Here’s What We Suspect About Treasuries…

The weak close for the second day in a row has
slowed the fear of a heavy short-covering bought ahead of the holidays. Poor
export sales and fears of increased selling in the cash market into early
January helped to pressure the market. Traders remain a bit concerned with
possible short-covering of a hefty net short position from speculators but with
the enormous supply of corn which could move on the cash market in the first
quarter of 2005, buyers do not seem to be in much of a hurry to extend coverage.
Weekly export sales for corn came in at 636,700 tons as compared with 773,000
tons necessary each week to reach the USDA forecast and compared with trade
expectations of 700,000-900,000 tons. Gross sales were higher but unknown
destination cancelled 182,000 tons for the week. Cumulative sales have reached
42.4% of the USDA forecast for the season as compared with 43.9% on average for
this time of the year. Midwest basis levels were steady to lower at some
locations with talk of increasing producer sales. Commercial traders believe
that many producers are waiting for a bounce to sell as LDP payments have been
received on over 6 billion bushels of corn from this year’s harvest. Once the
payment is taken, the producer has no price protection on the downside and the
corn is not eligible for the 9-month loan. Technical support for March Corn
comes in at 201 3/4 with resistance at 204 3/4 and 206 3/4. A resumption of the
downtrend leaves 198 1/2 as next swing objective.

Technical Outlook

CORN (MAR) 12/17/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. 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 lower than the pivot swing number. The next upside objective is 206.
The next area of resistance is around 204 3/4 and 206, while 1st support hits
today at 202 1/4 and below there at 201 1/4.

 

SOY COMPLEX RECAP

12/16/2004

January Soybeans finished down 1 1/2 at 544 1/2,
7 off the high and 1/2 up from the low. March Soybeans closed down 3 1/4 at 542.
This was 1 up from the low and 7 1/2 off the high.

March Soymeal closed down 2.4 at 160.4. This was
1.4 up from the low and 4.8 off the high.

March Soybean Oil finished up 0.21 at 20.57, 0.03
off the high and 0.28 up from the low.

Strong export sales combined with ideas that
yesterday’s break was a bit overdone helped to support the market early in the
session. However, a lack of follow-through short-covering from speculators and
growing fears that producer selling will pick up in the new tax year helped to
pressure. Weekly export sales for soybeans came in at 871,000 tons as compared
with 265,300 tons necessary each week to reach the USDA forecast and compared
with trade expectations of 500,000-800,000 tons. China was the most active buyer
of 406,300 tons for the week. Cumulative sales have reached 63.5% of the USDA
forecast for the season as compared with 64.7% on average for this time of the
year. For meal, sales were 167,200 tons as compared with trade expectations at
50,000-150,000 tons. Cumulative meal sales have reached 59.8% of the USDA
forecast for the season as compared with 50.6% on average for this time of the
year. Oil sales were 11,300 tons from trade expectations of 5,000-15,000 tons. A
revision higher for Brazil production from the government’s statistical division
along with China demand concerns at recent higher prices helped to limit the
buying support. In addition, mid-west cash basis levels were a little weaker due
to talk of increased producer selling. Support for March soybeans comes in at
539 and 535 1/4 with resistance at 548 and 550.

Technical Outlook

BEANS (JAN) 12/17/2004: 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 is an
indication the longer-term trend has turned positive. The market tilt is
slightly negative with the close under the pivot. The near-term upside target is
at 553 1/2. The next area of resistance is around 548 1/4 and 553 1/2, while 1st
support hits today at 540 3/4 and below there at 538 3/4.

MEAL (JAN) 12/17/2004: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend could be turning up with the
close back above the 18-day moving average. The outside day down is a negative
signal. The market’s close below the pivot swing number is a mildly negative
setup. The near-term upside target is at 165.9. The next area of resistance is
around 162.8 and 165.9, while 1st support hits today at 157.8 and below there at
155.9.

BEANOIL (JAN) 12/17/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The major trend has turned down with the cross over back
below the 18-day moving average. Market positioning is positive with the close
over the 1st swing resistance. The near-term upside objective is at 20.70. The
next area of resistance is around 20.61 and 20.70, while 1st support hits today
at 20.33 and below there at 20.13.

 

WHEAT MARKET RECAP

12/16/2004

March Wheat finished down 5 at 297 1/2, 6 1/2 off the high and
1/2 up from the low. May Wheat closed down 5 at 304 1/2. This was 1/2 up from
the low and 6 off the high.

