Here’s Why Treasuries Firmed Into The Close

Weakness in the other grains helped to turn the
market lower and selling intensified on the move under Tuesday’s lows.
Positioning ahead of the USDA report with traders expecting a sharp jump in corn
yields to near 147 bu/acre from last years record of 142.2 bu/acre helped to
pressure the market. A firm cash market tone and slow selling from producers
helped support the September contract. Private forecasters see milder weather
for the weekend and early next week which eases cold weather fears for the slow
maturing crops of northern Iowa and Minnesota. The average trade estimate for
corn production for Thursday mornings report is at 10.78 billion bushels (range
10.66-10.952) as compared with 10.635 billion last month and 10.114 billion last
year. For ending stocks, the average trade estimate comes in at 1.166 billion
bushels (range 1.071-1.3) as compared with 991 million bushels from last months
report and 896 million bushels at the end of this season. Old crop ending
stocks, however, are expected to be adjusted higher by 50-60 million bushels
from 896 million bushels. For the weekly export sales report, also released
before the opening, traders are looking for corn sales near 700,000-900,000 tons
as compared with 1.116 million tons last week. Support points for December corn
come in at 230 1/4 and 225 with resistance at 233 1/2 and 237 3/4.

Technical Outlook

#CORN (DEC) 08/12/04: Momentum studies are
trending higher from mid-range which should support a move higher if resistance
levels are penetrated. The near-term upside objective is at 238 1/2. The market
is in a bearish position with the close below the 2nd swing support number.
Market resistance comes in at 238 1/2 today, with support at 227 1/2. The
market’s short-term trend is negative as the close remains below the 9-day
moving average.

 

SOY COMPLEX RECAP

8/11/2004

September Soybeans finished down 10 at 561 1/2, 9
1/2 off the high and 2 up from the low. November Soybeans closed down 7 1/4 at
554 3/4. This was 2 3/4 up from the low and 10 3/4 off the high.

August Soymeal closed down 9 at 188.3. This was
1.1 up from the low and 4.2 off the high.

August Soybean Oil finished up 0.4 at 23.15,
equal to the high and 0.6 up from the low.

Trade expectations for a bumper crop season due
to excellent weather for July and most of August had traders believing that the
estimates for the crop report may underestimate the yield potential for the
crop. This helped push new crop futures lower while tight stocks and firm basis
supported August soybeans. The average trade estimate for yield for the report
is at 40.2 bu/acre which is up from the July USDA estimate of 39.9 bu/acre but
lower than the all-time high yield of 41 bushels per acre which was achieved 10
years ago. While there has been significant concern for the much below normal
temperatures in the northern mid-west, the forecast for milder weather into the
weekend and for early next week is seen as negative. August and September meal
are down sharply from news of 214 deliveries this morning and news from late
Tuesday that registrations with the CBOT for meal jumped to 291 lots from 77 on
Monday. Taiwan bought 21,000 tons of US soybeans overnight as part of a corn/soy
combo cargo and South Korea bought 55,000 tons of South American meal overnight.
News that oilseed output in India could drop by 7.6% from last year to 23.1
million tons may be limiting the selling pressures in oil. The average trade
estimate for soybean production for Thursday mornings report is 2.958 billion
bushels (range 2.889-3.022) as compared with 2.94 billion last month and 2.418
billion last year. For ending stocks, the average estimate came in at 255
million bushels (range 199-290) as compared with 210 million bushels from last
months report and 105 million bushels at the end of this season. For the weekly
export sales report, also released before the opening, traders are looking for
soybean sales near 350,000-500,000 tons, meal sales at 30,000-60,000 tons and
oil sales at 25,000-30,000 tons. November soybeans moved under last weeks lows
which leaves 548 1/2 and then 542 as next technical swing objectives with 556
and 560 1/2 as resistance.

Technical Outlook

#SOYBEANS (NOV) 08/12/04: The close below the 2nd
swing support number puts the market on the defensive. The next area of
resistance is around 561 1/2 and 570 1/4, while 1st support hits today at 548
and below there at 543 1/4. The market’s close below the 9-day moving average is
an indication the short-term trend remains negative. The daily stochastics have
crossed over down which is a bearish indication. The next downside target is 543
1/4.

MEAL (DEC): The daily stochastic’s gave a bearish
indicator with a crossover down. The next downside objective is now at 165.4.
First resistance comes in at 173.2, with support at 167.2. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market is in a bearish position with the close below the 2nd swing
support number.

BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Daily
stochastics are showing positive momentum from oversold levels which should
reinforce a move higher if near-term resistance is taken out. The next upside
target is 21.46. With the close higher than the pivot swing number, the market
is in a slightly bullish posture. The daily closing price reversal up is
positive. Daily swing resistance is found at 21.24 and above there at 21.46.
Support should be encountered at 20.71 and 20.40.

