Grains and Oilseeds: March corn closed at $6.46 ½, per bushel, up 8 1/2c on concerns that dry weather in the South American growing areas could damage crops. Even with the strong dollar, preference for U.S. grain prevails due to the detrimental weather patterns in other growing countries. Stay long corn. March wheat closed at $6.52 ¾ per bushel, up 7 1/2c for the same basic reasons as for corn. We like wheat from here basis the spread between corn and wheat where wheat should, I repeat, should demand a premium to corn. March soybans closed at $12.07 ¾ per bushel, up 10 3/4c on concern of supply shortages but slower economic growth could keep pressure on beans. However, we favor the long side of soybeans from here but would use stop protection for futures or purchase call options for the March delivery.
Meats: February cattle closed at $1.21450 per pound, down 9c on long liquidation after cattle have rallied nearly 12% on reported herd shrinkage. We like cattle but would use stop protection for any new purchases. February hogs closed at 84.3c per pound, up 32 points on shortcovering and new buying pushing prices to the highest level since December 14th. Cash trade quiet with higher than normal weights having put pressure on prices recently. Some terminal prices gained with packer margins positive. We still do not like hogs but would avoid any short positions due to the volatility. according to industry estimates.
Coffee, Sugar and Cocoa: March coffee closed at $2.2685 per pound, up 2.6c on shortcovering on expected increase in demand and supply concerns. We like coffee but new purchases should include stop protection. March cocoa closed at $2109 per tonne, down $21 on long liquidation and profittaking. We like cocoa from here for a potential move to the $2300-2350 level tied to output concerns from Ivory Coast after reports of increased supply from Ivory Coast earlier. March sugar closed at 23.3c per pound, down 21 points on profittaking in a narrow range. Output from Brazil has declined steadily and that prompted short covering earlier but prices remain in a narrow range with our expectation of a breakout to the upper end of the range. We like sugar for a move to the 24.50 to 25c level. Use stop protection.
Cotton: March cotton closed at 91.8c per pound up 17 points on shortcovering after heavy selling in previous months. Cotton has lost 37% during 2011 and we could see support between 85-90c per pound. We would buy cotton in that range without stop protection. Otherwise buy call options.
John L. Caiazzo