Sluggish export sales numbers were offset by some
light weather concerns to help the market consolidate recent gains early in the
session but talk that the crop is in good condition and should be able to
withstand very cold weather ahead helped pressure the market late. Traders see
the sharp drop in temperatures in the central US as a slightly supportive factor
as some of the wheat fields with young plants just coming out of the ground
could see light damage. Weekly export sales for wheat came in at 394,600 tons as
compared with 314,600 tons necessary each week to reach the USDA forecast and
compared with trade expectations of 300,000-500,000 tons. Nigeria was the most
active buyer of 125,000 tons for the week. Cumulative sales have reached 71.3%
of the USDA forecast for the season as compared with 62.9% on average for this
time of the year. The fast pace in spite of the export adjustment higher in the
December USDA supply/demand report suggests that if sales stay persistent, the
USDA will be in a position to raise the export forecast further. In overnight
export news, Taiwan bought 86,850 tons of US wheat, Japan bought 80,000 tons of
US wheat and traders await results of the Iraq tender. Overnight news of a
4.5-5% increase in China winter wheat seedings helped to limit the support and
could have helped pressure the market as the world new crop outlook seems to
lack much uncertainty given the good start to crops in the US, Europe and China.
Support for March wheat comes in at 297 and 295 with 302 1/2 and 307 as next
resistance. A resumption of the downtrend and move under 295 would leave 291 1/2
as next swing support.

Technical Outlook

WHEAT (MAR) 12/17/2004: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The market back below the 18-day moving average suggests
the longer-term trend could be turning down. The market is in a bearish position
with the close below the 2nd swing support number. The near-term upside target
is at 306. The next area of resistance is around 301 and 306, while 1st support
hits today at 294 and below there at 292.

 

LIVE CATTLE RECAP

12/16/2004

February Live Cattle closed down 0.10 at 87.97.
This was 0.17 up from the low and 0.50 off the high.

January Feeder Cattle finished down 0.30 at
101.77, 0.90 off the high and 0.02 up from the low.

February cattle experienced two-sided choppy
trade in a relatively tight range of just 67 points. Ideas that the big volume
of beef trade yesterday could be a signal of a near-term low helped to limit the
selling while weaker beef prices at noon and talk of lower trade in the cash
market this week helped to limit the buying support. Boxed-beef cut-out values
at mid-session were down $.46 to $139.88 as compared with 144.06 last week at
this time. Slaughter came in at 120,000 head as compared with trade expectations
at 120,000-127,000. The positioning ahead of Friday’s USDA report kept the trade
choppy. The average trade estimate for December 1st on-feed supply for Friday’s
came in at 100.6% (range 99.6-102). November placements are pegged at 95.2% of
last year (range 90.2-102) and markets are expected at 109.2% (range 104-113.5).

Technical Outlook

CATTLE (FEB) 12/17/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The close below the 18-day moving average is an indication
the longer-term trend has turned down. The market could take on a defensive
posture with the daily closing price reversal down. The market has a slightly
positive tilt with the close over the swing pivot. The next downside target is
87.400. The next area of resistance is around 88.300 and 88.720, while 1st
support hits today at 87.650 and below there at 87.400.

 

LEAN HOGS RECAP

12/16/2004

February Lean Hogs closed up 0.87 at 73.32. This
was 1.57 up from the low and 0.35 off the high.

February Pork Bellies finished down 0.45 at
98.12, 0.52 off the high and 0.62 up from the low.

February hogs closed sharply higher after the
early break failed to attract new selling interest. Weakness in the cash market
and ideas that cash will continue to falter in the weeks just ahead helped to
pressure the market early but talk that the packer profit margins are already
favorable and ideas that the Saturday slaughter will be high with packers
wanting to move as many hogs as possible into next week ahead of the holidays
helped support. After early next week, traders are a bit nervous that producers
will have an incentive to sell hogs into the next tax year and that marketings
could slow. In addition, the bitter cold weather moving down into the Midwest
this weekend could slow marketings as well. The CME 2-day lean index for the
period ending December 14th was reported at 74.48, down $1.58 on the session.
Slaughter came in at 403,000 head as compared with trade expectations at
400,000-404,000.

Technical Outlook

HOGS (FEB) 12/17/2004: A bullish signal was given
with an upside crossover of the daily stochastics. 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 close over the pivot swing is a
somewhat positive setup. The next upside target is 74.920. The next area of
resistance is around 74.270 and 74.920, while 1st support hits today at 72.370
and below there at 71.100.

 

COCOA MARKET RECAP

12/16/2004

March Cocoa finished down 13 at 1654, 26 off the
high and 4 up from the low.

