China's commodity cutbacks, 'window dressing' shape end-of-quarter trading

U.S. labor situation remains bleak

Grains and Oilseeds: May corn closed up 40c per bushel, to close at $6.44 as farm products all benefited from the USDA forecast that farmers would plant few acres for soybeans and lower than expected corn inventories. We prefer the sidelines in corn still preferring soybeans in this group. May wheat closed at $6.60 ¾ per bushel, up 48 1/4c on USDA report that farmers would plant a smaller than expected crop. May soybeans closed at $14.03 per bushel, up 47 1/2c also on that USDA report of a drop in U.S. soybean plantings. The USDA report caught shorts by surprise and prompted heavy shortcovering and new fund buying. We continue to prefer the long side of soybeans. We have preferred the long side of soybeans for some time and as you can see from the accompanying chart, our recommendations were correct and would have produced profits for our readers. Three dollars per bushel gain from January would have produced a $15,000 per contract profit for our readers.

Meats: June cattle closed at $1.1615 per pound, down 2.325c on profittaking after recent strength. Our goal of $1.25 per pound had been achieved and our suggestion to take profits was appropriate. Larger feedlots were a surprise to analysts and prompted long liquidation. We now look for further fundamentals but would hold long positions for now. "Barbecue season" fast approaching and demand usually increases around the Memorial day holiday weekend. In 2011 prices for cattle set a record high as retail demand rose.. This year increases in feedlot population could cause pressure as our expectation of a continued recessionary trend may reduce demand. July hogs closed at 91.65c per pound, up 1.10c Shortcovery in front of the weekend along with concern over commodity purchase demand from China. We prefer the sidelines in hogs.

Coffee, Cocoa and Sugar: May coffee closed at $1.8225 per pound, up 5.8c tied to concerns over Brazilian weather. Coffee prices sold off recently but on a technical basis the selling may be overdone. Expectations for surplus reductions and a continuing supply deficit from last year could prompt new buying in coffee. We like the long side from here but use stops. May cocoa closed at $2,221 per tonne, down $2.00 on profittaking after recent buying tied to a projected shortfall for the 2011-2012 supply. Expected demand could prompt new buying in cocoa. We like cocoa from here but use stops. May sugar closed at 24.68c per pound, up 8 ticks. One forecaster suggests a downgrade for the Brazilian cane crop and could prompt additional buying in the near term. We like sugar from here but as with other softs, use stop protection. I included the sugar chart here for reference purposes.
Cotton: July cotton closed at 93.92c per pound, up 19 points as cotton prices continue to improve even against the possibility of lower demand from a major importer, China. We prefer the long side based on a "continuation" chart and production concerns. Use stop protection and for those who have already established long positions based on our recommendation, bring up those trailing stops.

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About the Author
John L. Caiazzo



Information provided is from sources deemed to be reliable but not guaranteed. Futures and Options trading involve a high degree of risk and may not be suitable for everyone. John Caiazzo is a registered commodities broker with over 40 years experience in investments and opinions are his own and not of the Futures Commission Merchant to which he introduces his clients.

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