Corn futures are facing technical resistance

Corn futures are facing technical resistance. The yellow grain market continued its general rally Tuesday in the wake of the US production cut indicated on the January 12 USDA reports, with talk of South African drought also seeming to encourage buying. However, the equity index's ability to sustain only a portion of yesterday's early gains and the overnight breakdown in index futures, are raising fresh concerns about global demand prospects. In addition, nearby corn futures proved unable to top pivotal resistance associated with their respective 40-day moving averages Tuesday, which is probably spurring long liquidation. March corn futures edged up 0.25 cent to $3.68/bushel early Wednesday morning, while May rose 0.5 cent to $3.725.

Soybean futures have dipped after rallying Tuesday on strong export demand and proposed stimulus measures in China, the world's top soybean buyer. The market's inability to mount a serious test of its late December highs, much less those posted early in the month seemed to set the stage for the overnight pullback. Renewed talk of huge South American crops, as well as ongoing exports out of Argentine stockpiles, probably added to the pressure. Forthcoming action could be quite interesting since short-term moving average support is concentrated in the 8.76-8.78 area. March soybean futures slumped 4.5 cents to $8.79 Tuesday night, while Mar soyoil declined 22 points to 29.81 cents per pound and March meal slid $0.60 to $270.70.

Wheat futures set back after closing mixed Tuesday. Soybean weakness seemed to spill over into the wheat markets, although they didn't lack of bearish influences of their own. There is little fresh news pertinent to the US market, with talk of Russian capturing 30% of potential Iranian market share seeming to be the biggest item. The overnight equity index drop and persistent US dollar firmness didn't help the bullish cause, because both are seen as hurting export demand for American commodities,

especially wheat. March CBOT wheat dipped 2.25 cents to $4.7125 per bushel as Wednesday dawned over Chicago, while March KC wheat sagged 2.75 cents to $4.70 and March MWE slipped 0.75 cent to $4.955.

Live cattle rebounded on strength in the equity markets. Short covering supported nearby prices along with firm cash bids pushing the markets higher. Feeder cattle fed (no pun intended) off the live cattle strength gaining support in futures prices. US beef packer margins for Tuesday were +$99.60 vs +$115.70 on Monday, and +$140.55 last week. Boxed Beef Cutouts weakened Tuesday. Choice

cuts dropped 0.68 to 230.60 and Select cuts fell 0.45 to 224.49. February live cattle gained 1.75 cents to 129.30 cents/pound on Tuesday's close, while April futures rose 1.65 cents to 130.15. March feeder cattle improved 2.00 cents to 152.275 cents/pound and April feeders increased 1.95 cents to 152.80.

Lean hogs found support in the front months but weakened in the deferred trading. Bull spreading supported the nearby contract, betting on rising prices in the underlying and falling prices in the latter contracts. US pork packer margins for Tuesday are +$39.70 vs +$35.40 on Monday, and +$35.15 last week. Country hogs surged 2.47 to $53.91. As Hog prices near six year lows has farmers ramping

up new hog farm building construction in Iowa, the 3rd largest hog population. Cheaper feed and strong demand from outside countries. February hog futures closed 0.83 cents/pound higher at 62.850

cents/pound Tuesday, while April hogs gained 0.27 cents to 67.725 cents/pound.

Cotton futures rallied to its 2 week high as non-commercials trimmed their net short position as futures prices reached an RSI (relative strength index) point indicating an oversold position. Speculators have lowered their net long position to the lowest level in 3 ¬Ω months. The good Chinese economic news had to encourage cotton traders, since that country has absorbed so much cotton in recent years. The fact that nearby March futures did not drop below recent lows last Friday, is probably spurring aggressive short-covering as well. March cotton jumped 1.06 cents to 62.47 cents/pound on Tuesday's close, while May cotton gained 0.84 to 62.74 cents/pound.