Talk that Japan may soon ease its restrictions upon imported U.S. beef boosted cattle futures rather sharply Tuesday, although we would warn that it may take many weeks before all the obstacles to the increased flow of beef might actually occur. In addition, nearby futures were technically oversold late last week. Bullish CME traders may also have been reacting to the Tuesday bounce in wholesale values, especially when they saw the relative strength of boxed beef movement. Given the strength exhibited by cattle futures over the past two years, the market certainly seems likely to continue rebounding from the virtual 10-cent breakdown suffered since January 4, but such considerations did not prevent Chicago prices from dipping again overnight. February cattle slipped 0.20 cents to 125.52 cents/pound in pre-dawn price action, while April slumped 0.30 cents to 130.17.
CME lean hog futures appeared to benefit from optimism about the seasonal outlook Tuesday, since the cash and wholesale markets traditionally rise during the first six weeks of the year. The recent cattle breakdown has clearly clouded the bullish picture, but that does not change the fact that supplies decline and demand generally improves during the early part of the year. Still, bulls aren’t having everything their own way. For example, CME swine futures slipped Tuesday night in apparent reaction to the less than supportive results of the monthly USDA Cold Storage released yesterday afternoon. That is, both the ham and total pork inventory figures topped expectations, thereby suggesting demand is not living up to expectations. February hogs fell 0.27 cents to 85.42 cents/pound Tuesday night, while June futures dropped 0.57 cents to 97.70.
Cotton futures continued their impressive rally Tuesday, with industry sources citing strong buying from China and the ability of the March ICE contract to top the pivotal 80-cent/pound level in early trading. Wire service sources cited bullish confidence that product being bought by Chinese officials will not reemerge on the market in the near future. On the other hand, the March contract later proved unable to sustain its push above 80 cents, which may mean it will at least require a few days to consolidate recent gains before once again mounting a challenge of that resistance. Early morning reports that 2012-13 Indian production and exports fell well short of comparable year-ago levels did not seem to affect prices; that was probably old news. We tend to expect sideways to lower price action in cotton futures over the next few days. March cotton slipped 0.23 cents to 79.70 cents/pound in pre-dawn electronic action, while December fell 0.41 cents to 79.51.