Here’s What Could Be Propelling Treasuries Higher

Corn gave back all of Monday’s gains and came
within 1 tick of contract lows and the March close was a new contract low close.
Fears of a drop in domestic usage and a drop in exports has traders fearful of a
big jump in ending stocks for the morning report. Volume was slow with some
short-covering support being offset by the outlook for higher ending stocks for
the report out before the opening tomorrow. Traders are looking for an
adjustment higher in ending stocks for the USDA supply/demand report of about 80
million bushels from last month’s USDA forecast of 1.96 billion bushels. In
addition, world stocks could also swell with potential production increases from
Argentina and China. Positioning ahead of the report provided selling resistance
into the early short-covering bounce. Speculators held a record net short
position in all of the grain markets as of February 1st so the market remains
vulnerable to short-covering if resistance levels are violated and to more
speculative selling if support levels are violated. Gulf basis was mixed as
tight producer holding supported the nearby but a lack of exporter interest kept
the basis steady. Support for March corn comes in at 194 and 191 with resistance
at 197 1/2 and 198 1/4.

Technical Outlook

CORN (MAR) 02/09/2005: Daily momentum studies are
on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. The market back below the 18-day moving
average suggests the longer-term trend could be turning down. The market’s close
below the 1st swing support number suggests a moderately negative setup for
today. The near-term upside objective is at 197 1/4. The next area of resistance
is around 195 3/4 and 197 1/4, while 1st support hits today at 193 3/4 and below
there at 193.

 

SOY COMPLEX RECAP

2/8/2005

March Soybeans finished up 2 1/4 at 503 1/2, 2
1/4 off the high and 3 up from the low. May Soybeans closed up 1 1/2 at 506 1/2.
This was 2 1/2 up from the low and 2 off the high.

March Soymeal closed up 0.8 at 150.5. This was
0.8 up from the low and 0.7 off the high.

March Soybean Oil finished up 0.17 at 19.17, 0.05
off the high and 0.14 up from the low.

A lack of fresh demand news and positioning ahead
of the USDA Supply/Demand report for release before the opening tomorrow helped
trigger some choppy trade early in the session. Short-covering supported the
bounce into the mid-session but weakness in the other grains kept new buyers at
bay. Some traders are trimming South American estimates due to less than perfect
weather in all of the producing areas. Dryness in Rio Grande Do Sul for part of
the season and a dry trend this week helped provide some support. Given the
enormous world ending stocks forecast, it may take a significant revision higher
in demand or lower in world supply to have much of a price impact, however, a
shift to a slightly lower world production forecast in tomorrows report might
spark some pent-up buyers to get a little more active. Traders are looking for
an adjustment higher in ending stocks in the US supply/demand report of about 4
million bushels from last months USDA forecast of 435 million bushels. Meal
usage has not picked-up to the extent of trade expectations and traders are
nervous that crush demand may also be revised lower. Gulf basis was weaker this
morning do to lack of nearby interest. Resistance for March soybeans comes in at
507 and 510 1/4 with support at 500 1/2 and 498 1/2.

Technical Outlook

BEANS (MAR) 02/09/2005: The daily stochastics
have crossed over up which is a bullish indication. Rising from oversold levels,
daily momentum studies would support higher prices, especially on a close above
resistance. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The close over the pivot swing is a somewhat
positive setup. The next upside objective is 508 1/2. The next area of
resistance is around 506 and 508 1/2, while 1st support hits today at 501 and
below there at 498 1/4.

MEAL (MAR) 02/09/2005: The crossover up in the
daily stochastics is a bullish signal. The stochastics indicators are rising
from oversold levels, which is bullish and should support higher prices. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. The close over the pivot swing is a somewhat positive setup. The
next upside objective is 151.9. The next area of resistance is around 151.2 and
151.9, while 1st support hits today at 149.8 and below there at 149.0.

BEANOIL (MAR) 02/09/2005: The stochastics
indicators are rising from oversold levels, which is bullish and should support
higher prices. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The market has a slightly positive tilt with
the close over the swing pivot. The next upside objective is 19.33. The next
area of resistance is around 19.26 and 19.33, while 1st support hits today at
19.08 and below there at 18.96.

