Grains and Oilseeds: September corn closed at $7.40 ½ per bushel, up 9 1/4c on continued hot dry weather impacting crops. We could see additional crop damage and yet higher prices. Corn is used for both food and for fuel such as ethanol where 40% of the U.S. crop goes to ethanol production. Brazil where sugar is used to produce ethanol is also having problems due to weather concerns. We would hold long corn positions but any new purchase should be limited to call options where the risk can be controlled to a greater degree than with futures even with stop protection. September wheat closed at $8.47 ¾ per bushel up a penny but has rallied over $2.00 from the $6.25 low of mid June. Each dollar is equivalent to $5,000 in grains as the contract is for 5,000 bushels for corn, wheat and soybeans. We look for higher prices across the board but with substantial dollar wise corrections along the way. Use options. November soybeans closed at $15.52 ½ per bushel, up 23 1/2c and up from early June’s $12.50 prices. We expect, barring any weather improvement, for soybeans to continue higher. We have favored the long side of soybeans for some time and while recommending taking profits along the way, getting back on the long side using stop protection. Stay with the soybeans.
Meats: August cattle closed at $1.1720 per pound, up 1.75c along with other commodities and tied to dollar weakness on Friday. However, with higher feed prices, farmers are likely to continue moving cattle to market adding to supply so we would hold off any new purchases. August hogs closed at 90.4c per pound, down 1.875c per pound tied to some degree to high temperatures reducing demand for outdoor grilling. Demand decline along with some farmer movement to market also a factor. We have not favored the long side of hogs but would not consider shorting "food". Stay out.
Coffee, Cocoa and Sugar: September coffee closed at $1.8610 per pound, up 4.05c on shortcovering and technical buying by funds. Coffee prices have rallied from the mid June lows around $1.50 on concerns over Brazilian weather and potential cold front moving through the coffee growing areas. The weak dollar on Friday was also a factor and while we had favored coffee, we would now look to take profits and stand aside for now. September cocoa closed at $2,216 per tonne, up $27 tied to the weak dollar and continued Asian buying. We could see further prices to the $2,300-2,350 area which we consider resistance. Add to current long positions but use stop protection. The U.S. second quarter grind reflecting demand will be released July 19th. October sugar closed at 22.73c per pound, up 27 points tied to the weak dollar and concern that Brazilian rains could reduce output. We like sugar for a move to the $23.50-24c level but use stop protection in the event the dollar regains its "footing" and rallies from here.
Cotton: December cotton closed at 72.66c per pound, up 2.73c and the highest closing price in over three weeks. The gains attributed to the dollar weakness but moreso by the report of China’s GDP growth in the second quarter. China is the world’s largest consumer of cotton. We continue to favor the long side of cotton from here.