Here’s What Sparked The Afternoon Slide

The market opened into new contract lows but a
lack of aggressive new speculative selling in spite of the collapse in the other
grains helped keep trade slow in a tight range. US exporters sold 110,000 tons
of optional origin corn to unknown destination which helped provide some
support. Funds were noted sellers of near 2500 contracts into the mid-session.
While cash dealers are fearful of a jump in corn selling from producers, gulf
basis levels were mostly steady. However, there are some reports of increased
movement in the country this week. Resistance for March corn comes in at 202 and
203 with 198 as next downside objective.

Technical Outlook

CORN (MAR) 01/05/2005: The market was pushed to a
new contract low. 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. It is
a slightly negative indicator that the close was under the swing pivot. The next
downside target is now at 200. The next area of resistance is around 201 1/2 and
202 1/4, while 1st support hits today at 200 1/2 and below there at 200.

 

SOY COMPLEX RECAP

1/4/2005

March Soybeans finished down 10 1/2 at 525, 8 off
the high and 1/2 up from the low. May Soybeans closed down 11 1/4 at 530. This
was 1/2 up from the low and 9 off the high.

March Soymeal closed down 5.4 at 155.9. This was
0.4 up from the low and 4.4 off the high.

March Soybean Oil finished down 0.07 at 19.97,
0.14 off the high and 0.14 up from the low.

Continued talk of good growing conditions in both
Argentina and Brazil with talk of record yield potential in both countries this
year if the weather remains normal helped to generate increased selling interest
in soybeans today. Funds were noted sellers of near 7,000 contracts into the
mid-session. In addition, funds were noted sellers of near 6,000 meal and 3,000
oil. Weakness in China futures overnight and in Malaysian palm oil futures
(moving to near 15-month lows) added to the bearish tone for the opening. There
were no deliveries for January soybeans or meal this morning and 100 January oil
deliveries. While there is still some dry areas in southern Brazil, talk of
heavy rains in central Brazil over the past week have encouraged an overall
bearish supply outlook for the coming year. The Commitment of traders report
from yesterday failed to show an extreme oversold condition and the technical
action remains quite negative. Gulf basis was steady today. Weather has meal
dealers looking at a jump in feed demand over the near-term with cold and wet
weather in parts of the central plains and mid-west. Resistance for March
soybeans comes in at 532 and 535 with 524 1/2 and 518 as next support.

Technical Outlook

BEANS (MAR) 01/05/2005: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close below
the 18-day moving average is an indication the longer-term trend has turned
down. More selling pressure is likely given yesterday’s gap lower price action
on the day session chart. The defensive setup, with the close under the 2nd
swing support, could cause some early weakness. The next downside objective is
518 1/2. The next area of resistance is around 529 1/4 and 535 1/4, while 1st
support hits today at 520 3/4 and below there at 518 1/2.

MEAL (MAR) 01/05/2005: The market back below the
60-day moving average suggests the longer-term trend could be turning down. The
downside crossover of the 9 & 18 bar moving average is a negative signal. 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 gap lower on the day session chart is bearish
and puts the market on the defensive. The market is in a bearish position with
the close below the 2nd swing support number. The next downside objective is now
at 152.1. The next area of resistance is around 158.3 and 161.7, while 1st
support hits today at 153.5 and below there at 152.1.

BEANOIL (MAR) 01/05/2005: The market made a new
contract low on the break. Momentum studies trending lower at mid-range could
accelerate a price break if support levels are broken. The market back below the
18-day moving average suggests the longer-term trend could be turning down. The
market’s close below the pivot swing number is a mildly negative setup. The next
downside target is now at 19.69. The next area of resistance is around 20.10 and
20.24, while 1st support hits today at 19.83 and below there at 19.69.

 

WHEAT MARKET RECAP

1/4/2005

March Wheat finished down 6 1/4 at 296, 4 1/2 off the high and
3 3/4 up from the low. May Wheat closed down 5 1/4 at 304. This was 3 3/4 up
from the low and 3 1/2 off the high.

