More Buying Interest Ahead?

The idea that rain amounts for the eastern
cornbelt will be lighter than expected yesterday for the rain system of the next
2 days helped support the surge higher into mid-session. Funds and small
speculators were active buyers which was thought to be short covering with funds
noted buyers of near 8000 contracts into the mid-session. As of May 10th, the
Commitment-of-Traders report with options showed that speculators were holding a
combined net short position of nearly 130,000 contracts. A large section of
Illinois and northern Indiana has experienced rainfall of 40-50% of normal since
March 1st and this seems to be the primary reason for the market to begin to
build a weather premium. While the warmer weather is expected to help boost
emergence and early growth, the mounting rainfall deficits (4-6 inches) for much
of Illinois since March 1st seems to have taken over as a more important bullish
force. Weekly export sales, released before the opening, are expected to come in
near 800,000-1.0 million tonnes as compared with 1.389 million tonnes last week.
July corn support moves up to 210 and 207 3/4 with 213 1/4 and 215 3/4 as next
resistance.

Technical Outlook

CORN (JUL) 05/19/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The cross over and close above the
18-day moving average is an indication the longer-term trend has turned
positive. There could be more upside follow through since the market closed
above the 2nd swing resistance. The next upside target is 215. The next area of
resistance is around 213 and 215, while 1st support hits today at 208 1/2 and
below there at 205 3/4.

SOY COMPLEX RECAP

5/18/2005

July Soybeans finished up 12 1/2 at 633 1/4, 7
1/4 off the high and 8 3/4 up from the low. November Soybeans closed up 12 3/4
at 630 1/4. This was 9 1/4 up from the low and 6 3/4 off the high.

July Soymeal closed up 3.2 at 196.6. This was 2.4
up from the low and 3.2 off the high.

July Soybean Oil finished up 0.24 at 22.26, 0.14
off the high and 0.21 up from the low.

The gap higher opening attracted increased
speculative and fund buyers and the buying pushed the market through resistance
which activated buy-stops and added to the bullish tone. The market is concerned
with significant moisture deficits for the central Illinois and northern Indiana
region with much of the state experiencing rainfall deficits from normal since
March first of 4 1/2 to 5 1/2 inches. The trade still looks for some rains
across Illinois and Indiana over the next 36 hours but amounts are expected to
fade from western Illinois leaving topsoil conditions dry. Champaign Illinois
has received only.15 inches of rain since May 1st. Warmer and drier weather is
expected to boost early growth and trigger more active planting progress but the
market remains nervous with a hotter and drier pattern developing and the market
sees enough reason to build a weather premium into futures prices. Export news
is slow and palm oil futures were higher in overnight trade. Funds were noted
buyers of near 5000 soybean contracts into the mid-session and 4500 meal and
3500 oil. Weekly export sales, released before the opening, are expected to come
in near 150,000-225,000 tonnes as compared with 182,800 tonnes last week. Meal
sales are expected near 50,000-75,000 tonnes and oil sales near 2,000-6,000
tonnes. July soybean support moves up to 625 3/4 with 640 and 649 1/2 as next
resistance.

Technical Outlook

BEANS (JUL) 05/19/2005: The major trend could be
turning up with the close back above the 60-day moving average. A bullish signal
was given with an upside crossover of the daily stochastics. Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average indicates 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 has a bullish tilt coming into today’s trade with the close
above the 2nd swing resistance. The near-term upside objective is at 648 3/4.
The next area of resistance is around 641 1/4 and 648 3/4, while 1st support
hits today at 625 1/4 and below there at 617.

MEAL (JUL) 05/19/2005: 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. The gap up on the day session chart gave a bullish
indicator and more follow through could be seen this session. There could be
more upside follow through since the market closed above the 2nd swing
resistance. The next upside objective is 202.4. The next area of resistance is
around 199.4 and 202.4, while 1st support hits today at 193.8 and below there at
191.2.

BEANOIL (JUL) 05/19/2005: 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 has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. The next downside
target is now at 21.90. The next area of resistance is around 22.43 and 22.59,
while 1st support hits today at 22.09 and below there at 21.90.

