Hogs Collapse! Here’s Why…

The shift in the weather forecast to cooler for
the next 10 days helped support solid gains in corn this morning as slow
emergence and slow early growth is the current crop concern for corn. Many
traders believe that the benefits of early planting have already been lost to
extremes in temperature and moisture for a good portion of the Midwest and slow
early growth increases the odds of the crop pollinating in late July or early
August when temperature extremes or moisture stress are more likely. Export news
is quiet and basis levels are steady as producer selling has slowed from a more
active pace on Wednesday afternoon. Speculators were holding a net short
position of nearly 130,000 contracts in the last Commitment-of-Traders report
with options and traders will look for this afternoons update for a potential
impact next week. July corn support comes in at 212 and 210 with 215 3/4 and 216
1/2 (50-day ma) as next resistance.

Technical Outlook

CORN (JUL) 05/23/2005: Positive momentum studies
in the neutral zone will tend to reinforce higher price action. The cross over
and close above the 18-day moving average indicates the longer-term trend has
turned up. The market’s close above the 2nd swing resistance number is a bullish
indication. The next upside objective is 216. The next area of resistance is
around 214 3/4 and 216, while 1st support hits today at 211 3/4 and below there
at 210.

SOY COMPLEX RECAP

5/20/2005

July Soybeans finished up 2 3/4 at 632, 6 1/2 off
the high and 1 1/2 up from the low. November Soybeans closed up 4 at 630. This
was 2 up from the low and 5 1/2 off the high.

July Soymeal closed up 0.7 at 196.3. This was 0.9
up from the low and 1.7 off the high.

July Soybean Oil finished up 0.27 at 22.31, 0.21
off the high and 0.26 up from the low.

Short-covering hit the market early in the
session as traders who sold the market due to better than expected weather were
caught with only a shallow break off of the highs for the week and the buying
supported the early gains. Fund traders were also buyers as the technical action
in the market continue to improve with the highest close for new crop soybeans
since mid-March. Overnight weather models indicated a cooler and drier 10 day
outlook for the Midwest which added to the positive tone as the crop needs
warmer weather for better emergence and early growth. July soybeans closed more
than 20 cents higher on the week while July oil closed near 8 points higher on
the week with July meal up almost $7.00 on the week. July soybean support comes
in at 631 and 627 1/2 with 641 and 651 1/4 as next resistance.

Technical Outlook

BEANS (JUL) 05/23/2005: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. 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
close over the pivot swing is a somewhat positive setup. The next upside
objective is 641 1/4. The next area of resistance is around 636 and 641 1/4,
while 1st support hits today at 628 and below there at 625 1/4.

MEAL (JUL) 05/23/2005: The upside crossover of
the 9 & 18 bar moving average is a positive signal. Momentum studies are rising
from mid-range, which could accelerate a move higher if resistance levels are
penetrated. The market now above the 18-day moving average suggests the
longer-term trend has turned up. It is a mildly bullish indicator that the
market closed over the pivot swing number. The next upside objective is 199.1.
The next area of resistance is around 197.6 and 199.1, while 1st support hits
today at 195.0 and below there at 193.9.

BEANOIL (JUL) 05/23/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
market back below the 18-day moving average suggests 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 target is now at
21.83. The next area of resistance is around 22.54 and 22.76, while 1st support
hits today at 22.08 and below there at 21.83.

WHEAT MARKET RECAP

5/20/2005

July Wheat finished up 3 1/2 at 313, 1 1/2 off the high and 3
up from the low. December Wheat closed up 3 3/4 at 332 1/2. This was 2 1/2 up
from the low and 1 1/4 off the high.

Talk that funds are holding a hefty net short
position with potentially damaging weather forecasts in the US and Australia
helped to support the early bounce. Tonight’s Commitment-of-Traders report
should give traders a better indication of the extent of the fund net short in
wheat. Weather traders believe the hot and dry ridging pattern over the plains
for the weekend will shift back to the western US and allow for somewhat cooler
temperatures for Sunday through Wednesday which could also bring about some
scattered thunderstorms. In Spain, officials pegged the wheat crop at just 5.06
million tonnes as compared with 7.11 million tonnes last year and the forecast
is based on data from March and many traders believe the crop is even smaller
with continued drought conditions providing stress and lowering yield potential.
Australia wheat producers are waiting for rains to get the new crop planted and
there is still no rain in the 7-day outlook. Taiwan bought 43,000 tonnes of US
wheat overnight. July wheat support comes in at 310 1/2 with 316 and 321 1/4 as
resistance.

Technical Outlook

WHEAT (JUL) 05/23/2005: Momentum studies are
trending higher from mid-range, which should support 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. It is a mildly bullish
indicator that the market closed over the pivot swing number. The next upside
objective is 317. The next area of resistance is around 315 1/4 and 317, while
1st support hits today at 310 3/4 and below there at 308 1/4.

LIVE CATTLE RECAP

5/20/2005

June Live Cattle finished down 0.20 at 85.62,
0.12 off the high and 0.17 up from the low.

May Feeder Cattle closed down 0.27 at 111.47.
This was 0.07 up from the low and 0.37 off the high.

Cattle pushed moderately lower led by a break in
August to the lowest level since April 22nd. Talk of a weaker demand tone due to
a seasonal peak in beef demand now that Memorial Day buying is complete helped
to pressure the market and the collapse in the other meat markets added to the
bearish tone. Fears of bearish news for summer months from this afternoons USDA
Cattle-on-Feed report helped pressure. Traders are looking for on feed supplies
near 102.4% (range 100.5-104) with placements near 103.9% (99-115%) and
marketings near 96.8% (range 94-99%). Funds built up a large net long position
in recent weeks and ideas of continued fund long liquidation selling next week
added to the bearish tone. At mid-session, boxed beef cutout values were down
$.27 on the day to $156.71 as compared with $153.84 one week ago. Slaughter came
in at 126,000 head as compared with trade expectations of 120,000-124,000 head.