 

WHEAT MARKET RECAP

8/11/2004

September Wheat finished down 7 1/4 at 304 3/4, 8 3/4 off the
high and 1/4 up from the low. December Wheat closed down 6 3/4 at 319 1/2. This
was 3/4 up from the low and 8 off the high.

Speculative selling increased in wheat after
weakness developed in soybeans sellers were also positioning ahead of the USDA
reports. The outlook for a bumper world crop production estimate for tomorrows
USDA report, improving crop conditions for the spring wheat belt and continued
concerns with increased competition from non-traditional exporters for the
coming year helped to pressure. Funds were noted sellers of near 2000 contracts.
News that Jordan bought 50,000 tons of wheat from Eastern Europe may have added
to the selling pressures as Russia and other eastern Europe countries are more
competitive in the export market this year after recovering from last years poor
crop. Jordan has credits available for US purchases. The average trade estimate
for spring wheat production is at 511 million bushels (range 498-520) as
compared with 501 million last month and 533 million bushels last year. All
wheat production is pegged at 2.072 billion bushels, up 13 million bushels from
last month. For ending stocks, the average trade estimate comes in at 505
million bushels (range 485-530) as compared with 494 million bushels from last
months report and 546 million bushels at the end of this season. For the weekly
export sales report, also released before the opening, traders are looking for
wheat sales near 400,000-500,000 tons as compared with 504,100 tons last week.
The move under last weeks lows negates the reversal from August 2nd and leaves a
technical swing count of 316 1/4 as next support and then 311 for December wheat
with resistance at 322 1/4 and 326 1/4.

Technical Outlook

#WHEAT (DEC) 08/12/04: The sell-off took the
market to a new contract low. The close below the 2nd swing support number puts
the market on the defensive. Look for near-term support at 315 and below there
at 312 1/2, with resistance levels at 324 and 330. The market’s close below the
9-day moving average is an indication the short-term trend remains negative. The
daily stochastics have crossed over down which is a bearish indication. The next
downside target is 312 1/2. The 9-day RSI under 30 indicates the market is
approaching oversold levels.

 

LIVE CATTLE RECAP

8/11/2004

October Live Cattle closed down 1.47 at 87.30.
This was 0.10 up from the low and 1.95 off the high.

October Feeder Cattle finished down 0.95 at
112.27, 1.27 off the high and 0.37 up from the low.

October cattle opened higher but collapsed to
close 147 lower on the session as the optimism for higher cash trade diminished
and sharply lower pork prices added to the negative tone. A strong stopper for
August cattle deliveries helped support the early gains but a lack of cash
market trade with traders believing that cash would trade $2.00-$3.00 higher on
the week helped to trigger professional selling and then fund traders were
liquidating long positions late. Boxed-beef cut-out values were up $.52 to
$138.16 at mid-session as compared with $139.43 last week at this time. Today’s
estimated cattle slaughter came in at just 120,000 head as compared with trade
expectations at 126,000 to 128,000 head. With negative profit margins, packers
failed to pay higher for live inventory and instead may be cutting back on
kills. With the sharp drop-off in cattle, the trade had believed that beef would
rally sharply but demand appears to be sluggish and the cut-back in kills might
just add to the beef production totals in the weeks ahead as heavier cattle are
slaughtered.

Technical Outlook

#CATTLE (OCT) 08/12/04: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 85.70. The close below the 2nd swing support number puts the market on
the defensive. Support should be encountered at 86.27 and below there at 85.70.
Market resistance is at 88.32 and then again at 89.80. The outside day down and
close below the previous day’s low is a negative signal. The downside closing
price reversal on the daily chart is somewhat negative. The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.

 

LEAN HOGS RECAP

8/11/2004

October Lean Hogs closed down 1.82 at 67.02. This
was 0.17 up from the low and 1.37 off the high.

February Pork Bellies finished down 3.00 at
94.35, 2.45 off the high and equal to the low.

October hogs closed 182 lower on the session and
bounced off of limit-down trade a few times while bellies were limit-down into
the close. The technical action in October hogs turned more negative on the gap
lower opening with 10 days of trade action above the market. Last weeks reversal
from a contract high along with follow-through technical selling helped trigger
fund long liquidation selling. Cash hogs were mostly $1.00 lower as the supply
of market-ready hogs seems plentiful and weights are high. Fears of a seasonal
rise in production into the fall added to the bearish tone. The 2-Day lean index
for the period ending August 9th was up 10 cents to 79.73 from 79.29 a week
before. Today’s estimated slaughter came in at 386,000 head versus expectations
ranging from 386,000 to 390,000. Weekly average weights for Iowa/Minnesota for
the week ending August 17th came in at 259.9 pounds as compared with 259.3 the
previous week and 258 last year.

