Fiscal cliff stand-off wild card for markets

Grains and Oilseeds: March corn closed at $7.53 ¾, down 5¢ on reduced demand and adequate supplies. March wheat closed at $8.63 ¼ per bushel, down 22.25¢ on profit taking after having gained 1.7% in November and on concerns over U.S. government budget stalemate. March Soybeans followed the other pits losing 6.25¢ per bushel to close at $14.34 ¾. The recent rally prompted the U.S. increased value of exports pushed prices higher but profit taking emerged on ideas of an overbought condition. We are on the sidelines for now pending further fundamental news.

Meats: February cattle closed at $1.30525, down 1.575¢ per pound on speculation a weaker U.S. economy could result in lower demand. February hogs closed at 87.125¢ per pound on reduced demand for pork which could be attributed to economic concerns. We could see additional profit taking after the recent rally and would only hold existing option positions for now.

Coffee, Cocoa and Sugar: March coffee closed at $1.4985, down 6.55¢ on higher production from Brazil, the world’s largest producer as well as from Colombia, the second largest producer. Stay out but do not short since fundamentals could change “on a dime”. March cocoa closed at $2,486 per tonne, down $5.00 on continued sideways trading in a narrow range. We prefer the sidelines since the questionable U.S. budgetary impasse could result in lower global demand. March sugar closed at 19.33¢ per pound down one $11.20 tick and is “stuck” at recent lows. A few calls may be in order if only due to the low price relative to recent market action.

Cotton: March cotton closed at 73.8¢ per pound, up 45 points as an interest has developed for cotton tied to reduced sowings in Australia. Farmers have cut sowings for 2012-13 by 30% in excess of previous planting ideas. In the non-irrigated areas the decline in sowings could be as much as 50% and that could bode well for prices. We like cotton from here.

 

 

 

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About the Author
John Caiazzo

John has over 40 years experience at major U.S. Brokerage firms as Manager and Director of various International Divisions and is the founder of his own trading and brokerage firms. Over the years John has gained a wealth of knowledge and experience in all aspects of investments and trading. He was also a floor trader at the Commodity Exchange in New York. He formed Acuvest in 1999 and can be reached at futures@acuvest.com.

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