"Economic improvements" prove irrational exuberance

Grains and Oilseeds:

March corn (CBOT:CH14) closed at $4.31 ¾ per bushel, up 19 3/4c tied to the USDA lowering its forecast for corn production as yields declined. We could see further gains tied to the devastating effect of the worst drought in decades on corn production. Use stop protection on any new purchases. March wheat (CBOT:WH14) closed at $5.68 per bushel, down 16 1/4c tied to the USDA report showing an increase in marketings of 608 million bushels against last month’s 575 million bushel forecast. Stay out of wheat. March soybeans (CBOT:SH14) closed at $12.77 ¾ per bushel, up 4c as the USDA report was basically neutral and we expect further price gains after the recent decline from the $13.30 levels of December. Hold soybeans.

Livestock:

February cattle (CME:LCG14) closed at $1.3715, up 60 points to new highs as concern over shrinking animal supplies could prompt continued strength. The number of cattle in American feedlots is the second lowest on record and could produce shortages for beef. Buy calls on cattle for a possible more to the $1.50 level. February hogs closed at 85.80c per pound, up 55 points tied to persistent report of a virus that kills young pigs and will cause shortages and higher prices at the retail level. We could see prices move to price levels above 90c and possibly to the October highs around 94c. We would buy calls here.

Coffee, Cocoa and Sugar:

March coffee (NYBOT:KCH14) closed at $1.2040 per pound, up 1.05c tied to the weak dollar and expected production declines from Brazil. We could see higher prices but prefer the sidelines in coffee. March cocoa (NYBOT:CCH14) closed at $2,706 per tonne, up $22 in sideways action and remains in a range between the November $2,575 and December $2,840 prices. Good arrivals from the Ivory Coast and Ghana could provide some pressure going forward. We prefer the sidelines. March sugar (NYBOT:SBH14) closed at 15.60c per pound, up 12 ticks and remains under pressure near the recent lows. We are on the sidelines in sugar.

Cotton:

March cotton (NYBOT:CTH14) closed at 82.9c per pound up 9 little points mostly against the weak dollar but in line with expectations of reduced Chinese demand. We prefer the sidelines in cotton.

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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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