What Are Treasuries Telling Us?

Speculative selling pushed the market to an eight
session low with weak export news and talk of improving weather in the mid-west
helping to trigger the selling. Forecast for warm weather this week and more
warm weather early next week for the Midwest is seen as a bearish factor as the
corn crop will be able to advance closer to maturity. Weekly export sales for
corn came in at only 342,600 tons as compared with trade expectations at
500,000-800,000 tons. For the new crop season, sales were 209,100 tons as
compared with 907,600 tons necessary each week to reach the USDA projection.
Cumulative sales have reached 8.4% of the USDA forecast for the year as compared
with 9.7% on average for this time of the year. The International Grains Council
pegged world coarse grain production for the 2004/2005 season at 962 million
tons, up 14 million from last months forecast and up from 910 million tons last
year. Ending stocks are expected to jump 5 million tons this season to 140
million tons which is up 17 million tons from last months forecast. December
corn resistance comes in at 236 3/4 with support at 232 1/2 and 230 1/4.

Technical Outlook

CORN (DEC) 08/27/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close below
the 9-day moving average is a negative short-term indicator for trend. The
market’s close below the pivot swing number is a mildly negative setup. The next
downside target is 231 1/2. The next area of resistance is around 235 1/2 and
237 3/4, while 1st support hits today at 232 1/2 and below there at 231 1/2.

 

SOY COMPLEX RECAP

8/26/2004

September Soybeans finished down 6 1/2 at 616
3/4, 9 3/4 off the high and 2 1/4 up from the low. November Soybeans closed down
6 at 606 1/2. This was 2 up from the low and 9 1/2 off the high.

December Soymeal closed down 3.8 at 179.4. This
was 0.4 up from the low and 3.4 off the high.

December Soybean Oil finished up 0.13 at 23.89,
0.17 off the high and 0.32 up from the low.

Talk of weaker cash markets and ideas that the
short-term weather is a bearish influence on the market helped trigger selling
after the higher opening. After hefty rain amounts overnight in the southern and
central cornbelt, the outlook for warm and somewhat dry weather into early next
week is seen as favorable weather to see crop conditions improve. The warmer
weather should help the crop advance toward maturity. After a meeting with China
officials, Bush Administration officials indicated that the new China import
regulations will not hinder the country’s imports of American soybeans. Weekly
export sales for soybeans came in at 545,000 tons as compared with trade
expectations at 250,000-400,000 tons. For the new crop season, cumulative sales
have reached 18.4% of the USDA forecast for the year as compared with 15.9% on
average for this time of the year. China was a noted buyer of 113,000 tons for
the week. The weekly broiler report showed that commercial hatcheries set 3%
more eggs than a year-ago into incubators for the week ending August 21st and
that chicks placed for meat production were up 4% from last year. Continued
expansion in poultry production is seen as a positive factor for domestic meal
consumption. The Census crush report for July showed crush at 115.27 million
bushels, oil stocks at 1.408 billion pounds and meal stocks at 344,632 tons. The
numbers are right at trade expectations. Basis bids in the western cornbelt were
down sharply with talk of increased producer selling helping to pressure.
Resistance for November soybeans comes in at 615 with support at 604 and 597
1/2.

Technical Outlook

BEANS (NOV) 08/27/2004: Momentum studies are
trending higher but have entered overbought levels. The close above the 9-day
moving average is a positive short-term indicator for trend. The market tilt is
slightly negative with the close under the pivot. The next upside objective is
619 3/4. The next area of resistance is around 612 1/4 and 619 3/4, while 1st
support hits today at 600 3/4 and below there at 597.

MEAL (DEC) 08/27/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The close below the 1st swing support could
weigh on the market. The near-term upside objective is at 183.9. The next area
of resistance is around 181.3 and 183.9, while 1st support hits today at 177.5
and below there at 176.4.

BEANOIL (DEC) 08/27/2004: Rising stochastics at
overbought levels warrant some caution for bulls. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The close over
the pivot swing is a somewhat positive setup. The next upside objective is
24.34. The market is approaching overbought levels with an RSI over 70. The next
area of resistance is around 24.13 and 24.34, while 1st support hits today at
23.65 and below there at 23.37.