WHEAT MARKET RECAP

5/18/2005

July Wheat finished up 5 at 315, 3 off the high and 3 up from
the low. December Wheat closed up 5 1/4 at 334 3/4. This was 2 3/4 up from the
low and 3 off the high.

A lack of rain in the forecast for the driest
areas of the winter wheat belt helped support more speculative buying and short
covering on the opening and the surge higher in soybeans added to the positive
tone. Temperatures could cool slightly in the southern plains in the next few
days but a lack of rain is still the more serious problem and crop conditions
are thought to have deteriorated again this week in Kansas after Garden City
baked in 93 degree temps and dry conditions yesterday. Crops rated good to
excellent condition in Kansas fell 11% in the week ending Sunday and crops rated
poor to very poor in Kansas jumped to 12%. Further deterioration is expected for
the weekly report on Monday and without rain in the forecast, the crops could
continue to deteriorate for the following weekly report as well. In addition,
dryness in eastern Australia with the planting window narrowing provided
underlying support. South Korea bought 23,500 tonnes of US wheat overnight but
other US export news is quiet. Weekly export sales, released before the opening,
are expected to come in near 300,000-500,000 tonnes as compared with 365,300
tonnes last week. July wheat support moves up to 312 with 321 1/4 and 325 1/2 as
resistance.

Technical Outlook

WHEAT (JUL) 05/19/2005: The crossover up in the
daily stochastics is a bullish signal. Daily stochastics are showing positive
momentum from oversold levels, which should reinforce a move higher if near term
resistance is taken out. The market back below the 18-day moving average
suggests the longer-term trend could be turning down. With the close over the
1st swing resistance number, the market is in a moderately positive position.
The next upside target is 321. Short-term indicators suggest buying dips today.
The next area of resistance is around 318 and 321, while 1st support hits today
at 312 and below there at 309.

LIVE CATTLE RECAP

5/18/2005

June Live Cattle finished down 1.00 at 86.07,
0.92 off the high and 0.47 up from the low.

May Feeder Cattle closed down 0.32 at 111.60.
This was 0.10 up from the low and 0.30 off the high.

Funds were noted sellers early in the session
which turned the psychology bearish and trigger active speculative selling into
the mid-session as the market is correcting from the overbought condition. Ideas
of a seasonal peak in demand and talk of the hefty net long position from fund
traders after 9 contract highs in a row for Feeder Cattle and 4 contract high
days in a row for August live cattle helped pressure. At mid-session, boxed beef
cutout values were up $.69 on the day to $156.50 as compared with $155.13 one
week ago. Slaughter came in at 123,000 head as compared with trade expectations
of 123,000-128,000 head.

Technical Outlook

CATTLE (JUN) 05/19/2005: 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 defensive setup, with the close under the 2nd swing support, could
cause some early weakness. The near-term upside objective is at 87.570. The next
area of resistance is around 86.750 and 87.570, while 1st support hits today at
85.400 and below there at 84.800.

LEAN HOGS RECAP

5/18/2005

June Lean Hogs finished down 1.95 at 73.95, 0.95
off the high and 0.05 up from the low.

May Pork Bellies closed down 0.40 at 80.20. This
was 0.60 up from the low and equal to the high.

The downside technical break-out for many of the
hog and pork belly contracts along with the outlook for weaker cash markets for
later this week helped pressure the hog market to the lowest level since
February for the July contract (limit down) and bellies collapsed from a bearish
weekly cold storage report. Lower pork cut-out values overnight helped trigger
the early weakness. Traders are concerned that pork demand is seasonally
declining and that a slight jump in pork production could have a significant
impact on prices. August bellies hit new contract lows. The CME 2-Day Lean Index
for the period ending May 16th came in at 76.53 which was down 0.16 from the
previous session and down from 78.35 one week ago. The weekly average weights
for Iowa/Minnesota for the week ending May 14th came in at 267.8 pounds, down.1
from the previous week but up 1.7% from last year. Slaughter came in at 382,000
head as compared with trade expectations of 380,000-385,000 head.

Technical Outlook

HOGS (JUN) 05/19/2005: Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The gap lower price action on the day
session chart is a bearish indicator for trend. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. The next
downside target is 73.200. The next area of resistance is around 74.450 and
75.170, while 1st support hits today at 73.470 and below there at 73.200.

