Two Reasons For The Drop In Energy Today

The close on the day was 1 cent off of the highs
and below the opening which is not very impressive given the late surge higher
in soybeans. It was still the highest close for March corn since December 6th
and leaves the market vulnerable to short-covering into the end of the year. The
extent of the net short position of the fund trader will become clearer with the
release of the Commitment-of-Traders report this afternoon. Short-covering from
fund traders supported the early bounce but a lack of follow-through buying on
the move to the highest level since December 7th helped to trigger a break into
the mid-session. Slow producer selling and a firm basis tone added to the early
positive tone but traders are nervous that producer selling could increase
rapidly into the new tax year. Taiwan bought 35,000 tons of US corn on Friday.
Weekly export inspections came in at 35.98 million bushels as compared with
trade expectations at 35-40 million bushels. Cumulative shipments for the
2004/2005 marketing year have reached 582.8 million bushels as compared with
607.4 million last year by this time. Resistance for March corn comes in at 208
and 210 with support at 205 3/4 and 204 3/4.

Technical Outlook

CORN (MAR) 12/28/2004: 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. It is a mildly
bullish indicator that the market closed over the pivot swing number. The
near-term upside target is at 210. The next area of resistance is around 208 3/4
and 210, while 1st support hits today at 206 1/4 and below there at 204 3/4.

 

SOY COMPLEX RECAP

12/27/2004

March Soybeans finished up 5 3/4 at 554, 1 off
the high and 8 up from the low. May Soybeans closed up 5 1/4 at 558 1/2. This
was 7 1/2 up from the low and 1 off the high.

March Soymeal closed up 0.5 at 162.2. This was
2.0 up from the low and 1.6 off the high.

March Soybean Oil finished up 0.37 at 21.48, 0.15
off the high and 0.26 up from the low.

Continued speculative short-covering supported
the early bounce but a lack of new export news or new rumors of China buying
along with the fear of increased producer selling into next year helped to
pressure the market. Argentina’s top producing soybean state (Santa Fe) was
found to have cases of Asia rust which helped provide some early support. Weekly
export inspections came in at 30.3 million bushels as compared with trade
expectations at 20-25 million bushels. Cumulative shipments for the 2004/2005
marketing year have reached 498.7 million bushels as compared with 484.9 million
last year by this time. Weak trade action at the China exchange overnight and
fears that China buying could temporarily slow added to the negative tone into
the mid-session. The recovery to close moderately higher on the session and to
the highest close since November 24th is a positive technical development. March
Soybean resistance points come in at 557 and 565 with support at 547 1/2 and
542.

Technical Outlook

BEANS (MAR) 12/28/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The major trend could be turning up with the close back above the 18-day
moving average. The outside day up is a positive signal. 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 target
is at 561 1/4. The next area of resistance is around 558 1/2 and 561 1/4, while
1st support hits today at 549 1/2 and below there at 543 1/4.

MEAL (MAR) 12/28/2004: The daily stochastics have
crossed over up which is a bullish indication. 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. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
near-term upside objective is at 165.7. The next area of resistance is around
164.0 and 165.7, while 1st support hits today at 160.4 and below there at 158.5.

BEANOIL (MAR) 12/28/2004: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. The gap upmove on the day session chart is a bullish indicator
for trend. 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 target is 21.86. The market is approaching
overbought levels with an RSI over 70. The next area of resistance is around
21.68 and 21.86, while 1st support hits today at 21.28 and below there at 21.05.

 

WHEAT MARKET RECAP

12/27/2004

March Wheat finished down 4 1/2 at 305, 6 3/4 off the high and
4 up from the low. May Wheat closed down 4 at 312 1/2. This was 4 up from the
low and 6 off the high.

The lack of fresh fundamental news and the
emergence of fund selling were seen as the bearish forces for the day. The
sweeping reversal after the higher opening is bearish short-term technical
action and talk that the cold weather last week failed to cause much damage to
the winter wheat crop helped to trigger some light long liquidation selling on
the higher opening. Cash basis levels were steady this morning as producer
selling remains slow but there is some concern that producer selling will
pick-up into the new tax year which added to the bearish tone into the
mid-session. Weekly export inspections came in at 16.2 million bushels as
compared with trade expectations at 13-18 million bushels. Cumulative shipments
for the 2004/2005 marketing year have reached 627.82 million bushels as compared
with 627.84 million last year by this time. Fund selling has been noted in the
pit into the mid-session. Iraq extended its tender to buy 100,000-150,000 tons
of optional origin wheat until January 10th. There are still rumors that Iraq is
negotiating to buy 300,000-500,000 tons of US wheat. March wheat resistance
comes in at 307 1/2 and 310 with support at 303 1/4 and 301 1/4.

Technical Outlook

WHEAT (MAR) 12/28/2004: 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 1st swing support number suggests a
moderately negative setup for today. The next upside objective is 316 1/4. The
next area of resistance is around 310 1/4 and 316 1/4, while 1st support hits
today at 299 3/4 and below there at 295.

 

LIVE CATTLE RECAP

12/27/2004

February Live Cattle closed up 0.22 at 91.77.
This was 0.67 up from the low and 0.22 off the high.

January Feeder Cattle finished up 0.62 at 105.82,
0.27 off the high and 1.22 up from the low.

December cattle rallied for the 8th session in a
row to another new contract high at 92.95 before closing below the opening.
February cattle moved over the July high to establish a new contract high on
continued hopes of higher cash trade this week. Cash cattle are expected to
trade steady to $2.00 higher this week after active trade at $90.00 last week.
Offers emerged at $94-$95 this morning but there were no packer bids reported.
Ideas that packer demand will be weak during the first week of 2005 due to the
availability of contracted cattle by packers helped pressure the market early
but active speculative buying supported the solid gains into the close.
Boxed-beef cut-out values at mid-session were up $1.45 to $142.82 as compared
with $138.86 last week at this time.