 

WHEAT MARKET RECAP

8/26/2004

September Wheat finished down 1/4 at 305 3/4, 2 3/4 off the
high and 1 1/2 up from the low. December Wheat closed down 1/4 at 318 3/4. This
was 2 3/4 up from the low and 2 1/4 off the high.

While the export news was positive, the market
came under speculative selling pressures early in the session with weakness in
the other grains adding to the bearish tone. However, the lack of follow-thru
speculative selling and some strength at the Minneapolis exchange helped to
support the recovery bounce into the close. Traders seem to believe that the
fast pace in export sales is just temporary and that competition will intensify
for exports in the months ahead. Weekly export sales for wheat came in at
614,900 tons as compared with trade expectations at 300,000-500,000 tons and
344,900 tons necessary each week to reach the USDA projection. Cumulative sales
have reached 45.5% of the USDA forecast for the year as compared with 31.3% on
average for this time of the year. The International Grains Council pegged world
wheat production at 614 million tons as compared with 554 million tons last
year. Ending stocks are expected to jump by 9 million tons this season to 139
million tons. Support for December wheat comes in 315 1/2 and 311 3/4 with 321
and 323 3/4 as resistance.

Technical Outlook

WHEAT (DEC) 08/27/2004: 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 below the
9-day moving average is a negative short-term indicator for trend. The market
tilt is slightly negative with the close under the pivot. The next downside
objective is 313 3/4. The next area of resistance is around 321 1/4 and 323 1/2,
while 1st support hits today at 316 1/4 and below there at 313 3/4.

 

LIVE CATTLE RECAP

8/26/2004

October Live Cattle closed down 0.50 at 83.05.
This was 0.12 up from the low and 0.85 off the high.

October Feeder Cattle finished down 1.00 at
109.22, 1.27 off the high and 0.17 up from the low.

October Cattle closed moderately lower on the
session and down for the 9th session in a row to the lowest close since April
30th on a continued flow of bearish news and active fund selling. News from a US
meat industry representative that Japan is unlikely to change any import rules
for the rest of this year helped to trigger another round of speculative
selling. Boxed beef cutout values (600-750 choice) were down $1.01 at
mid-session to $139.66 from $141.72 last week at this time. Slaughter came in at
123,000 head as compared with 123,000 to 128,000 head expected. This brought
slaughter for the week up to just 479,000 head from 488,000 head last week and
539,000 head last year. The slower slaughter pace could suggest weak packer
demand for live cattle due to poor packer profit margins.

Technical Outlook

CATTLE (OCT) 08/27/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. It is a slightly negative indicator that the close was lower than the
pivot swing number. The next downside target is 82.270. The market is
approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 83.520 and 84.200, while 1st support hits today at 82.570
and below there at 82.270.

 

LEAN HOGS RECAP

8/26/2004

October Lean Hogs closed down 0.35 at 62.97. This
was 0.15 up from the low and 1.22 off the high.

February Pork Bellies finished up 0.42 at 93.07,
0.92 off the high and 0.37 up from the low.

October hogs closed lower with choppy and
two-sided trade as the weakness in pork product prices of the past few sessions
is seen as negative and could reduce packer profit margins which in turn could
pressure cash markets. The close was the lowest since June 2nd. Cash market was
steady to lower. The CME 2-day lean index for the period ending August 24th was
down 46 cents from the previous session to $74.59 as compared with 78.25 on
August 13th. The market tried to recovery to the upside supported by talk that
the basis levels are too wide but news of a hefty jump in weights on the week
would suggest that the market may need to absorb a large production base for the
next few weeks after the recent large slaughter pace. Slaughter came in at
394,000 head as compared with 392,000 to 398,000 head expected. This brought
slaughter for the week up to 1.579 million head from 1.490 million head last
year.

Technical Outlook

HOGS (OCT) 08/27/2004: Momentum studies are
declining, but have fallen to oversold levels. 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. The next downside target is now at 61.870. Some caution in pressing the
downside is warranted with the RSI under 30. The next area of resistance is
around 63.650 and 64.600, while 1st support hits today at 62.300 and below there
at 61.870.

