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Cattle: Outside Markets Helping to Recover Yesterday’s Weakness

by on January 31, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

It may take some help from the export market and increased interest from fund traders but cattle appears to have the supply fundamentals to continue to attract speculative interest for the coming season. The inventory report showed the smallest herd in 60 years. The feeder supply outside of feedlots came in down 4% from last year. Total cattle and calves as of January 1st came in at 90.769 million head, which was 97.9% of last year. The calf crop was 35.313 million head, 98.9% of last year. Traders see tightening supply into the spring as a potential bullish force. Short-term, however, it will be important to see the beef demand show some improvement. Boxed beef cutout values were down 92 cents at mid-session yesterday and closed $1.25 lower at $182.88. This was down from $183.52 the prior week and is the lowest beef market since January 20th. April cattle closed moderately lower on the session yesterday and stayed in a fairly tight range for the last several hours of trade after volatile trade early in the day. The market pushed sharply lower on the session early to push down to the lowest level since January 19th. The market managed a 50 point bounce off of the early lows into the mid-session as the selling slowed. Cash cattle traded $2.00 lower on the week last week to $124.00 and the cattle inventory report confirmed the lowest herd in 60 years, but this news was not a surprise to traders. The surge up in the US dollar and a sharp break in the stock market were seen as bearish forces for the early weakness. The estimated cattle slaughter came in at 114,000 head yesterday, which was right as expected but down from 123,000 last week and down from 121,000 a year ago as this time. Trend-following fund traders (non-commercial less index funds) were net long just 50,907 contracts as of January 24th, and this is down from 116,518 contracts in September of 2010. Index fund are net long near 117,000 contracts and have been net long as much as 156,752 contracts.

TODAY’S GUIDANCE: The more positive tilt to outside markets appears to be helping cattle quickly recover from yesterday’s weakness. However, beef prices are still struggling to move to a higher level and feedlot operating margins are deep in the red. The short-term cash fundamentals look a bit sloppy while the longer-term outlook is for sharply higher prices into the spring.

TODAY’S MARKET IDEAS: With the short-term overbought condition, traders might consider buying 2-3 calls and selling 1 futures for the April or June contracts. On a 150 point break, lift the futures and hold the calls for a spring rally. April cattle may show some technical support near 127.75 and a move through resistance at 128.72 would suggest a swing up to 130.62.

Hogs: Downside Looks Limited Against April

by on January 31, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

A recovery in loin prices late yesterday and ideas that supply will tighten ahead helped to support the strong action overnight. In addition, traders believe that livestock markets are likely to attract increased interest from fund traders this year as a weaker dollar and a firm global demand for protein remain a positive force. In addition, pork exports hit a record high in November (total and to China) and China buyers are back from holiday this week. Trend-following fund traders (non-commercial less index funds) were net long just 13,296 contracts as of January 24th and this is down from 57,697 contracts in late October. Index fund are net long near 85,000 contracts and have been net long as much as 127,379 contracts. April hogs closed slightly lower on the session yesterday but well up from the early lows, which came in right on the day session opening. The market pushed moderately lower on the session in early trade but held support above Friday’s lows. February hogs also pushed lower early yesterday but held above last week’s lows. Cash hogs traded mostly $1.00 lower as packers appear to be cutting back on the slaughter pace for hope of improving margins. However, the cut-back is a short-term negative demand force as packers are able to buy all the hogs they needed at lower prices due to the reduced slaughter pace. Packer margins are deep in the red after persistent weakness in pork product last week and a bounce in cash hog values. Loin prices were down to $91.41 late last week from $98.71 one week previous. The CME Lean Hog Index as of January 26th came in at 87.35, up 59 cents from the previous session and up from 85.27 the week before. The estimated hog slaughter came in at 406,000 head yesterday, which was below trade expectations. This was down from 427,000 last week but up from 381,000 a year ago as this time. Pork cutout values, released after the close yesterday, came in at $83.91, up 65 cents from Friday but down from $85.27 the previous week.

