Weak financial markets may depress commodities to start the week

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Financial market developments seemingly undercut commodity prices, including corn, Monday morning. The yellow grain and its crop counterparts got off to a poor start to the week due to prospects of favorable weather over the U.S. Corn Belt. Those then seemed to be exaggerated by big equity losses overseas and in U.S. index futures. Concurrent dollar strength did not help. July sank 7.75 cents to $6.54/bushel early Monday morning, while December lost 11.0 cents to $5.4525.

The soy complex declined in concert with many other commodities Monday morning. As with corn, forecasts for benign weather and concerns about the second-half 2013 economic outlook appeared to undermine support for legume values. Weekend losses in the vegetable oil markets seemingly added to the downward pressure upon soyoil futures. July soybean futures fell 4.0 cents to $14.8925/bushel in Monday morning electronic activity, while July soyoil dropped 0.32 cents to 47.70 cents/pound, and July soymeal slid $1.0 to $446.7/ton.

Wheat futures followed corn and soybean prices lower in early Monday trading. As in those markets, beneficent weather forecasts implying improving crop conditions almost surely played a sizeable rose in the slippage, as did the depressing financial market developments. On the other hand, persistent ideas that China will return to the global wheat market as a major buyer apparently limited losses. July CBOT wheat dipped 6.25 cents to $6.9175/bushel as the sun rose over Chicago Monday, while July KCBT wheat slipped 4.25 cent to $7.3225, and July MGE futures sagged 2.5 cents to $8.115.

Cattle futures seem set to open this week in mixed fashion. Strong Friday gains signaled underlying strength, but the monthly USDA Cattle on Feed report had bearish connotations. Wholesale prices were firm Friday, whereas late afternoon cash trading was steady to $1.00/cwt lower. The bearish financial market environment will not help. August cattle ended last week by jumping 1.60 cents to 121.60 cents/pound Friday afternoon, while December climbed 1.17 cents to 127.10. Meanwhile, August feeder cattle futures leapt 2.50 cents to 146.92 cents/pound and November soared 1.85 to 152.00.

Hog futures may open firmly Monday morning. Although the cash and wholesale markets have a history of turning decisively lower from June highs, the discounts already built into summer futures may have created room for a short-term bounce. And while the cash markets were weak Friday, the large week-ending rise in pork cutout seemed very supportive. July hog futures settled 0.50 cents lower at 99.75 cents/pound last Friday afternoon, whereas concerns about the market impact of PEDV disease seemingly boosted December 0.05 cents to 82.30 to end the week.

Cotton futures posted surprising gains despite adverse Monday morning conditions. The environment appeared quite negative for the white fiber market, with talk of Chinese economic weakness seeming aimed directly at cotton demand prospects. Furthermore, forecasts for favorable U.S. weather could significantly increase the 2013 U.S. crop. We have to assume technical and/or pragmatic factors were supporting cotton and the other soft commodities Monday morning. July cotton gained 0.15 cents to 85.30 cents/pound in early Monday price action, while December added 0.11 to 84.75.



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