Market clues to watch for following big commodity losses

Should U.S. leaders focus on home or Europe?

Grains and Oilseeds: July corn closed at $5.98 per bushel, up 4c tied to hot dry weather. While scattered showers are forecast for the U.S. Midwest corn and soybean growing areas in the next few weeks, the rains are expected to miss much of the corn belt and could provide for additional buying of corn. We could go long corn from here but with stop protection. July wheat closed at $6.30 ¼ per bushel, down 11 1/2c on continued weakness from the strong dollar and the forecast of a bumper crop next year. Analysts continue to expect the USDA to cut its forecast for next years harvest however. Expectation for improved yields also a factor in the negativity. We prefer the sidelines in wheat. July soybeans closed at $14.28 ¼ per bushel, down 1 3/4c tied to the strong dollar and Fed Chairman’s statement reducing expectation of a new round of economic stimulus. Earlier strength was attributable to the China interest rate cut which could have indicated an increase in demand for U.S. soybeans. We continue to favor the long side of soybeans.

Meats: August cattle closed at $1.2082.5, up 40 points on shortcovering after recent weakness. With slightly improved demand, we could see further strength. We like cattle from here but with tight stops. August hogs closed at 92.45c per pound, up 4.25c and gained 12% from a low of 85c in early May. Demand from u.S. processors are expect to slow after the recent rally. We prefer the sidelines in hogs.

Coffee, Cocoa and Sugar: July coffee closed at $1.5560 per pound, down another 10.5c on continued weakness on oversupply and reduced demand. The recent selloff from the April highs near $1.90 could prompt a shortcovering rally but we prefer the sidelines until more definitive fundamentals emerge. July cocoa closed at $2200 per tonne, down $26 also tied to reduced demand on concerns over the European economic situation and adequate supplies. With no new fundamentals from the African growing areas, we could see continue indifference toward cocoa. Stay out for now. July sugar closed at 19.98c per pound, up 22 points on continued shortcovering on concerns that wet weather may hamper harvesting from Brazil the largest exporter of sugar. We could see further price gains and would want to be long from here but with stop protection.

Cotton: July cotton closed at 72.90c per pound, down 99 points tied to the strong dollar, ample supplies, and concern that the current european debt crisis would curb demand for cotton. Expectation for an increased output in the U.S., the top exporter, of 17.63 million bales in the year starting August 1s will be up from the 17 million bale estimate by the USDA last month keeping pressure on prices. We look for a shortcovering rally after recent losses and would only buy with stop protection however.

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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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