After surging to a five-week high early Wednesday morning, corn futures suffered a sharp reversal when the CBOT pit session commenced. The drop was ostensibly caused by the weekly Energy Information Administration report, which stated the ethanol produced last week at its lowest level in 2 1/2 years. Having such a sign of diminished domestic demand come atop the poor results of recent export sales data suggests the market may be too high to elicit robust demand. Given the overbought nature of the short-term technical situation, it was not very surprising to see corn futures drop soon thereafter. However, the market came back to finish the day slightly higher; wire service sources cited persistent U.S. dryness and emerging dehydration of Argentine areas for the bounce. March corn ended the mid-week session 1 1/4 cents higher at $7.31 1/4, while December rose 3 1/2 cents to $5.89 1/4 per bushel.

In contrast to the corn reversal, soybean futures proved able to sustain a sizeable portion of their early gains into the noon hour. Talk of increasing dryness in Argentina, where shallow-rooted plants might prove especially vulnerable to a heat wave, apparently provided continuing support. The CBOT market then accelerated upward as the Chicago session wound down, with weather concerns and technical strength apparently powering the surge. The fact that March futures closed above their 40 and 50-day moving averages (MAs) probably inspired considerable buying. March beans closed 25 cents higher at $14.36 1/2 Wednesday, while March soyoil jumped 0.48 cents to 51.31 cents/pound and March meal gained $7.6 to $419.1/ton.

Wheat futures had seemingly been boosted early this week by talk of frigid temperatures dominating the Great Plains early next week. However, industry sources downgraded the potential importance of that news Wednesday morning, claiming the forecast temperatures would not be cold enough to seriously damage the hard red winter wheat crop. Conversely, traders have seemingly become more concerned about the general dryness dominating that region and are reportedly worrying about the impact of the reduced moisture upon spring growth prospects. March CBOT wheat rose 4 1/4 cents on the day to $7.85; March KCBT wheat also gained 4 1/4 cents to $8.42 1/2, while March MGE futures climbed 5 1/4 cents to $8.71 1/2 per bushel.

Nearby live cattle futures seemed perfectly positioned to rebound strongly from recent losses Tuesday and Wednesday, but proved unable to repeat their 2011-12 pattern of bouncing strongly from short-term setbacks. That weakness apparently persuaded Southern Plains producers to take packer bids around 125 cents/pound. While the Nebraska market stabilized around that level last week, this represents a drop of about 1.75 cents from the corresponding Panhandle average. Cutout values rose moderately Wednesday, but that clearly did little to support CME cattle prices in the face of the cash weakness. February cattle fell 1.90 cents to 128.52 cents/pound at the end of the Wednesday session, while April tumbled 1.72 cents to 132.70.

Hog futures proved surprisingly firm in the face of the Wednesday cattle breakdown. Differences in their respective cash situations probably account for the disparity. That is, while wire services were reporting significant declines in Southern Plains cattle prices, USDA reports indicated Corn Belt hog prices at steady higher levels. Pork prices also proved relatively firm. Still, one has to wonder if the hog and pork complex can perform at all well if cattle and beef prices suffer an unexpected failure during the days and weeks just ahead. February hogs settled 0.10 cents lower at 85.15 cents/pound, whereas the June future edged 0.05 cents higher, to 96.70.