Grains and Oilseeds: July corn closed at $6.02 per bushel, down 9c on profittaking after recent strength tied to reports of Chinese purchases. We favor the sidelines in corn. July wheat closed at $6.23 per bushel, down 7c on favorable weather conditions in the U.S. Great Plains. We favor the sidelines for now in wheat pending fresh fundamentals. July soybeans closed at $14.49 ½, up 28 1/2c tied to expectations of smaller South American harvests and increased demand. The buying allowed soybeans to reduce its weekly loss to 1%. Recent weakness was tied to the price gains in soybeans which could prompt farmers to plant more this year. We have favored the long side of soybeans for some time since the mid $13 level. A one dollar move is equivalent to $5,000 on a one contract basis. Stay long but raise those trailing stops.
Meats: June cattle closed at $1.1545, down 4c on continued selling pressure on increasing feed lots and cattle. We have favored the long side of cattle but after achieving our goal of $1.25 prices have come under pressure taking out some trailing stops. Hold off any new buying for now. July hogs closed at 87.95c per pound, down 1.375c on continued long liquidation. We remain sidelined in hogs.
Coffee, Cocoa and Sugar: July coffee closed at $1.79 per pound, up 3.35c on expectations of reduced production in Columbia tied to rainstorms in the world’s second largest arabica bean grower. The Columbian harvest failed to recover from wet weather reduction of 32% from the 2009 calendar year. Production from Columbia may be less than 7 million bags this season from the 7.8 million the prior season. Stay long coffee and add to longs on any price declines. Use stops on the entire position. July cocoa closed at $2,260 per tonne, up $26 on shortcovering and new buying tied to continued concern of bug infestation. We continue to favor the long side of cocoa since it made a low of $2056 on April 9th. Stay long but raise stops. July sugar closed at 21.64c per pound, down 13 points and remains under pressure even against concerns over Brazilian cane production. We expect prices to stabilize in this area after having declined from the mid March highs. We would buy here but only with stop protection around the recent lows.
Cotton: Cotton is mid range between the recent low of 87c and high of 94c. We have liked cotton from its lows and continue to favor the long side but with stops. Chinese accumulation of cotton in the national reserve is a bullish factor but Chinese intentions are always of some concern. Stay long but use stop protection.