Grain markets were mostly lower on the week, with most of the pressure coming in wheat and corn. Huge carryover stocks and very poor exports this marketing year have wheat prices on the defensive and testing the lows established last fall. In their latest supply/demand report, USDA projected wheat ending stocks at 1.001 billion bushels, the first time carry-over stocks will be above the 1 billion bushel mark in 22 years.

Corn has also felt pressure from better than expected yields on winter harvested acres across the northern Midwest, and like wheat, a slower than expected export pace so far this marketing year. Uncertainty over ethanol demand is also putting pressure on ethanol profits, which is adding to the negative corn bias as well.

The soy complex has seen a reversal in the meal/oil relationship in the last month. Bean oil has surged higher on expectations that bio-diesel will receive government subsidies and tax breaks. Soy meal has suffered as a result as crush is expected to increase with the demand now shifting to oil rather than meal, and meal will have trouble finding enough demand to absorb the expected increase in supply. The cattle complex was slightly higher for the week, still finding very solid support from adverse weather conditions across much of the cattle feeding regions. The temps may be warmer, but wet conditions are still creating muddy feedlots and stressing cattle. Slaughter weights continue to run well below normal, and total beef consumptions is significantly less than last year. Imports have also declined due to the stronger dollar, leading to tightness in the ground beef sector which has supported lower end boxed beef cuts to being equal in value to the normally higher valued choice boxed beef.

Energy markets have found solid buying support as they creep back to the early January highs. Precious metals were lower with most of the pressure coming in the gold contract. The higher dollar has cast some pressure to the metals, but also the fear of sovereign debt defaults would suggest a deflationary environment instead of an inflationary outlook, prompting investors to rethink their strategy of using gold as a hedge against inflation.

The Dow was stronger on a buying surge last week. The Dow has held support levels very well and investors are regaining some confidence that the economy will improve, while at the same time seeing no serious signs of inflation.