What Do Today’s Inflation Numbers Mean For The FOMC?

The gap lower opening and poor close into a new
contract low after a surge in open interest this week leaves the market in a
weak technical position but futures are becoming oversold with March down 12 1/4
cents off of the January 7th highs. With only routine export news and talk of
increasing planted acreage for the coming year, the fundamental news flow
remains bearish and has pressured the market. Informa Economics pegged planted
acreage for corn for 2005 at 82.79 million acres which is up 1.86 million acres
from this year. US producers are expected to shy away from soybeans this year
due to Asia rust which has raised expectations for increased corn plantings.
Gulf basis is higher on talk of slow producer movement and high water on the
river system. South Korea bought 52,500 tonnes of optional origin corn overnight
and Taiwan bought 20,000 tons of US corn overnight. The bearish USDA news this
week with higher supply and lower demand adjustments added to the bearish tone.
Resistance for March corn comes in at 198 1/2 and 201 with 196 3/4 and 191 as
support.

Technical Outlook

CORN (MAR) 01/17/2005: The sell-off took the
market to a new contract low. 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
195 1/2. The next area of resistance is around 198 1/4 and 199 3/4, while 1st
support hits today at 196 1/4 and below there at 195 1/2.

 

SOY COMPLEX RECAP

1/14/2005

March Soybeans finished down 17 at 519 1/2, 11
1/2 off the high and 1/2 up from the low. May Soybeans closed down 16 1/4 at 522
3/4. This was 3/4 up from the low and 11 1/4 off the high.

March Soymeal closed down 6.8 at 154.8. This was
0.3 up from the low and 6.4 off the high.

March Soybean Oil finished down 0.45 at 19.63,
0.32 off the high and 0.03 up from the low.

News of lower than expected crushing demand and
ideas that China could soon begin to switch import demand from the US to Brazil
helped trigger the sharply lower opening and follow-through speculative selling.
Reports of improved weather for the dry areas of southern Brazil and reports
that producers in Brazil are battling rust and that the problems with Asia rust
are much less prevalent than last year added to the bearish tone. Traders are
also fearful that producer selling could pick-up in Brazil and in the US over
the near-term with record crops at both locations. NOPA crush for December was
reported at just 143.39 million bushels, which was slightly below the lower end
of range of expectations. There were deliveries of 8 oil and 36 meal against the
January contracts this morning. The CIF markets for soybeans collapse after
moving to very high levels this week due to high water levels on the river
system. Funds were noted sellers of near 10,000 meal futures into the
mid-session. Resistance for March soybeans comes in at 524 1/2 and 529 with
support at 519 and 511. The close under 531 could signal a resumption of the
downtrend with 486 3/4 as next technical swing count for another leg down.

Technical Outlook

BEANS (MAR) 01/17/2005: The daily stochastics
have crossed over down which is a bearish indication. Momentum studies are
declining, but have fallen to oversold levels. The major trend has turned down
with the cross over back below the 18-day moving average. The defensive setup,
with the close under the 2nd swing support, could cause some early weakness. The
next downside target is now at 510 1/4. The next area of resistance is around
525 1/2 and 534 1/4, while 1st support hits today at 513 1/2 and below there at
510 1/4.

MEAL (MAR) 01/17/2005: The major trend has turned
down with the cross over back below the 60-day moving average. The downside
crossover of the 9 & 18 bar moving average is a negative signal. A bearish
signal was triggered on a crossover down in the daily stochastics. Negative
momentum studies in the neutral zone will tend to reinforce lower price action.
The market back below the 18-day moving average suggests the longer-term trend
could be turning down. There could be some early pressure today given the
market’s negative setup with the close below the 2nd swing support. The next
downside objective is 149.7. The next area of resistance is around 158.1 and
163.0, while 1st support hits today at 151.5 and below there at 149.7.

BEANOIL (MAR) 01/17/2005: Momentum studies are
declining, but have fallen to oversold levels. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The close below
the 1st swing support could weigh on the market. The next downside objective is
now at 19.36. The next area of resistance is around 19.80 and 20.05, while 1st
support hits today at 19.46 and below there at 19.36.

