Grains and Oilseeds: December corn closed at $8.08 ½ per bushel, down 6 1/4c after the longest rally since last year tied to the concern over crop damage from the drought. We prefer the sidelines in corn. December wheat also lost 6 1/4c per bushel to close at $8.88 ½ as concern over drought damage abated to some degree. Markets have a tendency to overdo reaction to news and revert to actual values after the "extreme" and technical "train" slows down. We prefer the sidelines in wheat as well since our work tells me the $9.00 level would provide heavy resistance on a technical basis. November soybeans closed at $17.31 ½ per bushel, up 16 1/2c and remains our favorite in the group. Our long standing suggestion to buy the "dips" remains intact but raise trailing stops.
Meats: December cattle closed at $1.27875 per pound, down 5.25c meeting resistance at the $1.28 level and forming a technical "pennant". We would move to the sidelines and await new fundamentals however, the current selling pressure is prompted by farmers moving animals to market as feed remains costly. Longer term we could see higher prices as it takes over a year to replenish herds once the market pressure abates. We would consider longs forward to June 2013. December hogs closed at 70.575 per pound, down 25 points and remain under pressure from rushing animals to slaughter on high feed prices. As with cattle, we could see a bottoming for prices around current levels but would only consider buying forwards as herds must be replenished at some point.
Coffee, Cocoa and Sugar: December coffee closed at $1.6310 per pound, up 1.25c on pre weekend shortcovering after the July highs around $1.90. We would take another look at the long side from here but support around the $1.50 level is a key factor. Increased surplus stocks a factor in the recent weakness. Use stop protection on any new buying between $1.60 and $1.55. December cocoa closed at $2,395 per tonne, up $10. Cocoa met selling at the $2,500 level but profittaking could bring prices down to the $2,325-$2,350 level. Weather a factor of concern and we like the long side from here but with stops. October sugar closed at 19.72c per pound, up 13 points on light volume. We prefer the sidelines in sugar pending new fundamentals.
Cotton: December cotton closed at 75.21c per pound, down 1.59c on an estimate increase for a global cotton surplus by Cotlook Ltd., the publisher of a benchmark cotton index. Some producers are attempting to lock in prices through the futures market and we could see additional long liquidation near term. We would stand aside for now.