Why The Dollar May Have Launched The Next Leg Down

The new contract low was triggered by news of
higher production, higher ending stocks and lower usage. The new low and new low
close is considered a bearish technical development. Ending stocks for the
2004/2005 season are now pegged at 1.96 billion bushels, up 116 million bushels
from last month’s forecast and up 74 million bushels from trade expectations.
Production was pegged at 11.807 billion bushels from 11.741 billion last month
and the USDA lowered their export forecast by 50 million bushels to 1.95 billion
bushels. For the quarterly Grain Stocks report, December 1st stocks came in at
9.449 billion bushels (the highest since 1987) which was 160 million bushels
above trade expectations and up 1.495 billion bushels from last year. Argentina
production was also revised higher to 17 million tons, up 1.5 million tons from
last months forecast. This helped push the world ending stocks estimate for the
2004/2005 season to 114.96 million tons, up 3.2 million tons from last month and
up 17.6 million tons from last year. Ending stocks are down from 122.5 million
tons for 2002/2003 and 148 million tons for 01/02. For the weekly export report,
released before the opening, traders are looking for sales near 600,000-800,000
tons as compared with 430,600 tons last week. Resistance for March corn comes in
at 202 1/2 and 204 3/4 with 198 and 196 3/4 as next support.

Technical Outlook

CORN (MAR) 01/13/2005: The sell-off took the
market to a new contract low. The major trend has turned down with the cross
over back below the 40-day moving average. The daily stochastics gave a bearish
indicator with a crossover down. Momentum studies trending lower at mid-range
should accelerate a move lower if support levels are taken out. The major trend
has turned down with the cross over back below the 18-day moving average. The
gap down on the day session chart is bearish with more selling pressure possible
today. The market is in a bearish position with the close below the 2nd swing
support number. The next downside target is now at 198. The next area of
resistance is around 202 and 204, while 1st support hits today at 199 and below
there at 198.

 

SOY COMPLEX RECAP

1/12/2005

March Soybeans finished down 9 1/2 at 533 3/4, 7
1/4 off the high and 3/4 up from the low. May Soybeans closed down 10 1/4 at 536
1/4. This was 3/4 up from the low and 6 3/4 off the high.

March Soymeal closed down 3.3 at 161.9. This was
0.3 up from the low and 2.6 off the high.

March Soybean Oil finished down 0.28 at 19.69,
0.25 off the high and 0.14 up from the low.

The gap lower opening and close near the lows
turns the short-term trend down. The USDA pegged US soybean production at 3.141
billion bushels which was 9 million bushels below the average trade estimate but
still an all-time record high. Ending stocks were pegged at 435 million bushels
which was down 25 million bushels from last month but still the highest since
1986/87. Pre-report estimates ranged from 415 to 500 million bushels. Crush was
revised higher to force ending stocks lower. For the quarterly Grain Stocks
report, December 1st soybean stocks came in at 2.305 billion bushels as compared
with the average trade estimate at 2.311 billion bushels (range 2.28-2.353).
This compares with 1.689 billion last year and is the highest December 1st
stocks on record. World ending stocks for the 2004/2005 season were pegged at
60.8 million tons from 60.57 last month, 38.86 million last year and 40.67
million two years ago. World ending stocks are also a record high. For the
weekly export report, released before the opening, traders are looking for
soybean sales near 500,000-700,000 tons, meal sales near 50,000-125,000 tons and
oil sales near 5,000-10,000 tons. Resistance for March soybeans comes in at 539
and 544 with support at 530 1/2 and 525 1/2. A close under 531 may be necessary
to signal a resumption of the downtrend with 486 3/4 as next swing count on
another leg down.

Technical Outlook

BEANS (MAR) 01/13/2005: The close under the
60-day moving average indicates the longer-term trend could be turning down.
Positive momentum studies in the neutral zone will tend to reinforce higher
price action. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The market setup is somewhat negative with
the close under the 1st swing support. The next upside objective is 543 1/4. The
next area of resistance is around 537 3/4 and 543 1/4, while 1st support hits
today at 529 3/4 and below there at 527 1/2.

MEAL (MAR) 01/13/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The cross over and close above the 18-day moving average
indicates the longer-term trend has turned up. The market setup is somewhat
negative with the close under the 1st swing support. The next upside target is
165.3. The next area of resistance is around 163.3 and 165.3, while 1st support
hits today at 160.5 and below there at 159.6.

BEANOIL (MAR) 01/13/2005: The market was pushed
to a new contract low. Daily stochastics declining into oversold territory
suggest the selling may be drying up soon. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The market setup
is somewhat negative with the close under the 1st swing support. The next
downside target is now at 19.33. The next area of resistance is around 19.88 and
20.10, while 1st support hits today at 19.50 and below there at 19.33.

 

WHEAT MARKET RECAP

1/12/2005

March Wheat finished up 3/4 at 307 1/4, 1 1/4 off the high and
5 1/4 up from the low. May Wheat closed up 1/4 at 314 1/4. This was 3 3/4 up
from the low and 2 3/4 off the high.

