Strong rebound for grains Wednesday; especially beans

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CBOT futures declined modestly after the WASDE report was released Tuesday morning, despite having the USDA lower its projected 2012-13 corn carryout forecast slightly to 117.6 million tonnes or 13.6% of annual usage. The Agriculture Department boosted its estimate of Chinese production by 8 million tonnes, thereby suggesting they’ll be buying little U.S. corn in the coming months. Corn continued its slide in overnight trading, possibly due to forecasts for near ideal weather over much of the crop growing areas of Brazil and Argentina, where farmers have recently struggled to get crops planted on time. March corn slipped 1 3/4 cents to $7.26 1/4 per bushel in overnight trading, while the December 2013 future was down 1 1/4 at $6.26 1/2.

Soybeans led the way downward in Tuesday night trading after having apparently been dragged downward by wheat in the wake of the WASDE report. The data release held few surprises for soybean traders, with only a minimal shift in forecast ending stocks and no change to anticipated 2013 production out of South America, but the sharply negative reaction posted by the wheat market depressed the whole CBOT complex. As with corn, fresh forecasts for beneficent planting weather in South America almost surely sparked fresh selling in the bean pit. January soybeans fell 9 cents to $14.63/bushel in overnight trading, while January soybean oil slipped 0.12 to 50.08 cents/pound and January meal dipped $2.9 to $445.2/ton.

Wheat futures fell rather dramatically in reaction to the Wasde report. Not only did the USDA cut its U.S. wheat export forecast for the third consecutive month, it boosted it boosted its 2012-13 world production estimate by 3.7 million tonnes and cut usage by 1.2 million. These data easily topped private forecasts, which very likely amplified their negative impact upon prices. Talk that India may allow a fresh consignment of stored wheat to be exported probably added to the downward pressure in Wednesday morning trading. March CBOT wheat was down 3 cents to $8.18 1/2 in early activity; March KCBT wheat had slipped 1/4-cent to $881 1/4; March MGE futures bucked the downward trend by bouncing 2 1/4 to $9.13 ¼ per bushel.

Breaking news that wholesale beef prices were surging Tuesday morning powered a sharp advance in live cattle futures. Choice cutout jumped 2.12 cents/pound, while the select cuts posted gains of 1.74 cents. This encouraged bullish traders who have been waiting for a sign of resurgent demand to push cattle prices higher, since supply conditions remain extremely tight. Yesterday’s late news that a large portion of Monday-evening delivery notices were reclaimed probably encouraged continued buying in overnight trading. February live cattle rose 0.20 cents to 132.15 cents/pound, while the April contract was up 0.17 to 135.70 cents/pound.

CME lean hog futures were mixed in Tuesday night trading, thereby probably reflecting the bullish pull of Tuesday’s cattle strength and the potential for short-term seasonal weakness faced by the hog and pork complex. That is, unless some of the other cuts exhibit signs of fresh strength during the days ahead, the traditional pre-holiday breakdown suffered by the ham market at this time of year could weigh heavily upon hog and pork values. Cutout was essentially unchanged Tuesday afternoon, while the direct markets fell moderately. February hogs were unchanged at 84.15 cents/pound, while the June contract slipped one tick to 99.02 cents/pound.

Cotton futures reacted well to the supportive elements of the WASDE report Tuesday. The USDA cut estimated U.S. production and boosted its export forecast, thereby lowering projected 2012-13 ending stocks to 5.4 million bales. In addition, the USDA suggested that China would purchase the bulk of its 2012 crop for its national reserve, thereby reducing supplies available to its domestic mills. The strong reaction pushed the March future above trendline resistance in place since late August, which may have set the stage for further gains. However, prices set back to test that line from above in overnight trading. March cotton slipped 0.09 to 74.81 cents/pound in early activity and the December future fell 0.15 to 77.98 cents/pound.

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