 

WHEAT MARKET RECAP

2/8/2005

March Wheat finished down 3/4 at 291 3/4, 3 1/4 off the high
and 2 1/4 up from the low. May Wheat closed down 1/2 at 300 1/2. This was 3 up
from the low and 3 off the high.

Speculative short-covering supported the higher
opening with futures moving to the highest level since January 26th on the open
before closing lower on the session. With speculators holding a record net short
position, some shorts seem a bit nervous about holding the position into the key
weather period just ahead and through the USDA supply/demand report for release
before the opening. However, a lack of supply concerns for the new season and
ideas that the soil conditions are favorable when the winter wheat crop breaks
dormancy in the spring helped to pressure. India officials revised their wheat
production forecast to 75 million tons from 73 million as previous forecast.
News from Ag Canada was also a bit negative with all wheat planted acreage for
2005 expected to jump to 26.5 million acres from 25.7 million for the 2004/2005
season. March wheat support comes in at 290 and 288 1/2 with resistance at 294
1/2 and 296 1/2.

Technical Outlook

WHEAT (MAR) 02/09/2005: The stochastics
indicators are rising from oversold levels, which is bullish and should support
higher prices. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The downside closing price reversal on
the daily chart is somewhat negative. The market has a slightly positive tilt
with the close over the swing pivot. The near-term upside objective is at 297
1/2. The next area of resistance is around 294 1/2 and 297 1/2, while 1st
support hits today at 289 and below there at 286 1/2.

 

LIVE CATTLE RECAP

2/8/2005

April Live Cattle finished up 0.15 at 88.80, 0.82
off the high and 0.15 up from the low.

March Feeder Cattle closed up 1.05 at 100.90.
This was 0.45 up from the low and 0.35 off the high.

April cattle closed 20 higher on the session but
gave back nearly 80 points during the last hour of trade. News that Japan was
getting closer to lifting the ban helped support the market early but talk that
the process will still take months before the ban is lifted helped water-down
the early support. Muddy feedlot conditions, especially in Kansas added to the
positive tone. The cash market tone is still firm with offers at $93-$94 as
compared with $91.00 trade last week. Boxed beef cutout values were up $2.76
into the mid-session to $147.61 as compared with $143.03 last week at this time.
The higher beef is expected to support better packer demand. Slaughter came in
at 113,000 head versus trade guesses ranging from 115,000 to 118,000.

Technical Outlook

CATTLE (APR) 02/09/2005: The upside crossover of
the 9 & 18 bar moving average is a positive signal. Positive momentum studies in
the neutral zone will tend to reinforce higher price action. 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 near-term upside target is at 89.920. The next area of
resistance is around 89.270 and 89.920, while 1st support hits today at 88.320
and below there at 88.020.

 

LEAN HOGS RECAP

2/8/2005

April Lean Hogs finished down 0.35 at 74.00, 0.85
off the high and 0.35 up from the low.

March Pork Bellies closed down 1.27 at 89.20.
This was 0.20 up from the low and 1.05 off the high.

April hogs closed 30 lower on the session and
down 90 from the highs as a sharp drop in February futures, weaker cash markets
and expectations for further weakness in cash this week helped to pressure the
market. February futures closed 195 lower. News that Japan was getting closer to
lifting the ban on US beef imports was seen as a bearish development and added
to the selling pressures as Japan may have booked more US pork during the beef
ban. Slaughter came in at 394,000 head versus trade guesses ranging from 391,000
to 396,000. The CME 2-day lean index for the period ending February 4th came in
72.86, down 70 cents from the previous session and down from 75.03 one week
previous.

Technical Outlook

HOGS (APR) 02/09/2005: The crossover up in the
daily stochastics is a bullish signal. Daily momentum studies are on the rise
from low levels and should accelerate a move higher on a push through the 1st
swing resistance. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The downside closing price reversal on
the daily chart is somewhat negative. The market’s close below the pivot swing
number is a mildly negative setup. The next upside objective is 75.320. The next
area of resistance is around 74.570 and 75.320, while 1st support hits today at
73.400 and below there at 72.950.