Weakness in the other grains along with higher
than expected stocks and lower demand forecasts for the old crop season helped
drag the wheat market lower after the higher opening. Even new crop July futures
were down more than 2 cents on the day into the mid-session. July recovered and
pushed higher on the day which supported the March contract off of the lows. The
USDA pegged ending stocks for wheat for the 2004/2005 season at 583 million
bushels which was up 30 million bushels from last month and up 36 million
bushels from trade expectations. However, the outlook for the 2005/2006 season
improved with the first forecast for winter wheat seedings at just 41.567
million acres which was down 1.63 million acres from trade expectations and down
1.78 million acres from last year. At last years average wheat yield, 1.78
million acres would produce about 77 million bushels of wheat. Soft red winter
wheat plantings fell to just 6.6 million acres which was down 900,000 from trade
expectations and down and down 1.7 million acres from last year. For the Grain
Stocks report, the USDA pegged December 1st stocks at 1.431 billion bushels from
trade estimates at 1.424 billion bushels (range 1.412-1.449) as compared with
1.520 billion last year. World wheat production was revised higher again to a
record 620.89 million tons which pushed world wheat ending stocks to 145.29
million tons from 142.8 million last month and from 130.9 million tons for the
2003/2004 season. This is still well below ending stocks for 2002/2003 at 167.6
million tons and 202 million tons in 2001/2002. For the weekly export report,
released before the opening, traders are looking for sales near 300,000-400,000
tons as compared with 91,800 tons last week. March wheat resistance comes in at
308 1/2 and 311 1/2 with support at 302 and 299 3/4.

Technical Outlook

WHEAT (MAR) 01/13/2005: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend.
Rising stochastics at overbought levels warrant some caution for bulls. The
major trend could be turning up with the close back above the 18-day moving
average. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The next upside objective is 312 3/4. The next area of
resistance is around 310 1/2 and 312 3/4, while 1st support hits today at 304
and below there at 299 3/4.

 

LIVE CATTLE RECAP

1/12/2005

February Live Cattle finished up 0.17 at 92.05,
0.40 off the high and 0.87 up from the low.

January Feeder Cattle closed up 0.10 at 105.75.
This was 0.75 up from the low and 0.15 off the high.

Cattle closed mixed with February slightly higher
and April slightly lower on the day into the close. Commercial selling drove the
market sharply lower early in the session with traders appearing to second guess
the current demand factors. February cattle rallied 535 points off of last
Thursdays lows due to weather and from expectations that the Canadian cattle
border opening scheduled for March 7th would at least be delayed. Cash cattle
traded at $92.00 into the middle of the session which helped boost February
futures off of the lows. Cash is up $4.00 from last week. Slaughter came in at
just 115,000 head as compared with trade expectations of 116,000-124,000 head.
Boxed-beef cut-out values were up $2.55 to $153.21 at mid-session as compared
with $139.23 one week ago. The surge in beef prices helped support the close.

Technical Outlook

CATTLE (FEB) 01/13/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market now above the 18-day moving average suggests the longer-term
trend has turned up. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. The next upside objective is 93.200.
The next area of resistance is around 92.670 and 93.200, while 1st support hits
today at 91.420 and below there at 90.670.

 

LEAN HOGS RECAP

1/12/2005

February Lean Hogs finished down 1.25 at 75.80,
1.55 off the high and 0.07 up from the low.

February Pork Bellies closed down 1.67 at 95.52.
This was 0.27 up from the low and 1.67 off the high.

February hogs moved to the highest level since
December 1st before a sharply lower close as the weaker tone for the cash market
and the premium of futures to the cash market triggered some long liquidation
selling. Cash hogs at terminals were down 50 cents. The bearish weekly cold
storage report for the second week in a row has traders a bit nervous over the
outlook for demand for bacon and the potential that high protein diets are
loosing steam. Warmer weather in the Midwest helped trigger increased producer
marketings. The 2-Day Lean index for the period ending January 10th was up.53 to
71.80 as compared with 66.10 one week previous. Weekly average weights for
Iowa/Minnesota for the week ending January 8th were reported at 268.9 pounds
from 268.1 pounds the previous week and 265.3 pounds last year at this time.
This is a new all-time record high for weekly weights which normally trend lower
from a December peak. Slaughter came in at 397,000 head as compared with trade
expectations of 390,000-398,000 head.

Technical Outlook

HOGS (FEB) 01/13/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. The market could take on a
defensive posture with the daily closing price reversal down. The market’s close
below the 1st swing support number suggests a moderately negative setup for
today. The next downside target is 74.550. Short-term indicators on the
defensive. Consider selling an intraday bounce. The next area of resistance is
around 76.600 and 77.770, while 1st support hits today at 75.000 and below there
at 74.550.

 

COCOA MARKET RECAP

1/12/2005

March Cocoa finished up 18 at 1486, 16 off the
high and 9 up from the low.

