Grains and Oilseeds: May corn closed at $646 ½ per bushel, up 2c tied to reports of dry weather and the expectation of demand by China. We prefer the sidelines in corn. May wheat closed at $654 ¼, per bushel, up 8c and increased its premium to corn, which in my opinion, is as it should be. Historically wheat has always held a premium to corn but recent "adjustments" in supply/demand tied to some extent by the introduction of ethanol, has changed that historic relationship. I like wheat against corn on spreads but otherwise continue to prefer soybeans to both. May soybeans closed at $13.65 ¾ per bushel, up 16 1/4c on the weak dollar and concern over production declines in Argentina. For the week, however, soybeans saw a first decline in five weeks losing 0.6%. We continue to favor the long side but would only add to long positions on setbacks.
Meats: April cattle closed at $1.2450 down 75 points on profittaking after recent gains. Reports of discontinued hamburger lunches was viewed by some trades as a reason for the long liquidation but cold storage figures up 1.6% over last year and 6.1% over the 5 year average was probably the real factor in Friday’s selling. We continue to favor the long side of cattle but would not add to existing longs for now. Prices achieved our previous goal of $1.25 per pound and technical resistance was to be expected. April lean hogs closed at 85.025c per pound, down 37.5 points on reduced demand and to some extent is tied to higher transportation costs and high energy prices. Cold storage report showed 624.7 million pounds of pork against analyst estimates of 615 million pounds. We continue to favor the sidelines in hogs.
Coffee, Cocoa and Sugar: May coffee closed at $1.7875 per pound, up 1.8c on shortcovering after recent selling and tied to the weak dollar on Friday. Potential crop damage due to cold weather in Brazil could prompt additional shortcovering and new buying in coffee. After the heavy selling of late, we would look to buy coffee for a bounce, but only for traders willing to assume the risk considering technical weakness. May cocoa closed at $2307 per tonne, up $22 against the weak dollar but remains in a range between our previous goal of $2,500 per tonne and the low end of the range around $2,200 per tonne. Since, without fresh fundamentals from Ivory Coast or Ghana, we prefer the sidelines from here. May sugar closed at 25.63c per pound, down 28 points but had exceeded our goal of 25c per pound and could gain further tied to expected slow production output from Brazil extending to the end of 2012. Another factor has been the flooding in Thailand, the second largest exporter behind Brazil. Reports of Malaysia and Pakistan in the market for raws also a factor in the buying. We continue to favor the long side but only on dips for a possible more to the 28-30c area.
Cotton: July cotton closed at 90.27c per pound, up 4 points. The decline from February high around 99c per pound to the recent low of 88c seems to have run its course. Export demand at the low end of the range and buying by China and others could provide the impetus for additionalbuying. With large short positions held by merchants and speculators, shortcovering could push prices even higher. We continue to favor the long side of cotton.