Wednesday stock market reversal seemed to depress commodities

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After eventually following soybeans higher Wednesday, corn futures turned lower early Thursday morning. General weakness due to the big equity market reversal Wednesday afternoon and to talk that a hedge fund was being forced to liquidate positions may have weighed upon prices to some extent. News that Taiwan had recently bought 60,000 tonnes of Argentine corn probably didn’t help sentiment either. Still, the main driver of the overnight slide may simply have been the modest soybean decline. March corn slipped 1.5 cents to $6.99/bushel in the early morning hours, while December fell 2.5 cents to $5.59.

Soybeans had spiked upward during the three preceding sessions, but set back Wednesday night. There was not a great deal of news published overnight, so we suspect dwindling bullish momentum, the Wednesday equity index decline and prospects for widespread precipitation over domestic grain/soy fields during the next week weighed upon the market. The fact that bulls couldn’t push prices above their early February highs yesterday may also have triggered some technical selling. March soybeans dipped 2.5 cents to $14.8025 early Thursday morning, while March soyoil fell 0.44 cents to 51.63 cents/pound, whereas March meal edged $0.7 higher to $434.3/ton.

Wheat futures also followed soybeans higher Wednesday, but subsequently reversed course. There was little news concerning U.S. wheat, but one might easily blame the headline that Iran had bought 180,000 tonnes of Australian wheat for a portion of the overnight decline, since it reemphasized the fact that many international customers are not buying from the U.S. Of course, the storm now blanketing the Central Plains with a healthy cover of snow is probably encouraging bears as well. March CBOT wheat sank 4.25 cents to $7.3425/bushel in pre-dawn trading, while March KCBT wheat skidded 4.5 cents to $7.7275, and March MGE futures slid 2.25 cents to $8.185.

After dipping to fresh eight-month lows Wednesday, cattle futures rebounded in early Thursday morning trading. The fact that fed animals traded at steady prices around midday Wednesday may have encouraged some buying. Technicians may also think late rebound from the daily low signaled burgeoning support at current levels. We do not think the news was particularly significant, but traders may be buying in response to Wednesday evening news that an international panel recommended that the U.S. get the best rating for BSE risk in its cattle. April cattle bounced 0.47 cents to 128.70 cents/pound in overnight price action, while August gained 0.42 cents to 125.95. Meanwhile, March feeder cattle surged 0.67 cents to 141.40 cents/pound, and August climbed 0.55 cents to 154.35.

Hog futures posted an impressive rebound Wednesday afternoon, but turned sharply lower again overnight. Afternoon reports of cash weakness across the Corn Belt may be weighing upon the market, but that would assume that the strong wholesale gains posted Tuesday and Wednesday had no supportive effect. We wonder if technical and/or seasonal factors played a role in the late drop. April hogs declined 0.85 cents to 82.10 cents/pound in the pre-dawn hours of Thursday morning, while June dove 0.82 cents to 91.52.

Cotton futures fell rather substantially Wednesday night. We suspect the equity market reversal suffered earlier in the day played a big role in the drop. The technical repercussions of the Wednesday afternoon cotton setback may also be translating into follow-through selling. That is, after seeming set to break out above trendline resistance drawn across its recent highs, nearby cotton futures now appear technically vulnerable. March cotton fell 0.58 cents to 81.70 cents/pound in early Thursday morning activity, while December dropped 0.62 cents to 83.65.

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