TODAY’S GUIDANCE: Perhaps pork product prices might show some recovery this week when China buyers are back from holiday. Loins jumped late yesterday to help spark a recovery. The downside looks limited for April futures and we would not rule out an export/fund led rally into the spring.

TODAY’S MARKET IDEAS: April hog support is at 87.25 and 86.90, with 88.10 and 89.37 as resistance. Watch for choppy to higher trade with 90.42 as objective.

Coffee: Needs Support from Outside Markets

by on January 27, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The coffee market remains firmly entrenched within the recent trading range as prices have found little benefit this morning from a weaker Dollar and early strength in global equities. Improving macro-economic sentiment due to positive developments in the Euro zone has provided limited support for the coffee market but has not been enough for prices to shed their recent negative tone. Many European trade houses are projecting the upcoming Brazilian coffee crop at 55 to 58 million bags, which if accurate could potentially offset supply shortfalls from several major producers this season. With the Lunar New Year holidays concluding, coffee supplies from Vietnam may increase during the next few weeks. There are reports of an outbreak of the “roya” fungus in the Antigua coffee production region of Guatemala. ICE exchange coffee stocks were up 5,802 bags at 1.529 million as of January 26th, with 45,239 pending review.

TODAY’S GUIDANCE: The Dollar and global equity market may not be making strong enough moves for the coffee market to receive significant support this morning. With the shadow of Brazil’s potential “bin-buster” crop hanging over the market this far ahead of harvest, March coffee may need to receive fresh news of supply problems in order to break out above this week’s trading range.

TODAY’S MARKET IDEAS: March coffee resistance will be at 221.90 this morning, with 216.80 as the next support level. A slide below this week’s lows could lead to a retest of the mid-December lows.

Wheat: Lower Prices May be Necessary to Attract Demand.

by on January 13, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: There was not much in the way of positive news from the USDA yesterday and the market gave back a large portion of the late December rally. March wheat closed sharply lower on the session yesterday as both wheat and corn data from the USDA was bearish enough to spark aggressive selling. US usage came in below trade expectations and wheat plantings for the 2012 crop came in well above trade expectations. The USDA pegged total winter wheat planted acreage for 2012 at 41.947 million acres as compared with trade expectations for near 40.933 million. Hard red winter wheat acreage was up 662,000 above trade expectations to over 30 million and soft red was up nearly 600,000 above expectations at 8.37 million. Ending stocks for the 2011/12 season were pegged at 870 million bushels, about 30 million above trade expectations. While exports were revised higher (as expected) feed usage was revised lower by 15 million bushels to 145 million which was bearish as traders expected a boost in wheat feeding. Wheat stocks as of December 1st were pegged at 1.656 billion bushels as compared with trade expectations at 1.695 billion. For the world report, 2011/12 ending stocks were pegged at 210.02 million tonnes, up more than 2 million from trade expectations and up from 199.9 last year and 202 million for the 2009/10 season. Weekly export sales for wheat came in at 365,200 metric tonnes for the current marketing year and 73,000 for the next marketing year for a total of 438,200. Cumulative wheat sales stand at 77.2% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 75.2%. Sales of 279,000 metric tonnes are needed each week to reach the USDA forecast. On top of the weekly sales, Algeria bought 300,000 tonnes of optional origin milling wheat. Traders believe the origin is likely France or Argentina. The EU granted export licenses this week for 168,000 tonnes which pushed cumulative exports since the start of the 2011/12 season to 7.5 million tonnes as compared with 11.9 million last year at this time. March wheat is now down as much as 78 3/4 cents or 11.7% from the 2012 peak. Japan bought 139,000 tonnes of US wheat for March shipment. Egypt is tendering for optional origin wheat overnight with results expected this morning.

TODAY’S GUIDANCE: The technical action turned very weak with yesterday’s collapse and the build-up in open interest in the last few weeks suggest that the trade could stay volatile. Lower prices may be necessary to attract demand.