The cocoa market attempted to rally Thursday but
could not maintain the higher price action in the close. With the Dollar
mounting a very impressive recovery rally we suspect that some recent arbitrage
buyers of cocoa decided to move to the sidelines. Also dampening prices Thursday
were reports that Cameroon cocoa production might have managed an increase on
the year and that combined with a prediction that Ivory Coast tensions won’t
impact the final Ivory Coast output tally is more than enough information to
give the bears a slight edge.

Technical Outlook

COCOA (MAR) 12/17/2004: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend could be turning up with the
close back above the 18-day moving average. The market could take on a defensive
posture with the daily closing price reversal down. It is a slightly negative
indicator that the close was lower than the pivot swing number. The near-term
upside target is at 1689. The next area of resistance is around 1669 and 1689,
while 1st support hits today at 1639 and below there at 1630.

 

COFFEE MARKET RECAP

12/16/2004

March Coffee closed down 0.80 at 99.75. This was
0.25 up from the low and 2.25 off the high.

The coffee market failed to make a new high for
the move but did probe above the prior days high and then failed. Certainly the
Brazil crop numbers is the source of the rise in prices but we have to think
that the fund long really reached a massive level around the highs today and
unless the small specs take up the cause we suspect that the market will begin
to exhibit topping volatility. Even if the small specs begin to buy the market
that could mean that the market is going from strong hands to weak hands. Maybe
prices deserved to rise from 72 cents to 102.50 because of lower production but
we are not sure if the market has the justification to go even higher.

Technical Outlook

COFFEE (MAR) 12/17/2004: The daily stochastics
have crossed over up which is a bullish indication. Stochastics are at mid-range
but trending higher, which should reinforce a move higher if resistance levels
are taken out. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The daily closing price reversal down puts the
market on the defensive. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. The next upside objective is 102.75.
The next area of resistance is around 101.00 and 102.75, while 1st support hits
today at 98.50 and below there at 97.75.

 

SUGAR MARKET RECAP

12/16/2004

March Sugar closed down 0.07 at 8.48. This was
0.04 up from the low and 0.05 off the high.

While short-term technical indicators are a bit
overbought, the presence of a massive net long position by the speculator during
a time period ahead when there is a tendency for cash market activity to slow
into the end of the year leaves the market vulnerable to increasing spec selling
as support levels are violate. The recent 2-week drop off in freight rates has
attracted increased export activity from Brazil and with India even buying some
sugar last week along with a jump in cash activity this week, traders are
surprised with the lack of support for futures. The recent weakness in energy
markets has trigger lower ethanol prices in Brazil as well as distributors do
not want to get caught holding high priced ethanol in a declining market. The
downside break-out in the March London sugar contract added to the bearish tone
in New York with March white sugar falling to the lowest level since June 30th.
On June 30th, New York March futures were as low as 797.

Technical Outlook

SUGAR (MAR) 12/17/2004: 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 lower than the pivot swing number. The next downside objective is now
at 8.40. The next area of resistance is around 8.52 and 8.57, while 1st support
hits today at 8.44 and below there at 8.40.

 

COTTON MARKET RECAP

12/16/2004

March Cotton finished up 0.70 at 43.46, 0.02 off
the high and 0.70 up from the low.

March cotton opened near unchanged but
experienced solid buying support for much of the session on ideas that the weak
dollar and strong demand for textiles into the first quarter of 2005 (especially
from China) could keep the export flow active. Weekly export sales for cotton
came in at 274,300 bales as compared with 120,400 bales necessary each week to
reach the USDA forecast and compared with trade expectations of 300,000-375,000
tons. Turkey and China were the best buyers. Cumulative sales have reached 64.2%
of the USDA forecast for the season as compared with 69.5% on average for this
time of the year. Shipments were 184,100 bales as compared with trade
expectations at 150,000-200,000 bales. A continued drop in certified exchange
stocks has added to the positive tone. Certified cotton stocks deliverable
against the exchange totaled 46,545 bales as of December 15th from 59,722 bales
on the 14th and 65,291 bales the previous session.

Technical Outlook

COTTON (MAR) 12/17/2004: The daily stochastics
have crossed over up which is a bullish indication. Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The cross over and close above the 18-day moving average
is an indication the longer-term trend has turned positive. A positive setup
occurred with the close over the 1st swing resistance. The next upside objective
is 44.01. The next area of resistance is around 43.82 and 44.01, while 1st
support hits today at 43.10 and below there at 42.57.