The Hightower Report Commodity Research

Below is a sample of our 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’s acreage report was considered bearish for wheat yesterday with the stocks report considered neutral. This combined with very bearish acreage and stocks numbers in corn to send the wheat market sharply lower yesterday, with the December contract easily taking out the March lows in the process. However, prices recovered later in the session yesterday and the rebound continued overnight with some traders saying that this may be a signal that the wheat market is finally running out of sellers. Harvesting continues at a good pace although rain may cause some minor interruptions in both hard and soft red areas today and again on Friday, Saturday and Sunday. Cash market sources say that this is not a major issue. On yesterday’s reports, the USDA pegged All Wheat acreage at 59.775 million acres, about 1.5 million acres above trade expectations of just over 58.2 million. Spring wheat acreage was also a bearish surprise at 13.772 million acres versus 13.304 million in March. Traders had been looking for a decline of about 200,000 acres for spring wheat, so this was 700,000 acres more than expected. Quarterly wheat stocks were about in line with expectations at 667 million bushels. That number now becomes the ending stocks figure for the just-ended 2008/09 wheat crop year. Deliveries against the July wheat contract today were heavy again at 5,312 contracts. This puts the 2-day delivery total at 11,346 contracts.

WEATHER: Dry weather is expected to continue today in most of the Midwest with the exception of the NE corner. A band of rain is also expected from western North Dakota down through eastern Kansas and into northern Arkansas. The Midwest should ten remain mostly dry through early next week with the exception of some rain in the SW and south central Midwest on Friday, Saturday and Sunday. Temperatures are expected to be moderate in much of the Midwest through next week and hot in the southern and central Plains. This may shift to a generally hot pattern starting about ten days out with a hot air mass covering nearly all of the Midwest and Plains from 10 to 14 days out.

TODAY’S GUIDANCE: The wheat market was an innocent bystander to some extent yesterday. Still, wheat acreage was raised substantially versus trade expectations and that was genuinely bearish news. This pushed the December contract to well below the March lows. However, the fact that wheat pulled back above the March lows into the close and rallied further overnight suggests that this was a temporary blow off, and we may now end up trading between 550 on the low end and 600 to 612 on the high end over the intermediate term. First support in the December contract is in the area of 560 to 565. Next support is at 550. First resistance is at 579 1/2 with the next resistance at 596 to 600.

TODAY’S MARKET IDEAS: Yesterday’s action may have finally cleared out existing sell orders in wheat.

This content originated from - The Hightower Report.

Below is a sample of our 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 grain markets were shocked by a lower than expected soybean acreage number yesterday as well as much larger than expected acreage numbers in corn, wheat and other crops. The USDA also found some extra corn and soybeans on its quarterly stocks reports to add to the generally bearish tone. However, traders noted that the soybean acreage number was actually bullish and the USDA added to the bullish news in soybeans with an announcement after the open that China was a buyer of 113,000 tonnes of old crop soybeans. This combination of bullish and bearish news within the grain markets sent the old crop/new crop soybean and meal spreads reeling throughout the day, with much of the action said to center around liquidation by spreads as we enter the July delivery period. However, the final result was another gain by old crop contracts. Prices then rallied overnight in both old and new crop contracts in soybeans, meal and oil. The USDA’s soybean acreage number was only 77.483 million, about 500,000 acres below trade expectations. However, this was still up from 76.024 million acres on the USDA’s March 31st report, and it is the largest soybean acreage number on record. The quarterly stocks number in soybeans was 597 million bushels, about 12 million above trade expectations. Weather is moving back to center stage. Precipitation remains light with forecasts for more of the same into next week, and some traders are concerned about growing dryness in the NW soybean belt. Temperatures are expected to remain moderate over the next week, but a mass of hot air with above normal temperatures is expected to move into the central and western soybean belt and the Delta during the second week of July. Deliveries against the July contracts this morning were again zero for both soybeans and meal and 5,721 contracts in oil with the 2-day delivery total in oil now standing at 10,667.

WEATHER: Dry weather is expected to continue today in most of the Midwest with the exception of the NE corner. A band of rain is also expected from western North Dakota down through eastern Kansas and into northern Arkansas. The Midwest should ten remain mostly dry through early next week with the exception of some rain in the SW and south central Midwest on Friday, Saturday and Sunday. Temperatures are expected to be moderate in much of the Midwest through next week and hot in the southern and central Plains. This may shift to a generally hot pattern starting about ten days out with a hot air mass covering nearly all of the Midwest and Plains from 10 to 14 days out.

