Grains and Oilseeds: December corn closed at $7.49 ¾ per bushel, up 3 3/4c on shortcovering and against the weak U.S. dollar. Recent heavy selling tied to increased sowings by farmers pressured prices and were higher than recent USDA expectations. We continue to prefer the sidelines in corn. December wheat closed at $8.99 per bushel, up 19 1/2c on shortcovering, the weak dollar, and on reports that Russia may curb exports. We prefer the sidelines in wheat but would hold existing long positions. November soybeans closed at $16.24 ¾ per bushel, up 6c on light shortcovering after recent heavy selling tied to the increased soybean sowings by farmers. We had preferred the long side of soybeans for some time expecting to add to long positions on further price declines but the volatility and extent of the selling pressure, kept us on the sidelines. We could now see support at current levels between the $15.50 and $17.50 chart points. We would look to buy calls from here.
Meats: October cattle closed at $1.2552 per pound, down 23 points on continued pressure from a weak cash market and slow exports. While prices remain rangebound, we could see shortcovering from here but any new purchases must be accompanied by stop protection. October hogs closed at 75.80c per pound, up 95c on continued shortcovering after prices had fallen from the 82c level in recent weeks tied to heavy slaughter numbers. We prefer the sidelines but existing long call positions should be maintained.
Coffee, Cocoa and Sugar: December coffee closed at $1.7320 per pound, up 4.6c but well below the $1.95 posted in mid July. Increased certified stocks and arbitrage selling had pressured prices and the recent recovery could be tied to the weak dollar and shortcovering. We could see prices move either way so we would be on the sidelines for now. December cocoa closed at $2,528 per tonne, up $9.00 on shortcovering and the weak dollar. Reports that the Ivory Coast marketing council had sold most of the 2012-2013 harvest and concern over short term supply could support prices from here. December cocoa is mid way between the $2400 and $2700 prices and any news could prompt a "breakout" of the range. We like the long side from here but with stop protection. October sugar closed at 19.4c per pound, up 19 ticks after trading as two year lows. A major sugar broker, Czarnikow, reduced its estimate for worle production surplus and prices appear to have stabilized at these lows. We would buy sugar or buy calls on sugar right here but the futures should be accompanied by stop protection. We like the March contract for both futures and calls.
Cotton: December cotton closed at 73.32c per pound, down 1.9c as India’s monsoon failed to provide estimated damage and reports that China may release some of its huge stockpile could depress prices further. After trading as high as 91c in early April, prices collapsed to the 65c level but have steadily and slowly regained some of that loss to current levels. Whether prices can hold here is in question but with some stability between 70c and 72c we would buy some calls in anticipation of further price recovery.