Surging cattle futures overshadowed events in the other pits

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Corn traders seemingly reacted rather ambivalently to weather forecasts implying improved South American moisture this week, which might then be followed by a return of a high blocking rain to Southern Brazil and Argentine fields next weekend. However, the weekly Export Inspections data apparently proved more supportive. That is, the USDA stated the latest figure at 21.1 million bushels; that almost doubled the week-ago result and fell only slightly below the year-ago total. This might be a one-time result, but the suggestion that U.S. corn exports are improving is certainly supportive of domestic prices. March corn had edged 1 3/4 cents higher, to $7.22 1/2 in late-morning activity, while December rose 2 1/2 cents to $5.86 3/4 per bushel.

The weekly Export Inspections report did not excite soybean traders since the latest figure came up over 8.0 million bushels (17%) short of the comparable week-ago figure; that result apparently had little lasting impact upon CBOT futures. That is, forecasters reportedly expect South American grain and soy fields to be blessed with decent rainfall this week, but they are also anticipating the return of the high blocking moisture to that region during the past few weeks. The market seemed confused as to how to interpret the anticipated shift. Still, the possibility of renewed dryness could boost prices sharply at some point in the near future. March beans had risen 1 1/4 cents to $14.42 1/4 per bushel in Monday morning action, while March soyoil fell 0.19 cents to 51.91 cents/pound and March meal rose $1.3 to $417.7/ton.

Wheat futures proved quite strong last Friday, with the supportive export news and surprisingly robust chart support seeming to spark the strong weekly close. In contrast, the Monday morning Export Inspections data was mediocre, thereby slightly exaggerating the modest pullback suffered in Sunday night-Monday morning activity. The widespread belief that the Southern Plains will not be blessed with ample moisture during the coming weeks probably limited the morning decline. March CBOT wheat futures had slipped 2 3/4 cents to $7.73 3/4 by late morning, while March KCBT wheat skidded 2 1/2 cents to $8.27/bushel and March MGE futures edged 1 3/4 cents lower to $8.63 1/4 per bushel.

As expected, live cattle futures responded well to the combination of bullish news on the Friday (1/25) USDA Cattle on Feed report and weekend news that Japan will ease restrictions on U.S. beef on February 1. They currently allow beef only from animals documented to be 20 months or younger, while the new rule will allow product from animals up to 30 months of age. This potentially opens the island nation up to the bulk of U.S. production, although the industry will almost surely have to be able to certify the age of animals used. This probably means some delays in ramping up Japanese exports, but that factor apparently did little to discourage CME bulls this morning. February cattle had jumped 2.42 cents to 128.72 cents/pound around midsession Monday, while April was up 2.47 cents to 133.22.

As one might expect, the big Monday morning cattle market surge spilled over into the hog pit, with most nearby contracts posting varying gains. A significant portion of that strength may also reflect bullish expectations concerning the short-term hog outlook, since cash prices traditionally rise moderately during late January and early February. The fact that the CME lean hog index remains at a noticeable premium to the nearby February future also seems very supportive. On the other hand, having Monday morning direct market quotes follow the losses posted last Friday with indications of persistent weakness probably limited the Chicago strength. February hogs had gained 0.40 cents to 87.22 cents/pound just before the lunch hour, while June futures had also climbed 0.40 cents to 97.47.

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