Grains and Oilseeds: December corn closed at $7.45 ¼ per bushel, up 4 1/4c tied to a government report showing improved export demand. December wheat closed at $8.47 ¼ per bushel, up 2c tied also to the USDA report. March soybeans closed at $14.004 per bushel, up 6 3/4c after a government report showed increased demand for exports. We like “food” but would be inclined to limit purchases to call options for now bearing in mind recent wide price swings.
Meats: February cattle closed at $1.32725 per pound after touching an intra-session high of $1.32925, an all-time high for the most active contract. We favor the long side of cattle from here. December hogs closed at 82.475c per pound, up 72.5 points also on shortcovering and against the weak U.S. dollar. We prefer the sidelines until fresh fundamentals emerge but would hold long call positions in meats.
Coffee, Cocoa and Sugar: December coffee closed at $1.42 per pound, down 2.8c while March closed at 19.14c per pound. The pressure in coffee was from reports of rising supplies in Brazil, the world’s biggest grower. Stay out for now. December cocoa closed at $2,574 per tonne, up $43 on continued shortcovering and new buying as well as the weak dollar. We could see continued buying against Barclays Capital expectations for a world cocoa production deficit and “firm demand.” March sugar closed at 19.19c per pound, down 45 points tied to producer selling. We prefer the sidelines until some sort of reversal or correction emerges and better fundamentals. Higher margin requirements set by the exchange also a factor in the selling pressure as the new margins are retroactive and must be met to hold positions.
Cotton: December cotton closed at 69.72c per pound, down 2.66c on continued long liquidation and waning Chinese demand. Selling pressure even against reduced expectation for planting acreage in favor of soybeans. We prefer the sidelines for now.