unchanged from last month and 2009 ending stocks at 140 m.b., down from 175 the month prior and pre-report estimates of 139 m.b. Like corn, soybeans too have no room for error in terms of weather for the next 2 months as stocks are tight. November beans were down 19 cents on the week, but this was after a 60 cent washout. As we said last week, we prefer the long side and would be buying dips, the closer to $15 the more aggressive we feel you could be. For now support comes in at the 20 day moving average at 15.56 followed by 15.27. We would recommend adding to length on a close above $16. Outside of just trading soybeans we also like soy meal. December meal should be supported at last week’s low 386.00, as we expect new contract highs and a potential run to 450. Look at the 480 strike for around $2000.
Wheat: Weekly export sales showed 617 t.m.t. of wheat was sold last week. It is a bullish demand signal as millers and exporters chase badly needed supplies. Demand should remain strong through the spring harvest. Friday’s crop report put all wheat production at 2.461 b.b vs. pre-report estimate of 2.478, soft red wheat at 607 m.b. vs. last month’s of 572. Hard red winter wheat production was at 1.040 b.b. vs. 1.030 last month. Spring wheat production was 507 m.b. vs. 537 last month. The USDA said that global wheat production will hit a record high 664 million tons in 2008-2009, a big improvement from last year's drought-stricken crop of 611 million tons. September CBOT wheat has support at 8.00 and with the chart looking oversold we could get a bounce to 8.40/8.60. Last week we failed to get thru the 40 day moving average on a closing basis and would need to see a settlement above that level for me to be convinced higher prices are to come. September KCBOT lost 18 cents last week, but for now the downside may take a rest. We would be cautious putting any size on because there is a gap on the chart below at 8.28 from late May that we expect to be filled, but if last week’s lows hold we could see a bounce. On a trade above the 50 day moving average; 8.72, look for prices to track back to the $9 level.
Softs
The USDA increased its estimate of the 07-08 Florida orange crop from 169 to 170 million boxes with a record high juice yield of 1.67 gallons per box at 42.0 degrees Brix. According to the most recent Commitment of traders report, funds are flipping from being short to long on both futures and options. The funds may be early, but we will join them with our clients getting long November futures from lower levels and have started getting positioned long in options as of late last week. Buy in times of weakness, as our clients got long options on Friday when prices were down 700 points. The 50 day moving average just above 121 should hold on a further retracement.
The USDA reduced 08-09 ending stocks of sugar from 1,273,000 to 607,000 tons. This took the stock to usage ratio from 11% to 5%, which in our eyes is bullish. We continue to like sugar from the long side with a longer time horizon. We would suggest using pullbacks in March 09 to get long futures or to buy calls. We will be looking to buy the 17 strike for $900 on a setback. The USDA reduced 08-09 ending stocks of cotton from 5.40 to 5.30 million bales. For the cotton crop that is currently in the ground the USDA estimated production at 14 million bales, below the 14.50 million bale estimate in June. US exports were lowered from 14.50 million bales from the USDA’s previous estimate of 15 million. The export forecast was lowered due to lower US supplies and lower foreign import demand. With no real surprise from the USDA and looking at the oversold conditions on the chart, we are looking for cotton to track higher looking for guidance from outside markets. Without some much needed precipitation we will get some stress on the crop and yields will become an issue. We have clients positioned long 10 cent bull call spreads in December as well as long December futures, anticipating prices to get to 90 cents with last week slow of 70.86 to hold.
Cocoa has cooperated and we got the correction from overbought levels that we were looking for. September gave up $167 last week and we ended the week almost $400 off the recent highs. Support comes in at 2850 and stochastic on the daily charts are at 13 so you could lightly start getting long. We would recommend a stop below last week’s low of 2857 and look to add length if the market turned higher. We continue to recommend watching the dollar for entry and exit signals as an inverse relationship is ever so present.
We did not quite get to $1.59 as previously suggested, but we certainly got the pullback we were calling for. Since we warned that prices were over due for a setback, September coffee has lost 15 cents or 10%. Prices are now trading below the 100 day moving average and for now we would step to the sidelines as
we are getting mixed signals. If this market was to give back an additional 10 cents we would look to start pricing out long strategies, but for now have no trade recommendation.
Metals
Last week August gold closed up $26 at $960.60, the highest close in over three months, supported by nervousness about the economy and unfounded rumors of war with Iran. Flight to quality buying may have contributed as well, as investors fleeing stocks may have found a home in gold. You are on the upper end of the Bollinger bands at current price points and by Monday morning you have also reached resistance at the 38.2% Fibonacci retracement level, so stay alert. Being long has been working and we still have that bias, but we would not get too committed as the recent advance may have gotten ahead of itself. What was resistance now becomes support at 946, with resistance now coming in at 1000. Investors can buy dips and we will also be pricing out $50 call spreads in December.
For the week, September silver closed up 60 cents at $18.82, also the highest close in over three months. We have now cleared the resistance levels and this should open up the doors for an advance to $20 plus in coming weeks. We would recommend buying dips for new entries and will be adding to our clients’ longs on pullbacks in September and December futures. As we expressed last week, if looking for option plays, investors can buy $1-2 call spreads in December looking for prices to make their way back to contract highs.