Technical Outlook

CATTLE (FEB) 12/28/2004: 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. It is a mildly bullish indicator that the market closed over the
pivot swing number. The near-term upside target is at 92.550. The market is
becoming somewhat overbought now that the RSI is over 70. The next area of
resistance is around 92.220 and 92.550, while 1st support hits today at 91.350
and below there at 90.770.

 

LEAN HOGS RECAP

12/27/2004

February Lean Hogs closed up 0.97 at 74.77. This
was 1.47 up from the low and 0.22 off the high.

February Pork Bellies finished up 0.02 at 95.62,
1.32 off the high and 0.27 up from the low.

The market pushed lower early in the session led
by a weak tone for the cash market and ideas that warmer weather could support
more active producer selling this week but minor support for February hogs held
(73.30) and the market found active speculative buying to support a surge higher
to the highest level since December 3rd into the close. After a very profitable
year for producers, some traders believe that producer marketings could slow
this week as producers try to move some income into next year. Strength in the
pork product market on Thursday night and expectations for active export demand
ahead helped to provide support. The CME 2-day lean index for the period ending
December 22nd was reported at 66.38, down $1.17 on the session and down from
72.93 one week ago. Slaughter came in at 362,000 head as compared with trade
expectations at 398,000 to 402,000 head. Traders await the results of the USDA
Hogs and Pigs report for Tuesday afternoon for longer-term direction. Traders
are looking for All Hogs and Pigs at 101.4% of last year (range 100.1-102), Kept
for Market animals at 101.5% of last year (range 100.3-102) and Kept for
Breeding Supply at 101% (range 98.6-102).

Technical Outlook

HOGS (FEB) 12/28/2004: 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. 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 76.150. The
next area of resistance is around 75.620 and 76.150, while 1st support hits
today at 73.950 and below there at 72.770.

 

COCOA MARKET RECAP

12/27/2004

March Cocoa finished up 12 at 1564, 6 off the
high and 9 up from the low.

The cocoa market forged a tight range near the
lower portion of the prior day’s lows. While some would suggest that the low
Dollar is supportive of cocoa we have to think that the arbitrage buyers are
getting full up on the low Dollar buying. The bull camp had to be disappointed
with the markets lack of bullishness considering a couple different anxiety
issues at the Ivory Coast over the weekend. Many longs continue to fret over the
recent talk that arrivals were understated and that might keep a lid on prices
in the near term.

Technical Outlook

COCOA (MAR) 12/28/2004: 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 slightly positive tilt with the close over the
swing pivot. The next downside objective is now at 1549. The next area of
resistance is around 1571 and 1578, while 1st support hits today at 1557 and
below there at 1549.

 

COFFEE MARKET RECAP

12/27/2004

March Coffee closed down 0.40 at 104.70. This was
0.80 up from the low and 2.80 off the high.

The coffee market opened higher and closed
slightly lower on the session. The higher opening was led by concerns for
infrastructure damage in Southeast Asia with Indonesia one of the worlds largest
producers. However, reports of very little structural damage from the disastrous
tsunami waves helped to pressure the market late. The trade is nervous that
tonight’s Commitment-of-Traders might show another new record high speculative
long position helped to pressure the market into the close. Volume was light in
holiday-type trade.

Technical Outlook

COFFEE (MAR) 12/28/2004: 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 daily closing price reversal down is a negative indicator for
prices. It is a mildly bullish indicator that the market closed over the pivot
swing number. The next upside objective is 108.75. The next area of resistance
is around 106.50 and 108.75, while 1st support hits today at 102.95 and below
there at 101.65.

 

SUGAR MARKET RECAP

12/27/2004

March Sugar closed up 0.13 at 8.99. This was 0.08
up from the low and 0.01 off the high.

The sugar market forged a surprised upward trade
Monday and did so without much in the way of physical activity. Apparently fund
buyers were key players in the action Monday and we have to think that the COT
report is certainly set to understate the magnitude of the small spec and fund
long. Some traders are suggesting that the long spec interest in sugar is rising
because the trade is expecting to see lower freight rates, due to the
significant and ongoing slide in energy prices. In other words, the total cost
of a physical cargo might be cheapening even if the flat price of sugar is
rising. Countervailing the upward bias in prices were reports of producer
selling but apparently the bulls have enough numbers to control the day’s
direction.

Technical Outlook

SUGAR (MAR) 12/28/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average indicates the longer-term trend has turned 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 target is at 9.06. The next area of resistance is around 9.03
and 9.06, while 1st support hits today at 8.95 and below there at 8.89.

 

COTTON MARKET RECAP

12/27/2004

March Cotton finished up 0.02 at 42.92, 0.03 off
the high and 0.75 up from the low.

While the March cotton fell down to last weeks
lows it did manage to respect that critical chart point. Reports that some
Chinese cotton planted area would be shift to grain crops should have provided
some support to prices but the shift wasn’t really significant enough to really
alter existing bear sentiment. The cotton market is still without a specific
reason to bottom and with the US well supplied and the year end reducing trade
we have to think that the bears retain control over prices.

Technical Outlook

COTTON (MAR) 12/28/2004: 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. The upside closing price reversal on the daily chart is somewhat bullish.
The close over the pivot swing is a somewhat positive setup. The next downside
target is now at 41.96. The next area of resistance is around 43.31 and 43.52,
while 1st support hits today at 42.53 and below there at 41.96.