The move to new contract lows turns the chart
pattern more bearish as the market quickly sliced through support. A slowdown in
the export news for US exporters along with a lack of production concerns for
the new crop outlook helped trigger aggressive speculative selling and a move to
new contract lows. News that Algeria bought 300,000 tons of optional origin
milling wheat with much of the purchase from Argentina helped pressure the
market as well. Morocco is tendering for 150,000 tons. Even French wheat prices
were forced lower this week with more and more talk of cheap Argentina
competition for the export market. News of a potential record India crop this
year (harvest begins in March) helped fuel fears that the 2005 world wheat crop
could be as high as the record production of 2004. Monthly state reports from
key winter wheat producing states showed the crop in generally good condition.
Kansas is rated 71% in good to excellent condition. The technical swing
objective on the move under 295 support for March wheat leaves 288 1/2 as next
support. Resistance comes in at 297 and 299 1/2.

Technical Outlook

WHEAT (MAR) 01/05/2005: The sell-off took the
market to a new contract low. Negative momentum studies in the neutral zone will
tend to reinforce lower price action. The close below the 18-day moving average
is an indication the longer-term trend has turned down. The gap lower price
action on the day session chart is a bearish indicator for trend. The market is
in a bearish position with the close below the 2nd swing support number. The
next downside objective is now at 288. The next area of resistance is around 300
and 304 1/4, while 1st support hits today at 292 and below there at 288.

 

LIVE CATTLE RECAP

1/4/2005

February Live Cattle closed up 2.07 at 90.47.
This was 1.22 up from the low and 0.02 off the high.

January Feeder Cattle finished up 2.42 at 104.77,
0.07 off the high and 1.82 up from the low.

Talk of cold and wet weather in the plains
supported cash markets and also helped trigger aggressive buying in futures.
Dealing with the political and legal issues on trade issues with Canada and
maybe others could have added to the recent volatility but US government
representatives seem to accept the mad cow in Canada and seem to want to move
ahead with opening of the borders. Slaughter came in at just 113,000 head as
compared with trade expectations for 120,000-126,000 head. The lower than
expected slaughter indicates weak packer demand. Packers may have decided to
pass on the higher offers and reduce slaughter instead of paying up for live
inventory. Boxed-beef cut-out values were down 13 cents to $140.46 as compared
with $141.76 one week ago.

Technical Outlook

CATTLE (FEB) 01/05/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. Momentum studies trending lower at mid-range should accelerate
a move lower if support levels are taken out. The major trend could be turning
up with the close back above the 18-day moving average. If yesterday’s gap
higher on the day session chart holds, additional buying could develop this
session. The market has a bullish tilt coming into today’s trade with the close
above the 2nd swing resistance. The next downside target is now at 88.950. The
next area of resistance is around 91.100 and 91.420, while 1st support hits
today at 89.870 and below there at 88.950.

 

LEAN HOGS RECAP

1/4/2005

February Lean Hogs closed down 0.20 at 76.50.
This was 0.55 up from the low and 0.50 off the high.

February Pork Bellies finished up 0.25 at 94.82,
0.22 off the high and 0.55 up from the low.

February hogs tried to follow the cattle market
higher with a firm opening but the stiff discount of futures to the cash market
continues to limit the speculative buying and has helped to increase the
commercial selling pressures. Cash hogs were traded at $2.00 higher on the
session at Peoria which was a bit stronger than expectations. The 2-Day Lean
index was up 72 cents to 65.09 as compared with 65.46 last week at this time.
This leaves February futures near an 1100 point premium as compared with a
normal premium of near 500 points at this time of the year. Slaughter came in at
399,000 head as compared with trade expectations for 380,000-396,000 head.

Technical Outlook

HOGS (FEB) 01/05/2005: 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. The market tilt is slightly negative with the close under the
pivot. The near-term upside target is at 77.520. The next area of resistance is
around 77.020 and 77.520, while 1st support hits today at 76.000 and below there
at 75.450.

