News that China had cancelled sales commitments of 300,000 tonnes of U.S. soybean sales sent the Chicago bean market sharply lower Tuesday morning, which in turn dragged grain prices downward in early trading. Ideas that two major winter storms will sweep across the Great Plains over the next ten days may have added to the downward pressure, since many areas are short of moisture at this juncture. And yet, the corn market posted a sizeable rebound its early low, possibly due to reports of firming basis bids across the Midwest. Whatever the underlying cause, the fact that corn came back in the face of so much downward pressure suggests bulls may be able to build upon the move during the days ahead. March corn ended the day just 4 cents lower at $7.20 1/2, while the December 2013 contract closed one cent higher at $6.23 1/2 per bushel.
China reportedly cancelled prior purchases of 300,000 tonnes of U.S. soybeans Sunday night, as did the buyer of 120,000 tonnes previously headed to an unknown destination. That news more than offset a report of a fresh 110,000-tonne sale to another unknown buyer. This news probably caught the market off guard, since prices had recently been rising. Chinese purchasing agents may have decided they now own enough beans to meet their short-term needs and will start looking to South America for their mid-2013 requirements. As with the grains, CBOT soy prices bounced from early lows, but ended the day having dropped to lows seen last week. This may bode ill for the short-term technical outlook. January soybeans dove 30 1/4 cents to $14.66 per bushel Tuesday, while January oil was down 0.62 to 49.17 cents/pound and January meal had dropped $10.5 to $444.9/ton.
The wheat market also fell substantially in reaction to early morning news that China had cancelled 300,000 tonnes of U.S. soybean purchases. Indeed, recent losses suggested bearish momentum might carry March CBOT wheat values below the psychologically important $8.00/bushel level. However, the market apparently found substantial technical support in that area, which in turn seemed to spark a sharp bounce. News that futures funds had sold wheat aggressively last week may have persuaded savvy traders that the market is oversold and due for a technical rebound. March CBOT wheat rose 3 1/4 cents to $8.11 1/4 per bushel; March KCBT wheat rose 4 3/4 cents to $8.60 1/2 and March MGE futures bounced 8 1/2 to $9.01 1/2.
Nearby live cattle and feeder futures built upon the big weather-driven surge posted Monday in Tuesday morning trading; traders were apparently concerned about the potential negative performance impact of wintry weather moving into the Central Plains today. Producers routinely boost their asking prices for fed cattle in such situations, but persuading packers to raise their bids may prove problematic, since their margins are already deeply in the red. In fact, we suspect midday news of a sizable drop in choice-grade beef values played a big role in the subsequent CME futures decline. That may give the cattle market a decidedly negative tone over the short term. February futures settled 0.55 cents to 132.95 cents/pound, while April fell 0.45 cents to 137.15.