TODAY’S MARKET IDEAS: March wheat resistance comes in at 622 with 588 as next support.

Corn: Will Take Positive Weather to Avoid More Selling Pressure

by on January 13, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: The USDA data showed a larger than expected supply of corn in the US and with lofty expectations going into the report and a hefty speculative net long position, a long liquidation trend is feared over the near-term “if” South America weather forecasts turn more normal. Big rains this week will stabilize crop losses but it will be important to see more rains by late next week and into next weekend in order to avoid further losses. March corn traded for just a few minutes yesterday before locking down the 40 cent limit. The market stayed limit down for the first two hours of trade and then saw a 2 1/2 cent trading range near the mid-session. The USDA data was very negative for grain stocks and production data and this helped spark aggressive selling from speculators and producers early in the day. The USDA pegged ending stocks for the 2011/12 season at 846 million bushels which was down two million from last month but near 100 million bushels above expectations. Final production was pegged at 12.358 billion bushels, up 48 million bushels from their previous forecast and up near 95 million from expectations. Yield was 147.2 vs. 146.7 previous. Exports were revised higher by 50 million bushels which was one of the few bright spots for the report. World ending stocks were pegged at 128.14 million tonnes from 127.19 million last month and trade expectations near 123.5 million tonnes. Argentina production was revised down by 3 million tonnes to 26 million and Brazil was left unchanged. Some traders believe South America production is down at least 10 million tonnes from December expectations and not the 3 million from the report. December 1st corn stocks were pegged at 9.642 billion bushels which was up 250 million from trade expectations. Weekly export sales for corn came in at 321,500 metric tonnes for the current marketing year and cancellations of 23,000 for the next marketing year for a total of 298,500 tonnes which was well below trade expectations. Cumulative corn sales stand at 59.6% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 53.9%. Sales of 493,000 metric tonnes are needed each week to reach the USDA forecast. Demand news is mixed but there appears to be increased interest in Australia feed wheat. The Philippines bought 55,000 tonnes of Australia feed wheat for May shipment.

TODAY’S GUIDANCE: With the large spec net long going into the report and perceptions that US producers have not sold a lot of old crop or new crop corn, selling pressures could resume next week “if” the January 21st to 26th rain event in Argentina looks fruitful. In other words, it will take positive weather news to avoid further selling pressures next week.

TODAY’S MARKET IDEAS: Short-term resistance for March corn comes in at 627 with 609 3/4 as a near-term pivot price. Support emerges at 600 and 586.

Special Report: Corn Volatility Alert!

by on January 11, 2012

Below is an excerpt from The Hightower Report’s most recent Special Report. To receive access to this report, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

Wide ranges of estimates for ending stocks and production for the upcoming USDA reports and continued weather uncertainties for late January and early February leaves the corn market in a potentially volatile trade setup into and beyond the Thursday, January 12th report window.
In January every year, the USDA Supply/Demand, Crop Production and Quarterly Grains Stocks reports are released on the same day, and for the last five years, the corn market has made limit moves on each of those days. In 2011, the market hit the 30 cent limit-up move and closed 24 higher on the day. In 2009 and 2010, the market closed down the 30 cent limit. In 2007 and 2008, the market closed up the 20 cent limit. With the wide range of estimates this year, prices look very volatile for later this week.

On top of that, extremely high temperatures after weeks of below normal precipitation has producers in Argentina nervous over the possibility that the crop had already experienced an extreme loss in yield ahead of significant rains that are due to start today. Most growing areas were well above 100 degrees over the weekend into Monday ahead of the rain, and losses are mounting. The expected lack of a shift in the weather pattern in spite of a good rain event this week leaves the market vulnerable to significant upside potential if the soils dry up again into late this month. Traders are concerned that after receiving 1/2 to 1 1/2 inches of rain this week, crops will be back into a stressful condition in another week. Temperatures are expected to move higher into the coming weekend, and there currently is no other organized rain event in the forecast.