Technical Outlook

CATTLE (JUN) 05/23/2005: 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. It is a slightly negative indicator that the close was lower than
the pivot swing number. The next downside target is now at 85.320. The next area
of resistance is around 85.750 and 85.900, while 1st support hits today at
85.500 and below there at 85.320.

LEAN HOGS RECAP

5/20/2005

June Lean Hogs finished down 1.20 at 72.27, 1.20
off the high and 0.75 up from the low.

May Pork Bellies closed down 3.00 at 77.60. This
was equal to the low and 2.45 off the high.

The market collapsed with hogs down sharply and
bellies limit-down ahead of the USDA monthly stocks report. The collapse in pork
product values from Thursday afternoon (loins down more than $4.00) along with
continued demand fears into next week when the market may need to absorb higher
production due to hefty weights added to the bearish tone. Traders are also
fearful of big cold storage supplies for the monthly cold storage report for
release this afternoon. Total pork in cold storage is seen near 550-555 million
pounds as compared with 448.6 million pounds last year. Traders are looking for
the report to show frozen belly stocks in the range of 88.2 to 91.3 million
pounds as compared with 81.3 million pounds at the end of March and 48.4 million
pounds last year. The CME 2-Day Lean Index for the period ending May 18th came
in at 76.40 which was down.07 from the previous session and down from 77.75 one
week ago. Slaughter came in at 361,000 head as compared with trade expectations
of 358,000-363,000 head.

Technical Outlook

HOGS (JUN) 05/23/2005: Momentum studies are
declining, but have fallen to oversold levels. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The close
below the 2nd swing support number puts the market on the defensive. The next
downside objective is now at 70.450. With a reading under 30, the 9-day RSI is
approaching oversold levels. The next area of resistance is around 73.250 and
74.320, while 1st support hits today at 71.320 and below there at 70.450.

COCOA MARKET RECAP

5/20/2005

July Cocoa finished down 6 at 1440, 10 off the
high and 8 up from the low.

It would seem as if a negative commodity fund
bias exists in the cocoa market, and with the US Dollar perpetually higher, we
can understand the slight bear tilt. Apparently, we continue to progress to the
disarmament date without Ivory Coast political uncertainty. Since no fundamental
change is anticipated, bearish technicals seem to prevail.

Technical Outlook

COCOA (JUL) 05/23/2005: 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. It is a slightly negative
indicator that the close was under the swing pivot. The next upside objective is
1458. The next area of resistance is around 1449 and 1458, while 1st support
hits today at 1431 and below there at 1423.

COFFEE MARKET RECAP

5/20/2005

July Coffee closed up 0.20 at 117.00. This was
0.75 up from the low and 1.00 off the high.

July coffee closed 20 higher on the session with
choppy trade in a relatively small trading range. The outlook for a colder trend
into next weekend in Brazil helped to provide some underlying support and fears
from the shorts that the weather forecast could turn even colder over the
weekend helped prompt some light short-covering. Failure for London to bust
through to new highs helped keep New York coffee trade quiet. The International
Coffee Organization indicated that the Vietnam crop might have withstood the
drought better than expected with a production forecast for the 2005/2006 crop
near 13 million bags from 14.5-15.0 previous estimates and from 14 million bags
last year.

Technical Outlook

COFFEE (JUL) 05/23/2005: Daily stochastics are
trending lower but have declined into oversold territory. The major trend has
turned down with the cross over back below the 18-day moving average. The daily
closing price reversal up on the daily chart is somewhat positive. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The next downside target is now at 115.35. The next area of resistance
is around 117.85 and 118.80, while 1st support hits today at 116.15 and below
there at 115.35.

SUGAR MARKET RECAP

5/20/2005

July Sugar closed up 0.06 at 8.59. This was 0.09
up from the low and 0.03 off the high.

October sugar closed 10 higher on the session and
up 26 higher on the week to the highest close since April 11th. Trade house
buying was noted early in the pit as Malaysia was suspected of buying a large
amount of sugar and commercial traders were the most active buyers early. In
addition, traders see funds as short and caught the wrong was and the market
looks vulnerable to more short-covering next week if the Commitment-of-Traders
report shows a hefty net short. Rumors had Malaysia buying at least 400,000
tonnes from 2 separate trade houses.

Technical Outlook

SUGAR (JUL) 05/23/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market now above the 18-day moving average suggests the
longer-term trend has turned up. It is a mildly bullish indicator that the
market closed over the pivot swing number. The next upside target is 8.69. The
next area of resistance is around 8.64 and 8.69, while 1st support hits today at
8.53 and below there at 8.46.

COTTON MARKET RECAP

5/20/2005

July Cotton finished down 0.10 at 50.05, 0.70 off
the high and 0.24 up from the low.

December cotton opened lower but managed to
bounce 80 points off of the lower opening to move higher on the session. A lack
of new selling interest on the move to the lowest level since late February and
some hope that the news that China imposed export tariffs on a number of
clothing and textiles in an attempt to ease trade-war tensions with Europe and
the US provided some support. Uncertainty over China demand has kept the market
in a long liquidation mode over the past few weeks but the enormous China import
forecast from the USDA remains as a bullish foundation for the cotton market.

Technical Outlook

COTTON (JUL) 05/23/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The close below the 18-day moving average is an indication
the longer-term trend has turned down. The market tilt is slightly negative with
the close under the pivot. The next downside target is now at 49.23. The market
is approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 50.52 and 51.10, while 1st support hits today at 49.58 and
below there at 49.23.