March cocoa peeked above $1,500 as a sharp break
in the US Dollar gave the market a needed boost. The sharp sell off since the
November high has taken technical indicators to over sold levels and a close
back over $1,500 is likely to shift the market into a new higher trading range.
Reuters is reporting that Ivory Coast farmers continue to smuggle cocoa into
Ghana since prices to farmers are around 25% higher than in the Ivory Coast.
November US cocoa imports were reported to be down 21.4% vs October and down
29.8% from a year ago, which suggests the US 4th quarter grind could be
disappointing.

Technical Outlook

COCOA (MAR) 01/13/2005: The daily stochastics
gave a bullish indicator with a crossover up. Rising from oversold levels, daily
momentum studies would support higher prices, especially on a close above
resistance. The major trend has turned down with the cross over back below the
18-day moving average. The market setup is supportive for early gains with the
close over the 1st swing resistance. The near-term upside objective is at 1512.
The next area of resistance is around 1498 and 1512, while 1st support hits
today at 1474 and below there at 1463.

 

COFFEE MARKET RECAP

1/12/2005

March Coffee closed up 3.20 at 98.85. This was
2.60 up from the low and 1.30 off the high.

May coffee gaped higher on the opening from solid
support from the London market and posted gains of 320 points to close at
101.15. Producer selling was noted as light and when trade house buyers became a
bit more active, there was a lack of interested sellers above 99.50. Roaster
buyers have been quiet recently but the sharp drop in the dollar combined with
the sharp drop in futures off of the December 29th highs may have been enough to
prompt coverage. A close over 102.50 may be necessary to assume a resumption of
the uptrend for May coffee with 115.80 as next upside swing objective.

Technical Outlook

COFFEE (MAR) 01/13/2005: The major trend could be
turning up with the close back above the 40-day moving average. Daily
stochastics declining into oversold territory suggest the selling may be drying
up soon. The major trend has turned down with the cross over back below the
18-day moving average. Since the close was above the 2nd swing resistance
number, the market’s posture is bullish and could see more upside follow-through
early in the session. The next downside target is now at 94.65. The next area of
resistance is around 100.80 and 102.40, while 1st support hits today at 96.95
and below there at 94.65.

 

SUGAR MARKET RECAP

1/12/2005

March Sugar closed up 0.07 at 8.62. This was 0.04
up from the low and 0.08 off the high.

The sugar market pushed higher early in the
session from trade house and commercial buying but a lack of speculative
follow-through buying and some selling from locals triggered the 8 point break
off of the highs to close just 7 higher on the session. Talk that India has
bought up to 400,000 tons of raw sugar since the start of the year helped
provide support. India millers took advantage of the break in world prices, the
break in world freight rates and the rise in local prices to book needs.
Interest from Pakistan was also noted with nothing confirmed. The Sao Paulo Cane
Agroindustry Union (UNICA) indicated that total Brazil exports for the May 2004
to April 2005 season should come in near 16 million tons from 14.5 million last
year. In addition, total ethanol exports are expected to hit 2.4-2.5 billion
liters from 1.07 billion last year. In the USDA Supply/Demand report, production
was revised lower to 8.143 million tons from 8.234 million last month and 8.649
million last year. This pushed ending stocks for the 2004/2005 season to 1.574
million tons from 1.665 last month, 1.897 last year and 1.67 million tons for
the 02/03 season.

Technical Outlook

SUGAR (MAR) 01/13/2005: The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. Momentum studies are declining, but have fallen to oversold levels.
The close under the 18-day moving average indicates the longer-term trend could
be turning down. Market positioning is positive with the close over the 1st
swing resistance. The next downside objective is now at 8.51. The next area of
resistance is around 8.68 and 8.75, while 1st support hits today at 8.56 and
below there at 8.51.

 

COTTON MARKET RECAP

1/12/2005

March Cotton finished up 0.39 at 46.59, 0.11 off
the high and 0.70 up from the low.

The market shook off the bearish news from the
USDA reports with the focus of attention on hopes of lower production next year
and talk of higher than expected demand from China. Rising exchange stocks has
bullish traders a bit nervous as well. Certified stocks as of January 10th
increased to 62,274 from 61,639 bales the previous session. World production was
pegged at 115.64 million bales as compared with 114.02 million bales last month.
US production was revised higher to 23.01 million bales from 22.82 million bales
last month. Production is at a record high and up 25% from last year. World
ending stocks are now pegged at 47.12 million bales from 46.5 million as last
months estimate and from 35.61 million bales last year. China import demand was
revised higher to 8.75 million bales, up 1 million from last month. The higher
US production forecast was offset by the higher export forecast with exports
revised higher by 200,000 bales to 12.7 million bales. US ending stocks were
pegged at 7.7 million bales, unchanged from last month and up from 3.51 million
bales last year and 5.39 million bales two years ago. Pakistan production was
revised to 11.5 million bales from last months forecast of 10 million bales. For
the weekly export report, released before the opening, traders are looking for
sales near 130,000-180,000 bales as compared with 156,800 bales last week.

Technical Outlook

COTTON (MAR) 01/13/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. It is a mildly bullish
indicator that the market closed over the pivot swing number. The next upside
target is 47.25. The next area of resistance is around 46.99 and 47.25, while
1st support hits today at 46.19 and below there at 45.64.