.