Grains and Oilseeds: December corn closed at $7.39 ¼ per bushel, down 2c. December wheat closed at $8.86 ¾ per bushel, down 15 3/4c and March soybeans closed at $14.36 ¼ per bushel, down 40 1/4c. Grain and soybean futures sold off after the USDA projected larger than expected domestic supplies for all three. We are now on the sidelines and awaiting fresh fundamentals such as supply and weather.
Meats: December cattle closed at $1.25675 per pound, up 250 points and remains rangebound and basically stagnant. One can make the argument that higher feed prices led to the accelerated marketing of animals but the fact remains that current prices are more or less in line with supply/demand factors. We prefer the sidelines for now. December lean hogs closed at .8090c per pound, up 70 points on the basis that the recent slaughter of breeding sows added to short term supply, but for the longer term could impact supply and lead to higher prices. Any purchases should be call options going out to April or even July.
Coffee, Cocoa and Sugar: Every time coffee looks to have formed a bottom, a new surprise prompts additional long liquidation and new short positions. The International Coffee Organization indicated a record harvest will return the market to surplus for the first time in over five years. Stay out for now but remain vigilant for any weather or crop problems which could prompt a sharp corrective rally. Otherwise just think about a few calls "hoping" for problems especially at current low prices. That’s the former pit trader in me talking though. December cocoa closed at $2367 per tonne, up $30 on forecasts for lower production tied to adverse weather conditions in West Africa. Production may have been hampered by the weather and a new forecast for a 98,000 tonne deficit by Barclays prompted the renewed interest. I like cocoa from here but with stop protection. March sugar closed at 19.17c per pound, up 33 points on light shortcovering in front of the weekend. After posting a two year low on data showing production in Brazil’s key Center South region was ahead of the previous year for the first time, with ouput expected to be up 73% against the same period last year. We are on the sidelines until further fundamentals emerge.
Cotton: December cotton closed at 69.75c per pound, up 49 points on shortcovering after recent heavy selling tied to forecasts for increased global cotton inventories. Larger than expected output from the United States, the world’s third largest producer and reduced demand from China, the world’s largest consumer prompted the recent 10c per pound decline. We could expect a corrective rally on any change in fundamentals but for now the sidelines appear the prudent choice.