TODAY’S GUIDANCE: After the smoke cleared from yesterday’s big USDA reports, old crop soybeans and meal told us that the spring rally is still in effect. This should produce new highs in old crop meal and oil, but the fact that the recent leadership has come mainly from old crop/new crop spreads suggests that the issue of new highs in new crop meal and soybean contracts is less likely. In the meantime, China was a buyer in old crop soybeans yesterday, which reinforces the idea of old crop tightness. Support for November soybeans is at 970 3/4 with first resistance near 1004 1/2 and just under 1019 1/2.

TODAY’S MARKET IDEAS: The threat of coming in after a long weekend to see a more threatening weather outlook for the third week of July may be enough to support more buying in the short run. The planted acreage break caused a short-term oversold condition as well.

This content originated from - The Hightower Report.

Below is a sample of our 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: Traders say that the corn market is still responding to yesterday’s very bearish acreage report which sent the market limit down through most of the day session. This came as the USDA “found” millions of acres that it failed to account for on the March Planting Intentions Report. So, instead of dropping by 1 million acres from the March report, the corn acreage number jumped sharply which added about 3 million acres that traders were not expecting prior to yesterday. The resulting sharp break took the December contract to well below the March low of 375 1/2. However, prices recovered somewhat overnight after that session started out with a further push below yesterday’s limit down close. Weather is again becoming more of a mixed factor with some dryness edging into parts of the SW Corn Belt and the Delta with more dryness forecast in most of the Midwest through next week. Some forecasters are also calling for above normal temperatures starting by the middle of the second week of July and this could cover the entire Corn Belt by the end of the second week of July. This heat will come as much of the corn crop is wrapping up the silking stage of development and areas that were planted earliest will be starting to enter the pollination stage. On yesterday’s reports, the USDA pegged corn planted area at 87.035 million acres. Again, that was about 3 million acres above trade expectations. This was also the second largest corn acreage number since 1946. The extra 3 million acres could add 420 million bushels or more to new crop production at the USDA’s current yield projection. The quarterly stocks number came in at 4.266 billion bushels, about 90 million bushels above trade expectations. Analysts indicate that this can be added directly to current ending stocks projections for 2008/09. With the added production potential for new crop, this could leave 2009/10 ending stocks more than 500 million bushels higher than the USDA’s latest projection, although lower prices are likely to increase feed, and possibly ethanol, demand in the US and overseas. Deliveries against the July corn contract were zero again today with the total for the month so far also at zero.

WEATHER: Dry weather is expected to continue today in most of the Midwest with the exception of the NE corner. A band of rain is also expected from western North Dakota down through eastern Kansas and into northern Arkansas. The Midwest should ten remain mostly dry through early next week with the exception of some rain in the SW and south central Midwest on Friday, Saturday and Sunday. Temperatures are expected to be moderate in much of the Midwest through next week and hot in the southern and central Plains. This may shift to a generally hot pattern starting about ten days out with a hot air mass covering nearly all of the Midwest and Plains from 10 to 14 days out.

TODAY’S GUIDANCE: The USDA delivered a shocking surprise to the corn market yesterday with a big jump in estimated corn acreage instead of the decline that most of the industry was looking for. In s sense, this should not have been such a big surprise since it was clear that the USDA had “abandoned” millions of acres on its March Planting Intentions Report. It should have been obvious that actual farmers were unlikely to abandon millions of perfectly good acres come planting time, and it now appears that they did not. The focus can now return to weather with forecasts of hotter weather building up into the Midwest from the west and SW after next week. It is difficult to find any meaningful support above the December low at 349 1/4, although today’s low could become support if the market rallies strongly today and closes near its highs. The March low at 375 1/2 has turned into a major resistance point with the next resistance at 390 1/2.

TODAY’S MARKET IDEAS: While the down trend is obviously firmly in place, the market may be temporarily oversold.

This content originated from - The Hightower Report.