Traders expect corn production in the US to be revised lower by about 45 million bushels for the USDA production report on Thursday morning, due to a revision lower in yield or even harvested acreage. However, there is a 210 million bushel range for the report. US Ending stocks are expected to be revised down by about 100 million bushels in Thursday’s report from the 848 million that was estimated in December. However, there is a 433 million bushel range of estimates. Traders are looking for December 1st corn stocks to be down about 660 million bushels from the previous year. Stocks last year were 10.057 billion bushels. However, there is a 500 million bushel range of estimates for that number.

Global ending stocks for the 2011/12 season are expected to be around 123.5 million tonnes, down from 127.1 million estimated last month. However, with the damage done to the South American crop since January 1st, many traders see the ending stocks eventually falling well under 120 million. If we assume an ending estimate of 119 million, world ending stocks would fall to a 50-day supply, the lowest since 1973. This compares to 56 days last year and 64 days two years ago.

Some traders are looking for lower yield, lower harvested acreage, higher feed usage, better ethanol demand and higher exports due to the sharp drop in Argentina production. This could spark extreme tightness in the old crop ending stocks for the US and the world. However, with higher plantings and normal yield this coming season, traders are expecting a lesstight situation for 2012/13. And while we debate “how tight” U.S. and world ending stocks will be if we lose 8-12 million tonnes of corn in South America, a minor jump in US planted area and a 164 bushel per acre yield for the 2012 crop would result in an increase in US production of about 50 million tonnes.

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Sugar: Without Outside Help Market Looks Vulnerable

by on January 4, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market seems to be in the process of absorbing a rebalancing period for index funds where index buyers could be buying 25,000 contracts of sugar this week. Sellers were hard to find yesterday as other fund traders appeared to also be active buyers with a shift in psychology to a more positive view on commodity markets. March sugar closed sharply higher on the session yesterday and managed to push to the highest level since November 16th. Outside market forces showed nothing but green lights for commodity bulls yesterday and sugar is sensitive to both the dollar and energy markets. The surge up in energy and equity markets and a sharp break in the US dollar helped to support the rally. Buyers were also active with sharply higher trade for metal and grain markets. China economic news was better than expected and this supported the market as well as traders see emerging market growth as a positive demand force. Outside market forces look more neutral for today but index fund buyers may still be active ahead. Commodity Index traders held a net long position of 191,187 contracts in the last COT report. For the two major index funds, traders believe that these funds will be buying near 25,000 contracts in the first week of the year. Traders believe new crop supply from Thailand will be hitting the global market by mid-January and that this could pressure the cash markets.

TODAY’S GUIDANCE: Without help from outside market forces, the sugar market looks vulnerable to a resumption of the downtrend but the buying may continue for at least the rest of the week.

TODAY’S MARKET IDEAS: March sugar resistance comes in at 24.81 with support back at 23.81. Use 22.09 as next target when the market resumes the downtrend.

Cotton: Strong Start to the Year; Need Strong Economy to Hold

by on January 4, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market has seen a very strong recovery bounce into the New Year and it may take a continued strong global economic view ahead in order to rationalize the recent strength. Exports have come in much better than expected in the past few months and there is also increased concern that producers in the US and China will back away from the market and plant less acres for the coming year just as global demand is improving. This would assume that emerging market growth continues on a firm pace and that the European debt situation does not slow global growth prospects. The International Cotton Advisory Committee indicates that China has acquired a total of near 2.1 million tonnes of cotton from producers to replace reserve stocks and also about 1 million tonnes of foreign cotton to add to reserves. Non-China cotton stocks are expected to increase by 26% this season to 8.7 million tonnes, the largest in four years. Global production for the 2011/12 season is expected to reach 26.8 million tonnes, up 8% from last year and that global demand is expected near 23.9 million tonnes, down 2% from last year. The market surged higher yesterday to close 4.4% higher on the day to push to the highest level since November 18th. Traders see short-term support from rebalancing efforts by index funds and from active “across the board” buying of commodity markets yesterday in anticipation of a stronger environment for commodities in 2012. Outside market forces were extremely supportive yesterday and look neutral for today. Global ending stocks look burdensome to start the 2012/13 season and this is expected to cap the market on corrective bounces. Cotton was the worst performing commodity market in 2011 dropping a whopping 36.6% for the year. The USDA attache in India revised their crop production forecast for the 2011/12 season down by 750,000 bales to 34.25 million bales. Commodity Index traders held a net long position of 51,276 contracts in the last COT report. For the two major index funds, traders believe that these funds will be buying near 11,000 contracts in the first week of the year. ICE certified deliverable stocks increased to 39,395 bales from 39,394 bales the previous session but from 49,998 bales last week.

