QE taper expectations driving markets to new highs

Grains and Oilseeds:

March corn (CBOT:CH14) closed Friday at $4.30 ¾ per bushel, down 5 3/4c tied to improved weather conditions for the final stages of the 2013-14 U.S. growing season even though some concern had prevailed over the late plantings. We like corn from here on a scale down basis on spreads against wheat. March wheat (CBOT:WH14) closed at $6.53 ½ per bushel, down 1 3/4c tied to adequate supplies and lack of fresh fundamentals. March soybeans (CBOT:SH14) closed at $12.64 ½ per bushel on profittaking after recent shortcovering but prices remain mid way between the August lows and September highs. We like soybeans but any purchases should be accompanied by stops.

Coffee, Cocoa and Sugar:

March coffee (NYBOT:KCH14) closed at $1.0925 per pound, up 3.6c or 3.4% on shortcovering after recent heavy selling tied to the weak Brazilian Real against the U.S. dollar. Large crops expected from Vietnam and oversupply in Brazil kept pressure on prices. Central American harvest is underway and could result in production gains. We prefer the sidelines in coffee. March cocoa (NYBOT:CCH14) closed at $2,726 per tonne, up $46 on continued technical buying. Good conditions for the current West African harvest could stall the rally in cocoa so we are on the sidelines here as well. March sugar (NYBOT:SBH14) closed at 17.63c per pound, down 1 tick tied to estimates of production surpluses this year. Sugar remains on our "no interest" list for now.

Cotton:

March cotton (NYBOT:CTH14) closed at 78.18c per pound, up 72 points on shortcovering after the recent sharp decline from the August 90c highs which saw a sharp decline to the 83c level. The shortcovering rally at that time took prices back to the 87c level but then another wave of selling took prices down to the current 77c level. The on again off again reports from China now indicate that they would be selling cotton from state reserves shortly and that could keep pressure on cotton. We like cotton between 77 and 75c per pound mostly on the basis of our view of an oversold condition.

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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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