Economic realities catch up to market, sentiment

Stock market drops as employment growth hits roadblock

Grains and Oilseeds: July corn closed at $5.51 ½ per bushel, down 3 3/4c on continued pressure from market condition and supply/demand factors. We continue to prefer the sidelines in corn. July wheat closed at $612.1/4 per bushel, down 31 1/2c on continued selling pressure from the recent USDA report. While exports were increased, the improvement in harvests kept prices under pressure. Stay out for now. July soybeans closed at $13.44 ¼ per bushel, up 4 1/4c on shortcovering after recent selling. Our recent bullish stance has been mitigated and we now would only hold long call positions. Selling across the board by commodity funds tied to offsetting some of their losses in equity index holdings and margin calls are putting pressure on commodities.

Meats: August cattle closed at $1.1960, up 70 points on shortcovering after recent losses. The drop in prices for fattened cattle along with packer losses had prompted long liquidation. We continue to favor the long side but with nominal positions only and preferably the purchase of call options. August hogs closed at 91.30c per pound, up 350 points on shortcovering and new fund buying tied to seasonal adjustments. We could see further cash price increases as "barbecue" season progresses. We prefer the sidelines in hogs.

Coffee, Cocoa and Sugar: July coffee closed at $1.5750 per pound, down 3.15c on long liquidation and spreading of the arabicas against the robustas. Arabica coffee futures are down 27% for the year aainst robusta futures gain of 25%. Large arabica inventories were more than enough to offset recent demand gains and the European "taste" has declined due to economic conditions. We prefer the sidelines for now. July cocoa, closed at $2,063 per tonne, down $20 on continued price erosion. Stay out for now. July sugar closed at 19.09c per pound, down 33 points on long liquidation and disappointing fundamentals. We are on the sidelines for now. Overall global economic conditions are pressure many consumer commodities.

Cotton: July cotton closed at 68.59c per pound, down 2.96c tied to some extent to a change of opinion by Standard Chartered, a major player in the commodities market. The USDA data had shown a "good" or "Excellent" crop condition. We are on the sidelines.

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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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