Below is a sample of our 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 USDA news late Friday was not enough to change traders’ minds that the market needs to see a further liquidation of animals to come in more in line with recent or current demand. This may leave summer pork supplies burdensome to absorb; especially if there is no improvement in the export market. Pork values were higher again on Friday which might slow the selling. The recovery in the ham market is seen as somewhat of surprise with talk in the mid-session on Friday of weakness in hams. All Hogs and Pigs as of June 1st came in right in line with expectations (down 2%) and should have little impact on the opening today. The time period covered for the report (March-May) had only a few weeks after the H1N1 virus hit and the industry saw only a slight decline in size. Traders viewed the trade estimates for the report as negative for the price trend right up front. Ideas that “if” the report were to show a drop of only 2-3% from last year in the size of the hog herd that there would be a “need” for additional liquidation of breeding stock and market animals for the months ahead which could increase the short-term supply and pressure prices. While the breeding herd is down 2.7% from last year, efficiency (pigs per liter) was up 2% to offset much of the lower breeding stock. As a result, the March to May pig crop came in at 99.7% of last year and is up 2.4% over two-years. Any movement in cash prices for live animals or feed costs which could adversely impact margins are factors which could cause an increase tendency for producers to liquidate. The August hogs closed sharply lower on the session Friday and managed another new contract low just ahead of a key USDA report. The market saw some early support from positive news from pork cut-out late Thursday but sellers turned more active with talk of weaker cash markets this week due to a slower slaughter schedule for the week. Slaughter on Friday was only 394,000 head which was well below expectations and suggests weak demand. This pushed the total for last week to 2.032 million head, down from 2.062 million last week at this time and down from 2.140 million a year ago. While slaughter was down 5% from last year for the week last week, pork production was down only 2.6% from last year due to hefty hog weights. The Commitment-of-Traders reports, released Friday, showed that speculators were fairly quiet for the week ending June 23rd with the exception of the index funds who were net buyers of 2,412 contracts to boost their net long position to nearly 56,000 contracts. Trend-following funds increased their net short position slightly to 25,206 contracts as compared with the record net short position of 29,480 back in July of 2007. The market remains oversold technically. The CME Lean Hog Index as of June 24 came in at 58.94, up 15 cents from the previous session and up from 57.80 the week before. Pork cut out values, released after the close Friday, came in at $55.28, up 42 cents from Thursday but down from $56.38 the previous week.

TODAY’S GUIDANCE: Traders had believed that there could have been more liquidation of animals over the past three months but since this did not occur, the market sees a more significant reduction of the supply herd this summer which will mean a larger than expected pork production period. Resistance for August hogs comes in at 58.27 and 59.70 with 55.90 as next downside target.

This content originated from - The Hightower Report.

Below is a sample of our 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 appears to have priced-in much of the poor demand news of recent months but continued weakness in beef prices despite a tighter supply and fears that we will see “extra” meat to absorb this summer in the form of liquidation of hogs has helped keep a negative tone for the market. August cattle probed lower on Friday trading down to Wednesday’s lows at one point, but managed to hold support and rally back towards unchanged on the day late in the session to settle only slightly lower. Some late in the week short covering may have lifted the market after a steep 3-day sell-off, but volume was low as traders looked ahead to the quarterly Hogs & Pigs report for some direction. Boxed beef cutout values were 60 cents lower in the morning which may have contributed to the early selling. Cash cattle traded at $82.00 in Texas on the day which was steady with the trade the previous week and up slightly from some trade earlier last week. Reports of hot weather causing cattle deaths in Nebraska last week as well as tight feedlot supplies helped to provide some support but the weather has moderated this week. The Commitment-of-Traders reports, released Friday, showed a massive short-covering event for the week ending June 23rd. Trend-following funds reduced their net short position by 11,392 contracts for the week to a net short of 7,077. Non-reportable traders (small specs and some producers) increased their net short position to over 20,000 contracts. Index funds were light net buyers. The estimated cattle slaughter came in at 130,000 head Friday and 27,000 head for Saturday. This was a little higher than expected and suggests good demand from the packer. Cumulative slaughter for last week reached 673,000 head, down from 675,000 last week at this time and down from 713,000 a year ago. Beef production was down 6.1% from last year. Boxed beef cutout values were down 60 cents at mid-session Friday and closed 76 cents lower at $138.93. This was up from $139.59 a week ago and down from $164.83 last year at this date. Last year, beef prices hit a peak for the year on July 10th at $173.80.

TODAY’S GUIDANCE: The market seems too cheap but demand remains very week. While beef production was down 6% from a year-ago last week, beef prices are still at $138.93 which is down from $164.83 last year at this time.

This content originated from - The Hightower Report.

Below is a sample of our 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!

