Here’s Why You May Pay More For That Cup Of Coffee

The late surge in the soybean market and the
ability to avoid new contract lows supported the late short-covering bounce. A
lack of near-term market-moving news has traders nervous over the possibility of
short-covering from speculators but short-covering was only seen after the
market failed to hit new lows and the jump in wheat added to the positive tone.
There are some growing concerns that US producers will become more active
sellers into the cash market when the new tax year hits in just a few weeks. The
Midwest cash basis levels were weak this morning with the gulf basis steady.
Continued reports of good crops in China and active feedwheat offers from the
former Soviet Union countries are factors which could keep US export news
sluggish. March corn closed 3 1/4 cents higher on the week. Technical support
for March Corn comes in at 202 3/4 and 201 1/2 with resistance at 205 1/2 and
206 3/4.

Technical Outlook

CORN (MAR) 12/20/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market back below the 18-day moving average suggests
the longer-term trend could be turning down. The upside daily closing price
reversal gives the market a bullish tilt. The market has a slightly positive
tilt with the close over the swing pivot. The near-term upside target is at 206
1/2. The next area of resistance is around 205 3/4 and 206 1/2, while 1st
support hits today at 203 1/4 and below there at 201 1/4.

 

SOY COMPLEX RECAP

12/17/2004

January Soybeans finished up 4 1/4 at 548 3/4, 1
1/4 off the high and 10 3/4 up from the low. March Soybeans closed up 2 at 544.
This was 9 1/2 up from the low and 1 off the high.

March Soymeal closed down 1.5 at 158.9. This was
2.2 up from the low and 1.4 off the high.

March Soybean Oil finished up 0.12 at 20.69, 0.03
off the high and 0.44 up from the low.

Talk of higher cash basis levels at the gulf and
a difficulty in sourcing soybeans by processors helped support the late surge to
move higher on the day into the close. The weak technical action into the close
yesterday spilled over into the session early on Friday with a lack of new news
to slow the sell-off. Midwest cash basis levels were weaker this morning in
spite of a slowdown in producer selling after the futures sell-off late
yesterday. Gulf basis, however, was firm and advanced during the session. While
there is still expected to be some support under the market due to news of Asia
rust spreading in Brazil, China futures were down overnight and palm oil was
also lower. There are 5 people suspected with bird flu in Japan and if
confirmed, the news could raise concerns that migratory birds are spreading bird
flu and that the harsh strain of the flu is spreading to humans. This could
weaken meal demand if birds need to be destroyed. March soybeans closed 11 cents
higher on the week while March meal was down $1.20 for the week and March oil
closed 55 higher than last week. Weekend cold weather and another cold blast for
next week could help boost feed usage above recent levels. Support for March
soybeans comes in at 538 and 535 1/4 with resistance at 547 1/4 and 556.

Technical Outlook

BEANS (JAN) 12/20/2004: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend.
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. The upside closing price reversal on the
daily chart is somewhat bullish. With the close over the 1st swing resistance
number, the market is in a moderately positive position. The near-term upside
target is at 558 1/4. The next area of resistance is around 554 3/4 and 558 1/4,
while 1st support hits today at 542 3/4 and below there at 534 1/2.

MEAL (JAN) 12/20/2004: The daily stochastics gave
a bearish indicator with a crossover down. Negative momentum studies in the
neutral zone will tend to reinforce lower price action. The close under the
18-day moving average indicates the longer-term trend could be turning down. It
is a slightly negative indicator that the close was lower than the pivot swing
number. The next downside target is now at 154.2. The next area of resistance is
around 160.9 and 162.7, while 1st support hits today at 156.7 and below there at
154.2.

BEANOIL (JAN) 12/20/2004: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
major trend could be turning up with the close back above the 18-day moving
average. The outside day up is somewhat positive. The market has a slightly
positive tilt with the close over the swing pivot. The next upside target is
20.94. The next area of resistance is around 20.82 and 20.94, while 1st support
hits today at 20.40 and below there at 20.09.

 

WHEAT MARKET RECAP

12/17/2004

March Wheat finished up 6 3/4 at 304 1/4, 3/4 off the high and
7 1/4 up from the low. May Wheat closed up 7 at 311 1/2. This was 7 1/2 up from
the low and equal to the high.