 

COCOA MARKET RECAP

2/8/2005

March Cocoa finished down 21 at 1594, 15 off the
high and 16 up from the low.

The cocoa market was lower Tuesday but still
managed to hold above the mid point of the prior session’s rather large range.
We suspect that reports of more gains in Nigeria dampened some of the recent
concerns for mid cr0p production and that might have fostered selling interest.
The trade is also seeing a more compacted March to May roll over and that could
mean that some recent longs are exiting the March and possibly waiting to
re-enter the May contract at a lower price. Ghana reported a 22% decline in
purchases and that would seem to be a negative but with some much smuggling
thought to be taking place in Africa, the year over year purchase data and
arrival data are really difficult to interpret.

Technical Outlook

COCOA (MAR) 02/09/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average is an indication the longer-term trend has turned
positive. It is a slightly negative indicator that the close was under the swing
pivot. The near-term upside target is at 1624. The next area of resistance is
around 1609 and 1624, while 1st support hits today at 1579 and below there at
1563.

 

COFFEE MARKET RECAP

2/8/2005

March Coffee closed down 1.05 at 111.70. This was
0.95 up from the low and 2.30 off the high.

May coffee hit a new contract high before closing
100 lower on the session and the reversal might attract some increased long
liquidation from speculators over the near-term. London futures pulled back from
2-year highs which helped trigger the lower opening and the rally to a new
contract high did not attract new buying interest. A lack of producer selling
due to holidays in many countries, including Brazil, kept volume slow and helped
support the early bounce on light volume buying. Talk of a world production
deficit of near 5 million bags helped support the early run to the highest level
for nearby futures since July of 2000.

Technical Outlook

COFFEE (MAR) 02/09/2005: A new contract high was
made on the rally. Daily stochastics have risen into overbought territory which
will tend to support reversal action if it occurs. The major trend could be
turning up with the close back above the 18-day moving average. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
near-term upside target is at 115.25. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 113.30 and
115.25, while 1st support hits today at 110.10 and below there at 108.80.

 

SUGAR MARKET RECAP

2/8/2005

March Sugar closed up 0.08 at 9.01. This was 0.14
up from the low and 0.06 off the high.

The sugar market pushed moderately higher on the
session but gave back some of the gains late in the day. Trade house and
speculative buying supported the gains as news that Pakistan was tendering for
150,000 tons of white sugar and 50,000 tons of raw sugar helped support. Traders
are also hopeful that India buying will emerge soon. Internal sugar prices in
Pakistan hit a 3 1/2 year high this week which helped encourage the bookings.
Traders are hopeful that Russia will return as a more significant buyer in 2005.
Russia sugar imports in 2004 were 2.583 million tonnes as compared with 4.112
million tonnes in 2003.

Technical Outlook

SUGAR (MAR) 02/09/2005: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The cross over
and close above the 18-day moving average indicates the longer-term trend has
turned up. The market setup is supportive for early gains with the close over
the 1st swing resistance. The next downside objective is now at 8.79. The next
area of resistance is around 9.11 and 9.19, while 1st support hits today at 8.91
and below there at 8.79.

 

COTTON MARKET RECAP

2/8/2005

March Cotton finished down 0.54 at 42.70, 0.45
off the high and 0.05 up from the low.

May cotton closed at the lowest level since
December 27th which could trigger additional small trader long liquidation
selling unless the USDA report in the morning provides some support. Traders are
hoping that the US export forecast will be revised higher by 200,000-300,000
bales from 12.7 million projected last month and there is also hope for a major
adjustment lower in China production from last year with the USDA forecast last
month at 29 million bales. Some believe that China production was actually 3
million bales lower.

Technical Outlook

COTTON (MAR) 02/09/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The major trend has turned down with the cross over back
below the 18-day moving average. The market setup is somewhat negative with the
close under the 1st swing support. The next downside objective is now at 42.30.
The next area of resistance is around 42.95 and 43.30, while 1st support hits
today at 42.45 and below there at 42.30.