Technical Outlook

#HOGS (OCT) 08/12/04: The market is in a bearish
position with the close below the 2nd swing support number. Resistance levels
comes in at 67.80 and 68.87 today, while support is around 66.25 and then 65.77.
The gap down on the day session chart is bearish with more selling pressure
possible today. The market’s short-term trend is negative as the close remains
below the 9-day moving average. Momentum studies trending lower at mid-range
should accelerate a move lower if support levels are taken out. The next
downside objective is now at 65.77.

 

COCOA MARKET RECAP

8/11/2004

September Cocoa finished down 72 at 1581, 83 off
the high and 6 up from the low.

The cocoa market fell sharply on more talk of
rain and with the small spec and fund long still holding at an extreme level it
is not surprising that stop loss selling unfolded. Apparently dry areas received
some rain but it is still somewhat unclear whether or not the crop will still be
adversely affected. It would seem that the Ivory Coast is expected to get
greater rainfall totals than the neighboring cocoa production areas. Therefore,
maybe stress to crops in Ghana will serve as a discouragement to really
aggressive liquidation.

Technical Outlook

COCOA (SEP) 08/12/04 The outside day down and
close below the previous day’s low is a negative signal. The downside closing
price reversal on the daily chart is somewhat negative. There could be some
early pressure today given the market’s negative setup with the close below the
2nd swing support. Cocoa should run into resistance at 1626 and above there at
1689 with support at 1537 and 1511. Negative momentum studies in the neutral
zone will tend to reinforce lower price action. The next downside target is
1511.25.

 

COFFEE MARKET RECAP

8/11/2004

September Coffee closed up 0.05 at 67.10. This
was 0.10 up from the low and 0.65 off the high.

After an early rally in coffee the market had
second thoughts and close weak. With the trade rolling from September to
December contracts it seems that fewer longs wanted to remain long as the
weather threat is going away and supply doesn’t seem to be that tight. The fact
that Mexico reported good flowering conditions for 2004/2005 is a longer term
negative but is nonetheless a negative. We suspect that the trade was already
bracing for a larger Mexican crop and that has already been integrated into the
general pattern of declines since the June highs.

Technical Outlook

COFFEE (SEP) 8/12/04 The market has a slightly
positive tilt with the close over the swing pivot. Daily stochastics are showing
positive momentum from oversold levels which should reinforce a move higher if
near-term resistance is taken out. The near-term upside objective is at 68.00.
The Coffee contract should run into resistance at 67.50 and above there at 68.00
with support at 66.75 and 66.50. The market’s short-term trend is positive on a
close above the 9-day moving average.

 

SUGAR MARKET RECAP

8/11/2004

October Sugar closed down 0.03 at 7.90. This was
0.02 up from the low and 0.13 off the high.

The sugar market tried to rally but in the end
closed poorly. Apparently a number of specs are concerned about the extremely
high open interest and with the market bordering on downside technical
violations on the charts the potential for aggressive stop loss selling is high.
Talk that the Brazil sugarcane harvest is behind schedule evidently provides
only minimal support to prices as few are worried that a delay will mean that
lower supply will be seen. The ISO continues to forecast a 2004/2005 deficit and
that is certainly giving the bulls a reason to hang on against recent price
adversity.

Technical Outlook

#SUGAR (OCT) 08/12/04: The market’s close below
the pivot swing number is a mildly negative setup. Swing resistance comes in at
8.08, with support found at 7.78. The downside crossover (9 below 18) of the
moving averages suggests a developing short-term downtrend. Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The next downside objective is now at 7.78.

 

COTTON MARKET RECAP

8/11/2004

October Cotton finished down 0.17 at 44.88, 0.17
off the high and 0.28 up from the low.

The cotton market opened higher and closed
slightly lower with choppy trade ahead of the USDA reports, released before the
opening. While there was some light concerns for the crop in the Deep South from
increased hurricane activity, news that the path is headed southeast was seen as
slightly negative as the extra rains into Georgia could support improving crop
conditions. Traders are fearful that world production could move over 105
million bales (104.73 last months forecast) which might dent the export outlook
for the US and pressure prices. The average trade estimate for cotton production
came in at 18.878 million bales (range 18.5-19.4) as compared with 18 million
last month and 18.22 million bales last year. Ending stocks for the 2004/2005
season are expected to jump to near 5.44 million bales (range 4.9-6.0) as
compared with last months estimate at 4.5 million bales. For the weekly export
sales report, also released before the opening, traders are looking for cotton
sales near 225,000-275,000 bales as compared with 300,600 bales last week. For
shipments, traders are looking for 200,000-250,000 bales as compared with
243,800 bales last week.

Technical Outlook

#COTTON (OCT) 08/12/04: The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
It is a slightly negative indicator that the close was lower than the pivot
swing number. Next resistance area comes in at 45.11 and then again at 45.30,
while support is targeted at 44.66 and 44.40. Positive momentum studies in the
neutral zone will tend to reinforce higher price action. The next upside target
is 45.30.