Stocks, commodities react to Fed's latest plan

Economic deck chairs?

Grains and Oilseeds: December corn closed at $7.82 on Friday, up 8 3/4c on general commodity strength and production estimate down from last month. We prefer the sidelines in corn. December wheat closed at $9.24 ¼ per bushel, up 23 3/4c. Australia expects its wheat crop to possibly be at a five year low tied to dryness in the growing regions. The weak dollar also played a part in the buying of U.S. wheat. We could see higher prices but at current levels a correction is due. Stay out for now. November soybeans closed at $17.39 per bushel, down 9 1/4c on profittaking but with the USDA production estimate down and continued dryness expected in the growing areas of the U.S., we would use any further weakness as a buying opportunity. Our ultimate price goal is $19-20 per bushel.

Meats: December cattle closed at $1.29725 per pound, down .625c tied to a better cash market and the weak U.S. dollar. We remain bullish for cattle but would raise trailing stops. December hogs closed at 73.45c per pound, up 1.075c on shortcovering and against the weak dollar. The increase in moving animals to slaughter tied to high feed prices seems to have diminished but with weights running above last year and the five year average, continued marketings are expected to keep pressure on prices. With this past week slaughter the largest in over 4 years, we would hold current longs but raise trailing stops.

Coffee, Cocoa and Sugar: December coffee closed at $1.81.10 per pound, up another 2.06c on shortcovering and the weak U.S. dollar. For the week coffee gained 11% on shortcovering after prices lost 20% early in the year tied to the certified stockpiles surpassing 2 million bags which was the highest since August of 2010. We continue to favor the long side of coffee but raise trailing stops. Any dollar rally or technical selling could provide a substantial correction. December cocoa closed at $2643 per tonne, up $24 tied to the weak U.S. dollar but also on Ivory Coast actions to protect farmers from price volatility. Price guarantees a factor. We had liked cocoa from a move about $2500 per tonne but prices have surpassed our goal. Stand aside for now. October sugar closed at 19.91c per pound, up 19 points tied to the weak dollar but strength from concern that rains may dissrupt the harvest in Brazil, the world’s largest producer could cut their output and a decline in exports from India also helped prices. We like sugar and would look for an interim move to the $22-23c level. Use stop protection.

Cotton: December cotton closed at 75.90c per pound, up 2.37c on the weak dollar and on good export sales. The U.S. Fed’s announced stimulus program also a factor in the expectation that any economic improvement would help consumer commodities. We like cotton from here but if the dollar stabilizes, we could see a minor correction. We would use that correction to buy cotton. Use stop protection.

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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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