COCOA MARKET RECAP

5/18/2005

July Cocoa finished up 15 at 1453, 5 off the high
and 12 up from the low.

Even the cocoa market seemed to get a lift from
the improved macro economic condition but we suspect that the slide in the
Dollar was the key factor lifting cocoa prices. However, it should also be noted
that cocoa managed the gains despite the presence of origin selling and that
really begins to alter the mostly bearish sentiment of the cocoa market.
However, we are still not seeing much cause to interject a premium into cocoa
prices and that could limit near term gains to simple technical short covering.

Technical Outlook

COCOA (JUL) 05/19/2005: The daily stochastics
gave a bullish indicator with a crossover up. 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 market back below the 18-day moving average suggests
the longer-term trend could be turning down. A positive setup occurred with the
close over the 1st swing resistance. The near-term upside target is at 1468. The
next area of resistance is around 1461 and 1468, while 1st support hits today at
1445 and below there at 1435.

COFFEE MARKET RECAP

5/18/2005

July Coffee closed up 0.20 at 118.40. This was
0.75 up from the low and 1.25 off the high.

July coffee closed slightly higher in choppy,
two-sided trade with low volume noted. Speculative long liquidation selling has
slowed after the recent sharp break but roaster buying is still slow. A lack of
weather developments in Brazil of Vietnam has kept fundamental news slow and
declining open interest over the past few weeks may indicate that the market is
now less overbought than recent COT reports would indicate. July coffee in
London managed to reach a new contract high and a new 5 1/2 year high for the
nearby futures.

Technical Outlook

COFFEE (JUL) 05/19/2005: Daily stochastics are
trending lower but have declined into oversold territory. The market back below
the 18-day moving average suggests the longer-term trend could be turning down.
The market has a slightly positive tilt with the close over the swing pivot. The
next downside target is 116.55. The next area of resistance is around 119.40 and
120.50, while 1st support hits today at 117.45 and below there at 116.55.

SUGAR MARKET RECAP

5/18/2005

July Sugar closed up 0.10 at 8.40. This was 0.07
up from the low and 0.12 off the high.

July sugar closed 10 higher on the session and
near the middle of the days range as an improving atmosphere for commodity
markets and some fund short-covering helped support. Dryness in Australia and
uncertainty for the crop outlook in Thailand helped support. In addition, there
were rumors of light buying from China in the cash markets and rumors that China
has been buying futures which added to the more positive tone. Lower world
freight rates may have boosted some increased cash market activity and there was
talk of Brazil shipments to Iran which came as a surprise to cash dealers as
media reports from Iran have indicated that the country would not import sugar
until next year. The European Commission has proposed deeper price cuts over a
shorter time period as part of a revised plan the reform the EU sugar plan. The
WTO rejected the EU appeal on a WTO ruling which found that much of Europe’s
exports were illegal.

Technical Outlook

SUGAR (JUL) 05/19/2005: 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.
A positive setup occurred with the close over the 1st swing resistance. The next
downside objective is now at 8.23. The next area of resistance is around 8.49
and 8.60, while 1st support hits today at 8.31 and below there at 8.23.

COTTON MARKET RECAP

5/18/2005

July Cotton finished down 0.26 at 51.80, 0.87 off
the high and 0.25 up from the low.

The cotton market experienced choppy, two-sided
trade as the outlook for active buying from China was partially offset by
concerns that the US will follow-through to slap on import quotas for a wide
range of textiles. Strength in the grain markets provided some underlying
support. A US Commerce official indicated that the US has not asked China to
voluntarily restrict clothing exports to the US but the US would have no need to
follow-through on plans to impose quotas if shipments fell from the current
market-disrupting levels. The market saw some pressure from the recent increase
in exchange stocks. Certified stocks deliverable against the exchange as of May
17th totaled 219,997 bales from 206,994 bales the previous session. Weekly
export sales, released before the opening, are expected to show improvement from
last weeks cancellations.

Technical Outlook

COTTON (JUL) 05/19/2005: 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
downside closing price reversal on the daily chart is somewhat negative. With
the close higher than the pivot swing number, the market is in a slightly
bullish posture. The next downside objective is 50.84. The next area of
resistance is around 52.35 and 53.07, while 1st support hits today at 51.24 and
below there at 50.84.