Energies: June crude oil closed at $104.93 per barrel, up 38c on pre weekend shortcovering and its highest settlement since April 2nd. The weaker than expected GDP reported by the U.S. Cmmerce Department of 2.2% was weaker than the expected 2.6% by economists but failed to offset the Energy Information Administration report showing better than expected February U.S. oil demand. Demand for energy products increased in spite of higher prices. We continue to view prices as too high to be sustainable against our expectation for a continued recessionary environment globally. Buy put options on crude but allow for increased time expirations.
Copper: July copper closed at $3.83 per pound, up 6c or 1.59% tied to reports of reduced inventories and continued low interest rates which are expected to provide for increased manufacturing and demand. Japanese copper cathode exports to China were down 5% in March from the prior year and increased stockpiles in China had provided for recent weakness. Shortcovering on concerns over mine production was also a factor in the buying as a production disruption at Freeport-McMoran’s Grasberg mine in Indonesia and lower grade copper at the Rio Tinto Kennecott mine in Utah were also positive factors for the renewed buying. We have been negative on copper and trailing buy stops would have been touched off but new selling or buying of put options can now be instituted on a scale tied to our expectations of increased concern over global economies. Most of our trade recommendations in futures require the use of stop protection.
Precious Metals: June gold closed at $1,664.80, up $4.30 against the weak dollar and slower than expected U.S. economic growth in the first quarter of the year. Another factor in the demand for precious metals was the concern over the downgrade of Spain’s credit rating by Standard & Poors Ratings Services late Thursday. July silver traded at $31.285, up 90 points in late trading while the white metals, platinum and palladium also gained. July platinum closed at $1,575.70, up $5.50 or 0.4% while June palladium fared better than platinum closing at $681.50 per ounce, up $8.85 or 1.3%. Our recommended spread long palladium, short platinum improved once again for our readers.
Grains and Oilseeds: July corn closed at $6.25 ½ per bushel, up 18c on shortcovering after recent weakness and on talks of China possibly buying to replenish reserves. Corn and wheat rallied on reports that an order for U.S. corn was the biggest one sale in 20 years and traders assumed China was back in the market. The weak dollar also provided support. We prefer the sidelines in corn. July wheat closed at $6.50 per bushel, up 14 1/2c also on shortcovering after weakness and against the weak dollar. We are on the sidelines in wheat. July soybeans closed at $14.93 ½ per bushel, up 13 1/4c and continues to rally on report by the USDA of orders for 216,000 tonnes of soybeans with half going to China. A day after releasing weekly sales figures exceeding market expectations. A disappointing South American harvest and downgrades following the frost in Argentina has provided the impetus for soybean demand forward. We have favored the long side of soybeans for some time and have not changed our opinion.
Meats: June cattle closed at $1.1285 per pound, up 47.5 points but failed to recover previous losses. A concern by Russia and South Korea after the discovery of a case of mad cow disease in California had some effect on prices but U.S. officials at the USDA said the infected cow was "never presented for slaughter for consumption, so at no time presented a risk to the food supply chain or human health". Taiwan was also closely monitoring the situation and would closely inspect all documentation to ensure public safety. The psychological impact however prompted immediate long liquidation but on Friday shorts covered. We had been bullish for some time and are now cautiously optimistic. Hold current positions. July hogs closed at 87.525 per pound, down .95c With no fundamental news to prompt position taking we continue to favor the sidelines in hogs.
Coffee, Cocoa and Sugar: July coffee closed at $1.762 per pound, up 35 points tied to the dollar weakness and interest in Brazilian beans. Roasters sought Brazilian beans as Colombian demand dwindled with reduced output tied to bad weather, and plant fungus. March exports were also sharply lower from Colombia. We continue to favor the long side of coffee from here but use stop protection on any new longs and raise trailing stops on existing positions. July cocoa closed at $2,300 per tonne, up another 28 dollars and briefly traded at the session high of $2,316. We have been bullish for cocoa and still look for prices to move higher possibly breaching the $2,500 technical resistance level. Hold longs, add on setbacks and use stops. July sugar closed at 21.33c per pound, up 8 points on the weak U.S. dollar but moreso on technicals as sugar is "attempting" a bottom after recent prices around the 25c level. We had been bullish but recent selling without positive fundamentals led us to the sidelines. Hedging pressure from the Brazilian harvest might add to weakness and provide an opportunity to buy.
Cotton: July cotton closed at 91.23c per pound, down 88 points mostly on profittaking after recent sharp price gains. After the July contract traded as low as 86.15c on April 16th due to heavy long liquidation by funds, cotton has moved sharply higher on shortcovering and new buying. The precipitive move from the late March high of 93.73c to the April 16th low of .8655 represented a "washout" of long positions and the addition of heavy short positions by technically oriented trading programs. The buying from those lows appear to be heavy shortcovering by funds. We saw that as a "golden opportunity" to buy but also indicated stop protection was a necessity due to the extreme price differentials. We continue to favor the long side but bring up those trailing stops. The current price level is nearly a 50% correction from that recent high to the lows.