Grains and Oilseeds: September corn closed at $8.00 per bushel, down 18 1/4c after trading as high as $8.43 ¾ on the USDA monthly supply/demand report showing a cut in its forecast for U.S. corn production. However prices fell on a disappointing USDA forecast for domestic corn inventories. We once again suggest the sidelines for clients not willing to assume the risk of wide price swings. September wheat lost 27 3/4c to close at $8.85 ¼ per bushel. Wheat followed corn up and then down as both are used for food and animal feed and are linked. Stay out of wheat also. Our favorite in the group however continues to be soybeans. November soybeans closed at $16.43 ¾ per bushel, up 12 1/2c on the USDA announced sale of 290,000 metric tons of soybeans to China during the 2012-2013 marketing year. A number of similar announcements during the week indicates continued strong demand for soybeans regardless of high prices. We continue to suggest the purchase of soy on any declines as we have for some months now. We don’t see an intermediate "top" for the time being although serious resistance between $18 and $20 can be expected. Take some profits "off the table" when available and then look to re-establish longs using stop protection of course.
Meats: December cattle closed at $1.2845 per pound, down 50 points with December hogs closing at 73.425c per pound, also losing a half penny. With poor grazing and high feed costs, animals are being pushed to market and while that portends short term supply gains, for the longer term, herd replacement will take time and eventually prompt supply cutbacks. For now the sidelines is the safe place to be unless you eat a lot of beef, and put out pork spareribs at barbecues…..
Coffee, Cocoa and Sugar: September coffee closed at $1.6640 per pound, down 5 ticks. ICE certified arabica coffee stocks were up 12,301 lots to 1,820,401 on August 9th, the highest since September of 2010 and over 65,000 lots are awaiting grading. Selling pressure should remain and we prefer the sidelines. September cocoa closed at $2,438 per tonne, down $25 on profittaking but still managed a 2% gain for the week. An El Nino weather pattern is under way and could cause widespread drought in Africa and Australia. Shortcovering and new buying on those concerns pushed prices up from the $2,200 per tonne area to nearly $2,500 per tonne, a figure we had been looking at for some time. We like cocoa but at current prices would await profittaking setbacks before buying. October sugar closed at 20.88c per pound, up 8 ticks even though the USDA lowered its forecast for domestic sugar supplies in the 2012-13 marketing year. Brazil, a major grower forecast improved transportation progress as well as better growing weather in India, the Number 2 producer. We prefer the sidelines in sugar.
Cotton: October cotton closed at 72.90c per pound, down 2.69c after hitting 75.52 during the session. Without new fundamentals and in line with other weak demand from China for commodities, we prefer the sidelines.