Deflation fears are again hitting the commodity markets. Fund liquidation seemed to hit the commodity markets again Tuesday morning, with only the precious metals and sugar avoiding sizeable early losses. Corn futures actually bounced from early lows, which probably marked a positive reaction to the weekly Export Inspections report. However, continued dollar gains suggest bulls face considerable resistance. March corn futures sagged 2.0 cents to $3.85/bushel late Tuesday morning, while July lost 2.25 to $3.9875.

Soybeans seem to be leading the crop markets lower. Recent Brazilian dryness had supported the soy complex, but forecasts for late-week rains in that country got this week’s trading started on the wrong foot. Talk of Chinese economic weakness on the heels of last Friday’s cancellation of a big shipment added to the downward pressure. The bean result on the Export Inspections report was actually rather large, but that couldn’t offset the bearish commodity market environment and fund sales. March soybean futures dove 17.5 cents to $9.7425/bushel around midsession Tuesday, while March soyoil dropped 0.44 to 32.95 cents/pound, and March meal sank $4.2 to $322.0/ton.

The wheat markets also lost significant ground. There was little wheat news over the weekend, although a comment from Russia’s Deputy PM saying he saw no need to ban grain exports could hardly be seen as a bullish sign. The Export Inspections data was mediocre. The relative expense of U.S. wheat, along with the rising value of the dollar, suggest little prospect for resurgent exports in the near future. March CBOT wheat slid 4.5 cents to $5.2825/bushel as the lunch hour loomed Tuesday, while March KC wheat slumped 8.75 cents to $5.6875/bushel, and March MWE wheat dipped 4.5 to $5.80.

Fund selling hit cattle futures again Tuesday morning. Wholesale beef prices fell Monday, which probably encouraged selling this morning. Still, it was pretty clear that active fund liquidation was swamping the market as the morning passed. Traders apparently think the greatly elevated cattle market will prove vulnerable to much larger losses in the seeming deflationary environment, despite very supportive fundamentals. February live cattle futures tanked by 2.77 cents to 151.67 cents/pound in late Tuesday morning action, while the April contract plunged 3.00 cents to 149.95. January feeder cattle futures stumbled 0.60 cents to 213.50, and March feeders plummeted 3.60 to 201.25.

Cash weakness encouraged CME hog sales as well. The cash hog markets proved rather weak Monday and today’s early spot quotes moved lower as well. Thus, traders rather obviously saw little reason to sponsor the long side of the hog market either, especially with worries about deflation and fund selling dominating the commodity markets. February hog futures dove 2.07 cents to 72.42 cents/pound around lunchtime Tuesday, while June hogs crashed 2.15 cents to 84.50.