 

WHEAT MARKET RECAP

1/14/2005

March Wheat finished down 10 at 297 1/2, 9 1/2 off the high
and 1/4 up from the low. May Wheat closed down 10 at 305 1/4. This was 1/2 up
from the low and 8 3/4 off the high.

Weakness in the other grain markets and a lack of
new demand news helped trigger light long liquidation selling in wheat. Funds
were noted sellers of near 1500 contracts into the mid-session and when March
wheat moved under 302 and again at 300, sell-stops were activated and selling
intensified. There are some minor weather concerns for flooding in the southern
Midwest and the potential impact on the crop with wide fluctuations in
temperatures this week which helped provide some support and the March contract
managed to hold above this weeks low. While US producers have planted less acres
to wheat this winter, traders are hesitant to believe that world production will
come down much off of the record crop of 2004. Open interest is at a record high
which has traders nervous over increased volatility ahead. March wheat
resistance comes in at 302 and 305 1/2 with support at 295 and 292 1/4.

Technical Outlook

WHEAT (MAR) 01/17/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down. A
crossover down in the daily stochastics is a bearish signal. Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The
market back below the 18-day moving average suggests the longer-term trend could
be turning down. The market is in a bearish position with the close below the
2nd swing support number. The next downside objective is now at 290 1/4. The
next area of resistance is around 302 1/4 and 309 1/2, while 1st support hits
today at 292 3/4 and below there at 290 1/4.

 

LIVE CATTLE RECAP

1/14/2005

February Live Cattle finished up 0.15 at 91.32,
0.27 off the high and 0.67 up from the low.

January Feeder Cattle closed down 0.30 at 105.85.
This was 0.25 up from the low and 0.30 off the high.

Cattle closed mixed with February a bit higher on
weather concerns into next week and April down with continued talk that the USDA
seems to be on track to lift the Canadian import ban on March 7th. Muddy and
cold weather is expected to stress feedlot cattle into early next week but dry
conditions for much of the week may not cause a significant problem. Boxed-beef
cut-out values were down $.24 to $154.14 at mid-session as compared with $143.18
one week ago. Slaughter came in at 114,000 head as compared with trade
expectations of 106,000-114,000 head. This was the 2nd day in a row which cattle
slaughter was above trade expectations.

Technical Outlook

CATTLE (FEB) 01/17/2005: A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. Momentum
studies are trending higher but have entered overbought levels. The market now
above the 18-day moving average suggests the longer-term trend has turned up.
The market tilt is slightly negative with the close under the pivot. The
near-term upside objective is at 92.150. The next area of resistance is around
91.770 and 92.150, while 1st support hits today at 90.850 and below there at
90.270.

 

LEAN HOGS RECAP

1/14/2005

February Lean Hogs finished up 0.57 at 76.77,
0.22 off the high and 0.57 up from the low.

February Pork Bellies closed up 0.40 at 95.82.
This was 0.47 up from the low and 0.77 off the high.

February hogs traded moderately higher as the
cold weather into early next week and forecasts for the bitter cold weather to
return for next weekend helped to support the market. A firm tone for the cash
market and a new high for loin prices led to talk of strong exports which added
to the positive tone. The 2-Day Lean index for the period ending January 12th
was up.11 to 72.20 as compared with 69.20 one week previous. Slaughter came in
at 381,000 head as compared with trade expectations of 385,000-395,000 head.

Technical Outlook

HOGS (FEB) 01/17/2005: A bullish signal was given
with an upside crossover of the daily stochastics. Studies are showing positive
momentum but are now in overbought territory, so some caution is warranted. The
cross over and close above the 18-day moving average is an indication the
longer-term trend has turned positive. The market has a slightly positive tilt
with the close over the swing pivot. The next upside target is 77.470. The next
area of resistance is around 77.150 and 77.470, while 1st support hits today at
76.400 and below there at 75.900.

 

COCOA MARKET RECAP

1/14/2005

March Cocoa finished down 5 at 1500, 13 off the
high and 10 up from the low.