While cocoa didn’t seem to find too much support from yesterday’s bullish currency action, the market seems to be having a much stronger positive reaction in the overnight trade suggesting a near-term low has been set. The Dollar has followed through weaker overnight and that is likely attracting more buying interest from investors seeking an inflation hedge. With the Pound up sharply, it also appears that arbitrage related buying is likely supporting the NY cocoa market. NY cocoa also seems to be gleaning some price support from a firmer London cocoa trade and talk of industry buying. While more of a technical bounce looks likely, we have doubts that funds will become aggressive buyers again unless macro economic conditions improve the demand outlook for chocolate. With equity markets continuing to waffle, yesterday’s reports on housing and manufacturing didn’t seem to significantly revive economic confidence, leaving the cocoa market lacking the strong macro economic optimism seen earlier in the month that was partly responsible for lifting cocoa prices to four month highs. The industry situation continues to leave traders without a strong buying incentive since growing conditions in West Africa are generally good and there doesn’t seem to be a significant crop problem developing. Expectations for a recovery in chocolate demand this year seemed to be a key factor behind the May/June rally in cocoa and unless the economic news over the balance of the week can revive this bullish demand side sentiment, we suspect a technically based price bounce in cocoa may be short lived.

TODAY’S GUIDANCE: With the market becoming oversold on the break, it’s not too surprising to see September cocoa build on gains in the overnight trade given the bullish currency action. A close back above the 100-day moving average at $2,518 in September cocoa will start to improve the market’s chart setup. But unless fund investors turn active buyers again, a technical bounce in cocoa may end up being short lived. After the swift sell-off seen last week, it might take a sustained and sharp decline in the Dollar and continued gains in the Pound along with a better macro economic view in order to lure strong fund participation back to the cocoa market.

TODAY’S MARKET IDEAS: On a purely technical basis, a close back above the 100-day moving average at $2,518 in September cocoa suggests a move back to the $2,615 to $2,661 price range may be possible.

This content originated from - The Hightower Report.

Below is a sample of our 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 slowdown in the selling and a steady open interest for the first time in a while has helped stabilize the coffee market back near the April consolidation. September coffee is already down as much as 18.6% off of the June highs as an aggressive long liquidation trend from speculators and funds has helped pressure. September coffee in London posted a contract low overnight but managed to move back up near the highs with talk of the extreme oversold technical condition helping to support. Ideas that the total coffee supply is on the rise with the Brazil harvest and talk that the high end of the market (Colombia premiums) has stabilized and that more Colombia coffee will be available with a larger crop this fall has helped drive the market lower. Indications from the head of the International Coffee Organization that Colombia production is expected to jump to near 12 million bags this season from under 10 million last year combined with talk that next year’s coffee crop from Brazil could be as high as 60 million bags from near 40-43 million this year added to the bearish tone. The coffee market pushed lower on the session yesterday and down to the lowest level since late April as the firm tone in other commodity markets and a sharply lower dollar failed to attract much in the way of new buying interest. Some light trade house selling and ideas that the Brazil harvest could be a little higher than initial believed helped to pressure. A continued long liquidation trend from fund traders was noted as another bearish force. Vietnam prices are also in a downtrend and pushed to near 27-month lows this week. The Brazil weather outlook remains near ideal for harvest as dry conditions could keep harvest active and there are still no significant cold weather scares on the horizon. Colder weather is expected into the weekend in coffee growing regions of Brazil but no damaging frost is expected. US exchange stocks were down 24,123 bags to 3.642 million with 42,056 bags pending review.

TODAY’S GUIDANCE: The market is now extremely oversold and downside momentum appears to be slowing. Close-in support for September coffee comes in at 118.40 and we would not be surprised to see a recovery bounce to 124.00.

This content originated from - The Hightower Report.

Below is a sample of our 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 managed to absorb the improved weather for the West Texas cotton crop from last week and we would not be surprised if crop conditions improve into next week. After a good rain into the weekend, it will be a long time until the crop needs more rain and the hot and sunny forecast is considered somewhat negative. The market seemed expensive on the run to nearly 64 cents in May but the set-back to near 55 cents may have attracted some new business. The weakness in the dollar yesterday was seen as a potential positive force but the market has followed the stock market more than anything else recently. December cotton inched lower after choppy and two-sided trade early yesterday but managed to close strong. A lack of direction from the stock market and continued talk that last week’s rains had a significant and positive impact on the crop in Texas helped to limit the advance. There was some buying interest near 55.00 which is a half way back support point of the March-May rally but a sluggish tone to the demand outlook helped to limit the buying support. The collapse in the US dollar helped provide underlying support. A continued slower demand outlook could push December down to near 53.00 before finding the next near-term support. The Texas crop was rated only 30% good/excellent as compared with 33% last week and 40% as the 10-year average. A higher percentage of the crop is from Texas this year as other delta and Deep South producers switched more land to other crops this year. Traders await next week’s update from the USDA on planted acreage and most seem to be looking for a further revision lower.

