Corn, wheat under pressure; soybeans bullish in early trade

The corn market continued its recent decline Thursday, due largely to growing ideas that high U.S. prices are rationing demand even more substantially than seems to be required by the current shortage. For example, Thursday's weekly export data indicated the late-2012 sales pace is the slowest since 1987. The concurrent breakdown in wheat prices to six-month lows probably didn't help the situation. Futures were mixed in overnight trading despite a report from China's agency for controlling its grain reserves. They have apparently revised the anticipated addition to their stockpiles downward by about 10 million tonnes to 5.1 million. Chicago traders may have anticipated such a move. News that the International Grains Council forecast substantial increases in world corn and wheat production in 2013-14 probably depressed deferred futures. March corn inched 1/4 cent higher to $7.20 1/2 overnight, whereas the December 2013 contract fell 3 1/2 cents to $6.22 1/2 per bushel.

Soybean futures reacted strongly to the bullish results of Thursday's export sales report, but gave back a substantial portion of the rise in early afternoon trading. The market surged again in overnight activity, following strong gains in India in early-morning trading. The source of that strength was not obvious. Whatever the cause, there was little question about its bullish impact, since the nearby contracts are threatening to break out above last week's highs. January beans were 11 3/4 cents higher at $14.88 1/4 per bushel in early trading, while January oil had risen 0.55 cents to 49.55 cents/pound and January meal surged $3.8 to $459.1/ton.

Disappointment with U.S. wheat sales added to the downward pressure upon domestic markets again Thursday, with CBOT prices testing support at lows not seen since early summer. A March futures drop below the $8.00/bushel range might open the door to a more substantial breakdown in early winter. However, wheat futures apparently attracted fresh buying at recent lows and rose significantly overnight. The big soybean surge probably offered spillover support. March CBOT wheat rebounded by 5 1/4 cents in early-morning activity, while March KCBT wheat rose 3 1/4 cents to $8.66/bushel and March MGE futures jumped 4 1/4 to $9.04.

The cattle market remains greatly elevated due to persistent tightness of the supply/demand situation. Indeed, early-2013 futures are anticipating a surge to record highs, thereby reflecting expectations for seasonal and cyclical reductions in feedlot marketings. And while current cattle and beef demand remains historically strong, CME traders are apparently worried about the robustness of that buying. Slippage in choice beef values Thursday did nothing to ease those concerns. The December delivery situation isn't clarifying the situation, especially after a large portion of Wednesday's notices were reclaimed yesterday. Prices barely changed overnight, with February cattle rising 0.07 cents to 131.55 and April up 0.12 cents to 135.50 cents/pound.

Traders in the CME lean hog market are trying to balance bearish short-term price prospects against the potential for a substantial seasonal rebound in early 2013. The Thursday afternoon pork report exemplified this conflict. It stated primal ham values over 1.0 cent lower as the leg muscle market continues its traditional pre-holiday breakdown (since grocers have almost surely completed their purchases for Christmas dinner entrees at this point. However, pork cutout actually rose 0.25 cents to 83.83 cents/pound due largely to substantial advances in pork rib and belly values. Those seem to indicate the market will do very well once the industry gets past the short-term demand weakness and the normal mid-December bulge in hog marketings. Futures generally favored the bulls in overnight trading; February hogs rose 0.17 cents to 86.07, while June lifted 0.07 cents to 100.10 cents/pound.

The result of the weekly cotton sales report were rather disappointing, thereby setting a negative tone for Thursday trading. The concurrent losses suffered by corn and wheat probably added to the downward pressure upon the white fiber market. The gains posted earlier in the weak may have opened the door for a setback as well. Conversely, overnight advances in the grain and soy complexes very likely encouraged buying in the cotton pit. Little apparent news emerged late Thursday or early Friday. March cotton seems set to open the New York trading day 0.34 cents higher at 74.90 cents/pound, while December inched 0.07 higher to 77.70.


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