TODAY’S GUIDANCE: Look for technical signs of a near-term top near key resistance for March cotton at the 95.78 to 97.80 zone with support back at 93.60 and 91.42. Index fund buyers may be more active this week before the buying slows.

TODAY’S MARKET IDEAS: Position traders might look to establish bearish put strategies for the first quarter and we would not rule out another leg down longer-term objective.

Sugar: Many Factors Keeps on Downside Pressure On

by on November 23, 2011

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Renewed supply concerns with trade house forecasts for a world production surplus of as high as 8 million tonnes plus a more aggressive long liquidation selling trend from speculators into the holiday helped to drive the market sharply lower yesterday. While there was talk of the oversold condition basis traditional technical indicators, the weekend COT report showed that large and small speculators combined were still holding a net long position of 82,559 contracts. Fears of a slowing global economy plus a continued move by fund traders to lighten up on long positions helped to drive the market sharply lower yesterday. There was a noted lack of new buying from commercial traders. March sugar closed sharply lower on the session yesterday and pushed down to the lowest level since June 2nd. News that India will allow the export of 1 million tonnes of white sugar helped to pressure London and the selling overflowed into New York. Outside market forces were not strong enough to offset the long liquidation selling and selling accelerated on the move under Monday’s lows. Brazil rains have slowed old crop production but traders see the rains as beneficial to the 2012/13 production.

TODAY’S GUIDANCE: The downside break-out and lack of commercial support plus further weakness in outside market forces overnight could keep the market on the defensive today.

TODAY’S MARKET IDEAS: March sugar resistance is at 23.86 with 22.36 as next downside objective. There is some chart support at 22.88.

Cocoa: Under Pressure but Avoid New Low Ground

by on November 23, 2011

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The cocoa market was finally able to post a positive result yesterday, although there is more than $300 worth of losses to recover from the past two weeks of trading. March cocoa went through a choppy and volatile trading session on Tuesday but was able to make a sizable recovery after posting a new multi-year low. Support from outside markets proved to be a key factor, as the market was able to post a daily gain for the first time since November 7th. While heavy near-term supplies continue to pressure the market, reports of dry weather over Ivory Coast production areas may have triggered the rebound. In addition, short-covering in front of the Thanksgiving holiday may have helped to lift prices further away from the early lows. Cocoa port arrivals in the Ivory Coast have been running well behind last season’s pace but a producer stockpiling program has not been effective in lifting prices out of their recent slide. Other major West African cocoa producing nations such as Ghana and Cameroon are projected to have their second record high cocoa crops in a row.

TODAY’S GUIDANCE: March cocoa is back under pressure this morning, although prices were able to avoid extending the recent selloff down to new low ground. If cocoa’s fundamentals remain negative and outside markets continue to be sluggish, prices are likely to go into tomorrow’s holiday down near multi-year low levels.

TODAY’S MARKET IDEAS: March cocoa close-in resistance is at 2440, with 2380 and then 2355 as the next downside objectives. Given the steep drop in prices since early November, traders should wait for a more extensive bounce before entering the short side of the market.

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