After beginning the week strongly, corn futures slipped lower as the Tuesday trading session passed. Weather concerns are probably providing considerable support at this juncture, since forecasts imply growing dryness over the central U.S. and major crop areas of Brazil and Argentina; these are raising very pertinent questions about the forthcoming South American harvest. However, American corn exports have remained poor during early winter, while demand from the domestic ethanol industry has slowed. The market seemed to suffer a dearth of corn news overnight, which explains the relative lack of price movement. March corn had edged 3/4 cent higher to $7.29 1/4 early morning trading, while December gained 1 1/2 cents to $5.91 1/2 per bushel.

Traders were reportedly buying soybean futures in response to growing worries about prospects for South American crops Tuesday. The weather in their main bean growing areas has recently shifted to a hot, dry pattern, thereby threatening to curtail yields. Ongoing U.S. soybean exports have also proven very strong lately. Talk that China will continue buying U.S. beans aggressively over the short term apparently encouraged bulls to push prices sharply higher Tuesday. These same factors seemed to support nearby futures overnight, although hopes for an improved 2013 U.S. harvest appeared to weigh upon the deferred contracts. March beans inched 1/2 cent higher, to $14.52 1/4, in pre-dawn activity, while March soyoil was unchanged at 52.43 cents/pound and March meal gained $0.7 to $422.3/ton.

U.S. wheat exports have improved lately, which, when combined with the persistent dryness dominating the Winter Wheat Belt, are supporting wheat prices at the various Midwest commodity exchanges. That strength is also being supplemented by less than optimal growing conditions around the globe. For example, an overnight report indicated that a big heat wave is hurting the spring Australian crop. The same report also cited active Australian exports. Thus, it is not terribly surprising to see U.S. wheat prices generally higher this morning. On the other hand, the size of those gains was not very impressive. Ultimately, the inability of bullish traders to push the March CBOT contract above the pivotal $8.00/bushel level Tuesday suggests the market may need to consolidate recent gains before making another run at that resistance. March CBOT wheat was unchanged at $7.79 1/4 in overnight trading, while March KCBT wheat rose 1 1/2 cents to $8.32 1/4 and March MGE futures actually slipped 1/4 cent to $8.64/bushel.

Talk that Japan may soon ease its restrictions upon imported U.S. beef boosted cattle futures rather sharply Tuesday, although we would warn that it may take many weeks before all the obstacles to the increased flow of beef might actually occur. In addition, nearby futures were technically oversold late last week. Bullish CME traders may also have been reacting to the Tuesday bounce in wholesale values, especially when they saw the relative strength of boxed beef movement. Given the strength exhibited by cattle futures over the past two years, the market certainly seems likely to continue rebounding from the virtual 10-cent breakdown suffered since January 4, but such considerations did not prevent Chicago prices from dipping again overnight. February cattle slipped 0.20 cents to 125.52 cents/pound in pre-dawn price action, while April slumped 0.30 cents to 130.17.

CME lean hog futures appeared to benefit from optimism about the seasonal outlook Tuesday, since the cash and wholesale markets traditionally rise during the first six weeks of the year. The recent cattle breakdown has clearly clouded the bullish picture, but that does not change the fact that supplies decline and demand generally improves during the early part of the year. Still, bulls aren’t having everything their own way. For example, CME swine futures slipped Tuesday night in apparent reaction to the less than supportive results of the monthly USDA Cold Storage released yesterday afternoon. That is, both the ham and total pork inventory figures topped expectations, thereby suggesting demand is not living up to expectations. February hogs fell 0.27 cents to 85.42 cents/pound Tuesday night, while June futures dropped 0.57 cents to 97.70.

Cotton futures continued their impressive rally Tuesday, with industry sources citing strong buying from China and the ability of the March ICE contract to top the pivotal 80-cent/pound level in early trading. Wire service sources cited bullish confidence that product being bought by Chinese officials will not reemerge on the market in the near future. On the other hand, the March contract later proved unable to sustain its push above 80 cents, which may mean it will at least require a few days to consolidate recent gains before once again mounting a challenge of that resistance. Early morning reports that 2012-13 Indian production and exports fell well short of comparable year-ago levels did not seem to affect prices; that was probably old news. We tend to expect sideways to lower price action in cotton futures over the next few days. March cotton slipped 0.23 cents to 79.70 cents/pound in pre-dawn electronic action, while December fell 0.41 cents to 79.51.