 

COCOA MARKET RECAP

8/26/2004

September Cocoa finished up 27 at 1685, 10 off
the high and 40 up from the low.

The cocoa market continues to exhibit wild back
and forth action but in the end prices managed to close firm. The Press
suggested that the market had almost no selling interest and that seemed to
result in a sharp recovery bounce. Reports of a tightened cocoa supply situation
in Asia might have given the market a fresh support as most of the focus over
the last month was trained on the rain/no rain situation in African growing
regions. The fact that small specs rushed back into the long side Thursday means
that the market is once again being bid up with weak hands.

Technical Outlook

COCOA (DEC) 08/27/2004: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend.
Positive momentum studies in the neutral zone will tend to reinforce higher
price action. A positive signal for trend short-term was given on a close over
the 9-bar moving average. The daily closing price reversal up on the daily chart
is somewhat positive. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next upside objective is 1766. The next
area of resistance is around 1742 and 1766, while 1st support hits today at 1672
and below there at 1626.

 

COFFEE MARKET RECAP

8/26/2004

September Coffee closed up 0.85 at 70.65. This
was 1.15 up from the low and 0.35 off the high.

The coffee market managed an impressive upward
breakout and seemed to garner most if its strength from intense fund buying. A
decline in Guatemala 2003-2004 coffee production of 4.2% might have given the
market support especially since 2004-2005 production was to be level with the
prior year. It would seem that New York coffee managed to ignore the weaker
London action but in the end the biggest feature of the day appeared to be
spread action and that would seem to discount the upside pulse in prices. It
would seem that some commercial traders are viewing coffee prices below 72.00 as
too cheap for forward looking fundamentals.

Technical Outlook

COFFEE (DEC) 08/27/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The close above the 9-day
moving average is a positive short-term indicator for trend. A positive setup
occurred with the close over the 1st swing resistance. The next upside target is
75.75. The next area of resistance is around 75.25 and 75.75, while 1st support
hits today at 73.70 and below there at 72.60.

 

SUGAR MARKET RECAP

8/26/2004

October Sugar closed down 0.07 at 7.60. This was
equal to the low and 0.10 off the high.

October sugar closed lower after two-sided trade
with fund sellers active and only light buying noted from trade houses. Traders
continue to believe that the market will see solid support on breaks from trade
houses as cash inquiries should be improving with the recent break but if end
users see even lower prices ahead as a possibility, the buying support from the
trade may not materialize until prices are seen as “cheap”. With big open
interest in October futures and speculators holding a massive net long position
in sugar, the path of least resistance looks down until commercial buying
materializes. The EU sold 84,000 tonnes of white sugar at their weekly tender
vs. expectations at 60,000-100,000 tons. Recent dry weather in the center-south
region of Brazil has helped the harvest to catch-up to a more normal pace and
dry weather in the forecast for the next few weeks should keep harvest progress
active.

Technical Outlook

SUGAR (OCT) 08/27/2004: A crossover down in the
daily stochastics is a bearish signal. 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 9-day moving average is a negative short-term
indicator for trend. The market setup is somewhat negative with the close under
the 1st swing support. The next downside target is 7.53. The next area of
resistance is around 7.65 and 7.72, while 1st support hits today at 7.55 and
below there at 7.53.

 

COTTON MARKET RECAP

8/26/2004

October Cotton finished down 1.84 at 48.40, 2.05
off the high and 0.20 up from the low.

December cotton was sharply lower and with a
series of technical points violated we suspect that some follow through margin
selling is ahead. Exports were pegged at 115,600 bales off expectations of
50,000 to 150,000 bales and that is a mixed reading. Reports of trade selling
also weighed on prices and since the specs were also seen attacking the short
side, we suspect that more pressure will be seen ahead.

Technical Outlook

COTTON (OCT) 08/27/2004: The daily stochastics
have crossed over down which is a bearish indication. Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. A negative signal for trend short-term was given on a close under
the 9-bar moving average. The market is in a bearish position with the close
below the 2nd swing support number. The next downside objective is now at 46.62.
The next area of resistance is around 49.52 and 51.11, while 1st support hits
today at 47.28 and below there at 46.62.