Grains and Oilseeds: September corn closed at $7.98 ½ per bushel, up 3/4c and remains near alltime highs tied to the severe drought conditions in the growing areas. However, recent selling on profittaking and on soft demand prompted the decline from the $8.17 recent level. We are on the sidelines for corn since any improvement in weather could have a dramatic effect on prices even though the current damage to crops will not improve enough to alter recent estimates by the USDA. Stay out for now. September wheat closed at $8.74 ½ per bushel, up 12 3/4c on reports that the Ukraine and Russia may halt new grain sales due to lower production estimates in the Black Sea region. Expectation for light rains however, limited price gains and we could see sideways price action based on emerging reports. The U.S. drought situation persists and we could see further price gains early in the week. We prefer the sidelines in wheat. November soybeans closed at $16.45 ¾ per bushel up 20 1/2c on Friday but remains in the middle of the recent range between $16.90 and $15.36. Cash basis provided support after early week selling pressure. We remain bullish for soybeans and as we suggested in recent weeks, add to long positions on any setbacks. Use trailing stops.
Meats: December cattle closed at $1.2820 per pound, up 1.25c tied to better cash prices for beef. After the close the USDA released the monthly Cattle on Feed report showing the number of cattle on feed up 1% from last year. July placements however were down 10%. With farmers having pushed animals to slaughter tied to increasing feed costs, prices had declined to the $1.23 level in late June and early July. Shortcovering prompted the return to current levels and we could see continued sideways action for now. However, since it takes a couple of years to replenish herds, our longer term expectation is for higher prices. December hogs closed at 73.6c per pound, up 70 points tied to heavy hog slaughter estimates. We could see further increases in slaughter tied to the increase lack of feed and sharply higher feed prices. We now look for higher hog prices after having been on the sidelines for some time.
Coffee, Cocoa and Sugar: September coffee closed at $1.6030 per pound, up 1.45c on shortcovering but still lost 3.6% for the week. After trading as high $1.90 in July, prices have dropped considerably but recent rains keeping farmers from the fields may prompt continued shortcovering and new buying. We like coffee from here but use stop protection. September cocoa closed at $2,487 per tonne, up $63 on speculation the dry weather will reduce output in Ghana, the top grower behind Ivory Coast. We could see further price gains and like cocoa from here for a move through $2,500 to the $2,650-2,700 level. Use stop protection here as well. October sugar closed at 20.18c per pound, up 3 ticks on shortcovering after 14 losing sessions but we see no reason to jump in at the present time. The buying on Friday was shortcovering and in conjunction with strength in other commodities. Stay out for now.
Cotton: December cotton closed at 73.30c per pound, up 71 points on shortcovering but remains rangebound after recent world crop reports. We could see additional shortcovering and would buy a few calls to participate. Recent reports from India could suggest a production shortfall so we may have seen an interim bottom. Use stop protection on any new buying.