Ag markets diverged Friday morning

Talk about diminished ethanol demand undercut corn prices again Friday. The EPA is reportedly ready to rule that the blend wall on U.S. gasoline consumption force it to lower the amount of ethanol to be produced under the congressional mandate. That holds bearish connotations for the long-term corn outlook. As one would expect, corn futures have slipped in response. December corn futures dipped 4.0 cents to $4.3425/bushel Friday morning, while May lost 4.0 cents to $4.555.

The soy complex also moved mostly lower this morning. The talk of an EPA cut to the ethanol mandate suggests the drive toward renewable fuels is waning, which could be a negative factor for the soyoil outlook. Talk of good harvest progress and surprisingly high yields also may have depressed prices. The drop probably had a substantial technical component as well. November soybeans dove 18.25 cents to $12.6975/bushel around midsession Friday, and December soyoil plunged 0.72 cents to 40.50 cents/pound, while December soymeal lost $5.9 to $403.7/ton.

Wheat futures posted impressive gains Friday morning. Despite concurrent corn and soy losses and a lack of supportive news, wheat futures rose significantly in early trading. Some wire service reports were quick to cite crop problems in Russia, Ukraine and Argentina, but that's rather stale information. We suspect short covering and technical considerations are powering the rise. December CBOT wheat surged 7.5 cents to $6.93/bushel just before lunchtime Friday, while December KCBT wheat advanced 8.0 cent to $7.635, and December MGE futures rallied 6.75 cents to $7.5775.

Talk of cash strength boosted cattle futures in early Friday action. CME traders are reportedly expecting country cattle to trade at steady-higher levels later today. However, bulls cannot be happy that no demands have been made on the deliveries posted against expiring October futures this week; that suggests poor packer demand for cattle. December cattle futures climbed 0.40 cents to 132.57 cents/pound late Friday morning, while April added 0.37 to 135.32. Meanwhile, November feeder cattle jumped 1.22 cents to 169.15 cents/pound, and January ran up 0.92 to 168.75.

The hog market moved mostly lower Friday morning. Stock index gains appeared to support nearby hog futures today, with ideas of relatively tight supplies probably encouraging bulls as well. However, this week's chatter concerning a potential fall surge in hog supplies may be causing the swine industry to rethink its optimism about the 2014 outlook. Deferred futures seemingly suffered as a consequence. December hog futures declined 0.07 cents to 86.57 cents/pound with the lunch hour looming Friday, while April dropped 0.25 cents to 89.80.

Renewed equity strength seems to supporting cotton prices. There has been little market-moving cotton news lately. Consequently, ICE traders are apparently buying the market in reaction to the current equity rally, which implies improved apparel demand down the road. December cotton rose 0.24 cents to 83.41 cents/pound soon around midday Friday, while March gained 0.31 to 84.32.