 

COCOA MARKET RECAP

1/4/2005

March Cocoa finished down 4 at 1523, 11 off the
high and 5 up from the low.

The pattern of light selling continued in cocoa
with the small spec and fund accounts slowing giving up and moving to the
sidelines. We have to think that the massive rise in the US Dollar undermined
cocoa and extended the recent weakness in cocoa prices. With more technical
damage on the charts we suspect that the bears will remain in control over the
near term trend.

Technical Outlook

COCOA (MAR) 01/05/2005: 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 tilt is slightly negative with the
close under the pivot. The next downside objective is 1509. The next area of
resistance is around 1531 and 1540, while 1st support hits today at 1515 and
below there at 1509.

 

COFFEE MARKET RECAP

1/4/2005

March Coffee closed down 1.65 at 101.45. This was
1.65 up from the low and 1.05 off the high.

Fund long liquidation selling helped pressure
coffee futures but commercial buying was noted on a scale-down basis which
helped cuss ion the fall. Some trade house interest emerged on the move near 100
which helped support a bounce into the close to near the opening. The
Commitment-of-Traders report with options showed the market in an overbought
condition with speculators net long over 46,500 contracts (as of December 28th)
which is within 5% of the historical peak of mid-December. Funds reduced their
net long by 2,600 contracts to near 41,000 contracts for the week and the
selling trend is considered a short-term bearish force. The technical action has
also soured this week with a successful test of the contract high last week and
three poor closes in a row.

Technical Outlook

COFFEE (MAR) 01/05/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. 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 98.65. The
next area of resistance is around 102.80 and 104.00, while 1st support hits
today at 100.15 and below there at 98.65.

 

SUGAR MARKET RECAP

1/4/2005

March Sugar closed down 0.14 at 9.03. This was
0.01 up from the low and 0.20 off the high.

The sweeping reversal and sharply lower close
after hitting the highest level since October 15th turns the technical picture
sour and with fund traders holing a net long position of over 86,000 contracts
(as of December 28th) the market looks vulnerable to a near-term correction. The
hefty net short position means additional fuel for follow-through technical
selling. London futures managed to close higher but just barely and the close
was below the opening and near the lows of the day. While the fundamentals of
the market seem important and supportive, the trade remains concerned that fund
traders plan to reduce their holdings in soft markets for 2005 which might have
added to the long liquidation sell-off.

Technical Outlook

SUGAR (MAR) 01/05/2005: The daily stochastics
gave a bearish indicator with a crossover down. Momentum studies trending lower
from overbought levels is a bearish indicator and would tend to reinforce lower
price action. The major trend could be turning up with the close back above the
18-day moving average. The outside day down is somewhat negative. The market’s
close below the 1st swing support number suggests a moderately negative setup
for today. The next downside objective is now at 8.87. The next area of
resistance is around 9.13 and 9.28, while 1st support hits today at 8.93 and
below there at 8.87.

 

COTTON MARKET RECAP

1/4/2005

March Cotton finished up 0.37 at 44.49, 0.11 off
the high and 1.08 up from the low.

The lower opening and higher close leaves cotton
futures vulnerable to some additional short-covering from fund traders who hold
a hefty net short position. A lack of follow-through selling on the opening
helped trigger some light trade house buying with some optimistic views on China
demand expected to be reported at the annual US Beltwide conference. In
addition, short-term demand for a wide variety of clothing, blankets and
rebuilding materials for the Asia disaster aid programs could help provide some
significant but temporary support.

Technical Outlook

COTTON (MAR) 01/05/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. 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. The daily closing price reversal up is a positive indicator that could
support higher prices. The market has a slightly positive tilt with the close
over the swing pivot. The next upside objective is 45.43. The next area of
resistance is around 45.08 and 45.43, while 1st support hits today at 43.90 and
below there at 43.06.