A lack of follow-through selling on the early
break and light weather concerns helped support some short-covering strength in
the market ahead of the weekend with the weather forecast on Monday morning
becoming a more significant factor. Soft red winter wheat crops in the southern
mid-west and the mid-south will need to absorb frigid temperatures next week
without snow cover. New crop July wheat seemed to lead the market higher. There
is some concern for light damage to crops in the plains and Midwest with a cold
front moving in on the weekend and another (and stronger) cold blast for later
next week. Areas without snow cover and with young and undeveloped wheat plants
are vulnerable to some damage with the potential for sub-zero temperatures. Soft
wheat basis was steady to a bit higher. Traders still await news on the Iraq
tender to buy 100,000-150,000 tons of optional origin wheat for Jan-Feb
shipment. March wheat closed 7 3/4 cents higher on the week. Support for March
wheat comes in at 302 1/2 and 297 with 307 and 308 3/4 as next resistance.

Technical Outlook

WHEAT (MAR) 12/20/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The major trend could be turning up with the close back above
the 18-day moving average. With the close over the 1st swing resistance number,
the market is in a moderately positive position. The near-term upside objective
is at 310 1/2. The next area of resistance is around 308 1/4 and 310 1/2, while
1st support hits today at 300 1/4 and below there at 294 3/4.

 

LIVE CATTLE RECAP

12/17/2004

February Live Cattle closed up 1.87 at 89.85.
This was 1.20 up from the low and 0.05 off the high.

January Feeder Cattle finished up 1.47 at 103.25,
0.20 off the high and 1.15 up from the low.

February cattle closed 187 points higher on the
session and up 325 points for the week with active new buying from fund traders
and prospects for weather problems next week proving solid support ahead of a
monthly USDA report for release this afternoon. Japan/US trade meetings and
higher cash trade this week added to the bullish tone. Boxed-beef cut-out values
at mid-session were down $.83 to $138.96 as compared with 142.17 last week at
this time. Slaughter came in at 111,000 head as compared with trade expectations
at 115,000-122,000. For the week, slaughter hit 624,000 head as compared with
627,000 last week and 636,000 head last year at this time. The average trade
estimate for December 1st on-feed supply for today’s report is 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) 12/20/2004: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. The crossover up in the daily stochastics is a bullish signal.
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. Follow through
buying looks likely if the market can hold yesterday’s gap on the day session
chart. The market’s close above the 2nd swing resistance number is a bullish
indication. The next upside objective is 90.800. The next area of resistance is
around 90.450 and 90.800, while 1st support hits today at 89.250 and below there
at 88.320.

 

LEAN HOGS RECAP

12/17/2004

February Lean Hogs closed up 0.52 at 73.85. This
was 1.00 up from the low and 0.22 off the high.

February Pork Bellies finished down 0.35 at
97.77, 0.62 off the high and 0.27 up from the low.

February hogs closed moderately higher on the
session and to the highest level since early December with traders hopeful that
weekly pork production has finally peaked and that producer marketings could
slow in the weeks ahead. February hogs ending up closing 217 points higher for
the week. The CME 2-day lean index for the period ending December 15th was
reported at 72.93, down $1.55 on the session. Slaughter came in at 406,000 head
as compared with trade expectations at 390,000-405,000. Slaughter for the week
hit 2.241 million head as compared with 2.091 million last week and 2.236
million last year at this time. Bitter cold weather in the forecast for late
next week along with ideas that producers may attempt to hold some hogs for 2005
tax year marketings helped to support.

Technical Outlook

HOGS (FEB) 12/20/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. 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 near-term upside objective is at 74.870. The next area of
resistance is around 74.450 and 74.870, while 1st support hits today at 73.250
and below there at 72.450.

 

COCOA MARKET RECAP

12/17/2004

March Cocoa finished down 54 at 1600, 28 off the
high and 4 up from the low.

