Commodities retreat after Fed-induced margin calls

Grains and Oilseeds: September corn closed at $5.91 ¾ per bushel, down 6 1/2c on technical factors, the strong dollar and no negligible weather related threat to U.S. crops. Stay out for now even though a corrective "bounce" could occur early in the week. September wheat closed at $7.04 ½ per bushel, down 3 1/4c as traders and analysts await yield reports from the early harvesting of winter wheat in the Southern Plains. Stay out for now. November soybeans closed at $12.70 ¼ per bushel, down 14 3/4c on technical selling, the strong dollar, and the expectation of increased planted acreage of soybeans in the U.S. We have favored the long side of soybeans but would only hold long call positions and not add for now.

Coffee, Cocoa and Sugar:

September coffee closed Friday at $1.1945, up 1.10c on short covering after recent weakness tied to Brazilian deliveries against the New York contract even at a 9c discount. We continue to favor the sidelines in coffee with the weak Brazilian Real prompting additional origin selling. September cocoa closed at $2,156 per tonne, down $1.00 tied to the U.S. dollar strength but in anticipation of a U.S. economic slowdown caused by the Federal Reserve proposed action of reducing quantitative easing. Stay out for now. March sugar closed at 16.97c up 4 ticks but remains weak tied to reduced demand and sufficient supplies. Friday light short covering tied to increased Brazilian conversion to ethanol. Stay out.

Cotton:

October cotton closed at 85.71c per pound, down 21 points and remains under pressure from long liquidation and farm selling. Some concern over weather in the delta could prompt short covering but we prefer the sidelines for now until an assessment of any impact from the severe weather materializes.

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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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