The cocoa market forged an inside day down on
Friday and the lack of momentum would seem to take away some of the residual
bull tilt that was present for most of the last week. Apparently the market was
initially lifted by more trade buying but into the close it seemed as if the
longs lost interest ahead of the extended weekend and dumped some long
positions. It is also possible that continued strength in the US Dollar
conspired to halt the week’s pattern of gains as US cocoa prices in other
currencies finished the week significantly higher than where prices were coming
into the week.

Technical Outlook

COCOA (MAR) 01/17/2005: The stochastic indicator
is rising from oversold levels, which is bullish and should support higher
prices. The major trend has turned down with the cross over back below the
18-day moving average. It is a slightly negative indicator that the close was
lower than the pivot swing number. The next upside objective is 1523. The next
area of resistance is around 1511 and 1523, while 1st support hits today at 1489
and below there at 1478.

 

COFFEE MARKET RECAP

1/14/2005

March Coffee closed down 1.00 at 100.10. This was
0.50 up from the low and 0.65 off the high.

Weakness in London and fears that the COT report
over the long holiday weekend might show a hefty net long position from the
speculator helped trigger weakness in New York on Friday. The higher US dollar
may have helped trigger some long liquidation selling but producer selling has
been noticeable absent which helped limit the selling. Cash markets have been
very quiet in Brazil, Colombia and Central America as producers backed away from
selling after the break from the December highs. Brazil coop stocks as of
December 31st totaled 6.76 million bags which is up from 5.7 million bags last
year but down from 7.39 million bags at the end of November. German imports for
the first 10 months of 2004 reached 13.74 million bags, up 10.7% from the
previous years pace.

Technical Outlook

COFFEE (MAR) 01/17/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. 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 upside objective
is 101.25. The next area of resistance is around 100.65 and 101.25, while 1st
support hits today at 99.55 and below there at 99.00.

 

SUGAR MARKET RECAP

1/14/2005

March Sugar closed up 0.11 at 8.83. This was 0.08
up from the low and 0.01 off the high.

The market pushed moderately higher with renewed
buying interest from speculators and a lack of aggressive selling from
producers. The market has moved back to the center of the recent 5-month trading
range and traders continue to view the demand as bullish and the supply as
adequate with Brazil a steady exporter and traders hoping that Thailand export
activity will slow. Funds were noted as active buyers but the trade is a bit
nervous that the weekend COT report will show a hefty net long position of the
speculator. EU 2004 production has been revised higher with excellent weather
late in the year helping to boost production from many countries. Key resistance
points on the recovery bounce come in at 913 and 920 for May sugar.

Technical Outlook

SUGAR (MAR) 01/17/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
Momentum studies trending lower at mid-range should accelerate a move lower if
support levels are taken out. The close below the 18-day moving average is an
indication the longer-term trend has turned down. With the close over the 1st
swing resistance number, the market is in a moderately positive position. The
next downside objective is now at 8.73. The next area of resistance is around
8.87 and 8.90, while 1st support hits today at 8.79 and below there at 8.73.

 

COTTON MARKET RECAP

1/14/2005

March Cotton finished down 0.11 at 46.17, 0.13
off the high and 0.51 up from the low.

Cotton closed mixed with March down slightly and
May closing higher with an inside trading session. The lack of index fund buying
and longer-term positioning in cotton because of strong demand possibilities in
the years ahead helped keep the market choppy. A lack of producer selling and a
combination of fund buying and fund short-covering has provided solid buying
support for the market since the late December lows. While China import demand
is on the rise, record production in the world and US supply/demand reports this
week and increasing estimates for world ending stocks leaves the supply a
potentially bearish factor.

Technical Outlook

COTTON (MAR) 01/17/2005: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The cross over and close above the 18-day moving
average indicates the longer-term trend has turned up. The market setup is
somewhat negative with the close under the 1st swing support. The next downside
target is 45.44. The next area of resistance is around 46.49 and 46.71, while
1st support hits today at 45.85 and below there at 45.44.