Grain, livestock markets mixed Thursday

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Thursday morning news that China had cancelled private sales of 315,000 tonnes of soybeans scheduled to be shipped in the coming weeks depressed that market and weighed upon grain values as well. Corn futures may also have been suffering from talk of benign weather over South American growing areas, since the prospect of bumper crops in the Southern Hemisphere might undercut U.S. exports that are already proving quite slow. The crop markets rebounded substantially around midsession, which seemingly reflected strong buying from technicians and fund managers looking for a sustained bounce to start the new year. However, yellow grain prices had slipped back into negative territory by the end of the day. March corn bucked the downward move by closing 1 1/4 cents higher, at $6.92/bushel, whereas December had fell 3 1/4 cents to $5.89.

The USDA announced Thursday morning that China had cancelled delivery of 315,000 tonnes of soybeans previously scheduled for the 2012-13 crop year. As one would normally expect, the news was not conducive to strength in Chicago futures. Moreover, growing talk of a bumper South American bean crop apparently held significantly negative implications for the intermediate-term outlook. Nevertheless, soybean futures rebounded substantially from early lows, which may have reflected an influx of fresh fund buying, especially if those managers believe the market is technically oversold in the wake of recent losses. Unfortunately for bullish interests, the bounce proved rather ephemeral. March beans settled 9 3/4 cents lower at $13.95 3/4 per bushel, while March soyoil closed down 0.37 cents to 50.15 cents/pound and January meal fell $4.9 to $402.2/ton.

The wheat markets proved even more amenable to a Thursday morning rebound than did their counterparts in the corn and soybean pits. In fact, the bounce came despite talk that Egyptian officials hope to reduce their 2013 imports by about 1.0 million tonnes and the concurrent rebound posted by the U.S. dollar, since such gains typically raise the cost of American products faced by foreign buyers. Ultimately, traders may simply have concluded the recent drop was overdone and the market is now due for a significant rebound. Indeed, it would be easy to construe today’s March CBOT wheat action as a technical reversal signal. That contract ended the day 4 cents higher at $7.59 1/4; March KCBT wheat was up 6 1/4 cents to $8.17 1/4, while March MGE futures surged 8 1/2 cents to $8.50/bushel.

Cattle futures rose moderately in Thursday morning electronic trading, then accelerated upward after the CME pit session commenced. We are inclined to credit talk of rising cash and/or wholesale prices later in the day, particularly after the noon report showed beef cutout values almost 1.5 cents higher. Given its history of posting a substantial seasonal rally through the first quarter, especially in years when snow and cold dominate the Southern Plains, the cattle market rally was not very surprising. Still, such strength certainly suggests bulls will continue to dominate the cattle market for the foreseeable future. February cattle jumped 1.47 cents to 133.85 cents/pound on the day, while the April future advanced 1.15 cents to 137.32 cents/pound.

The latest hog and pork news has not been particularly supportive of the short-term outlook. For example, pork cutout essentially gave back its Monday gain Wednesday afternoon. Meanwhile, the Iowa-Southern Minnesota hog market declined modestly yesterday and was called about 1.25 cents lower this morning. Nevertheless, CME swine futures followed their counterparts in the cattle pit substantially higher after pit trading began Thursday morning. Market participants may simply think the ongoing cattle surge will lift all boats, especially with the hog and pork complex also exhibiting an historical tendency to rally during the first six weeks of the year. The February contract actually ended the day having given back a substantial portion of its morning advance, closing just 0.22 cents higher at 86.40 cents/pound around, while June futures rose 0.70 cents to 98.95 by the end of the CME pit session.


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