The cocoa market mostly fell apart in the action
Friday as the small spec and funds decided to stand aside or were forced out on
the stop loss selling wave. With a gap down trade we suspect that even more stop
loss selling will be seen in the coming sessions. While the Dollar was lower we
suspect that the arbitrage trade wasn’t willing to set into the long side
because of a favorable currency differential, when the market was under
aggressive attack. The Press suggested that fund selling dominated but we are a
little surprised that the market wasn’t supported more by a 2005 forecast of
higher cocoa prices. Right now the market isn’t very concerned about the
potential for a smaller Ivory Coast crop.

Technical Outlook

COCOA (MAR) 12/20/2004: The close under the
40-day moving average indicates the longer-term trend could be turning down. A
negative indicator was given with the downside crossover of the 9 & 18 bar
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 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 close below
the 2nd swing support number puts the market on the defensive. The next downside
target is now at 1574. The next area of resistance is around 1616 and 1638,
while 1st support hits today at 1584 and below there at 1574.

 

COFFEE MARKET RECAP

12/17/2004

March Coffee closed up 4.55 at 104.30. This was
5.30 up from the low and 1.00 off the high.

March coffee soared to a new contract high and a
new high close gaining 455 points on the day and up 700 points for the week.
After the lower opening, the lack of new selling interest from speculators and a
slowdown in commercial selling helped to support. Stops were activated above
last week’s highs and above the contract highs. On top of the bullish news on
Brazil potential supply for the 2005/2006 coffee crop size, an industry leader
in Brazil was projecting that Brazil could soon become the world’s largest
consuming country with a projection of 16 million bags in domestic consumption
for 2005. While traders are nervous that the Commitment-of-Traders report today
could be a reminder of a massive net long position from funds, the commercial
net short position is also at a record high and the steep uptrend could support
panic short-covering from trade houses. Nearby futures reached the highest level
since July of 2000.

Technical Outlook

COFFEE (MAR) 12/20/2004: The market made a new
contract high on the rally. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. The cross
over and close above the 18-day moving average indicates the longer-term trend
has turned up. A positive signal was given by the outside day up. 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 near-term
upside objective is at 109.50. The 9-day RSI over 70 indicates the market is
approaching overbought levels. The next area of resistance is around 107.40 and
109.50, while 1st support hits today at 101.15 and below there at 96.95.

 

SUGAR MARKET RECAP

12/17/2004

March Sugar closed up 0.16 at 8.64. This was 0.16
up from the low and 0.01 off the high.

March sugar closed 16 points higher on the
session with more active speculative and fund buying noted after a lack of
speculative long liquidation selling helped support local buying early in the
session. In spite of the Friday recovery, March futures ended down 5 points on
the week. Hopes of increased buying from India and Russia in the weeks ahead
helped support. With ample supply in Brazil, it seems important to see the local
prices avoid weakness if the demand from ethanol producers is strong. Traders
are anxious to see the extent of the liquidation of the speculative net long
position to be revealed in the Commitment-of-Traders report.

Technical Outlook

SUGAR (MAR) 12/20/2004: 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 has a bullish tilt coming into today’s trade with the
close above the 2nd swing resistance. The next downside objective is 8.44. The
next area of resistance is around 8.72 and 8.77, while 1st support hits today at
8.56 and below there at 8.44.

 

COTTON MARKET RECAP

12/17/2004

March Cotton finished up 0.67 at 44.13, 0.02 off
the high and 0.83 up from the low.

March cotton moved to the highest level since
December 1st with fund short-covering and trade house buying supporting solid
gains for the week. Ideas that China cotton demand may be higher than the
current USDA forecast (due to lower production and a solid uptrend in demand)
has helped to support the market. The weak dollar and expanding world demand for
textiles has added to the positive tone. In addition, traders are hopeful that
planted acreage will be down in China and in the US next year but this is still
uncertain. A continued drop in certified exchange stocks has added to the
positive tone recently but certified cotton stocks deliverable against the
exchange totaled 49,072 bales as of December 16th from 46,545 bales as of
December 15th and 59,722 bales on the 14th.

Technical Outlook

COTTON (MAR) 12/20/2004: The market now above the
40-day moving average suggests the longer-term trend has turned up. 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. 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
upside objective is 44.77. The next area of resistance is around 44.55 and
44.77, while 1st support hits today at 43.71 and below there at 43.08.