TODAY’S GUIDANCE: Key support for December cotton comes in at 55.00 and 52.95 with 57.06 and 58.12 resistance.

This content originated from - The Hightower Report.

Below is a sample of our 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!

On Monday, the August sugar in London was at the lowest level since April and New York second month sugar moved to a near 3 year high yesterday as aggressive fund and speculative buying emerged to support. There was a lack of commercial selling overhead and the trade quickly assumed that a large commercial trader was ready to accept delivery of July sugar and ship to India. India tightness after the poor crop for the 2008/2009 season of just 14.7 million tonnes has provided solid support to the market and traders recall quickly that a large commercial took delivery of 16,579 contracts in the May delivery and this was seen as a positive factor at that time as the market knew that the sugar had a home. Given the technical break-out yesterday, tightness in India, a slow start to the India monsoons and the market working off of a world production deficit this season and next; it won’t take much in the way of positive news from outside markets to spark more buying. October sugar moved to a new contract high and July sugar is back near the May highs with yesterday’s rally as aggressive buying from speculators and funds helped to support strong gains on the session. The outlook for a world production deficit for the coming year and a slow start to the India monsoon season were noted as positive forces. Ideas that the recent set-back in prices was enough to correct the overbought condition of the market and may have also sparked buying from India helped to drive the market higher and a firm tone to the energy markets added support.

TODAY’S GUIDANCE: Close-in support for October sugar comes in at 16.80 and 16.42 with 17.40 as next upside objective. Beyond that, the May 2006 highs at 18.00 could be considered as another target.

This content originated from - The Hightower Report.

Below is a sample of our 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!

DOLLAR: While the Dollar was showing signs of a possible upside breakout in the prior trading session, the overnight action makes it clear that the Dollar just doesn’t have the resolve to forge a return to the June highs. In fact, we suspect that the Dollar bulls will need a weak Durable Goods reading and a soft New Home sales report on Wednesday morning to even rise above the 81.30 level in the September Dollar Index. While we think that the Dollar bulls will generally prevail in the near term, there just doesn’t appear to be a definitive theme operating in the currency markets overall. While the Pound, Canadian, Swiss and Euro would all seem to be poised to gain in the face of near term weakness in the Dollar this morning, the fear of even more slowing evidence from the US economic front later this week, seems to have knocked all of the currencies off balance. We do suspect that the Dollar will see a temporary decline off the US existing home sales data this morning, with a near term targeting on the downside pegged at 80.48. However, on a dip this morning, to the aforementioned downside target, we would suggest that aggressive short term players consider getting long the Dollar for a Wednesday morning recovery bounce.

EURO: It would appear as if the Euro is poised to win by default in the coming trading session. Perhaps the Euro sees the latest German sentiment readings as a supportive development and we assume that the US existing home sales data will add to that slight bullish tilt. However, with the outlook for the US economy expected to generally remain suspect, we are not sure that the September Euro is poised to see sustained aggressive gains in the coming trading sessions. Therefore in the first half of the trade today, we can’t rule out at least a temporary recovery bounce back above the 140.10 level in the September Euro. In fact, the technical trade probably sees the entrenched down trend pattern in the June Euro, as the overall prevailing force in the Euro and given a broadening of the slowing fears later this week, we would not be surprised to see the September Euro eventually fall below 137.50 level before Friday’s close.

YEN: The Yen might be the only “quasi” trend in the currency markets in the coming trading sessions. However, the trend in the Yen probably won’t be definitively bullish this morning, as the flight to quality angle could be temporarily dented in the wake of the scheduled US data flow this morning. However, we would suggest that aggressive short term traders look to buy the September Yen on a slight dip this morning back down to 104.68.

SWISS: The September Swiss seems to have built a solid base on the charts just below 92.00 and that support zone should support the Swiss for a possible return to the 94.00 level in the coming trading sessions. In fact, we suspect that the September Swiss will see a rise above 93.03 in the early going today, but that the market will lack the resolve to punch up to 94.00 level perhaps until Wednesday afternoon.

POUND: Like the Canadian, the Pound remains off balance and vulnerable to more selling pressure ahead as the Green shoots of recovery view has seemingly been replaced with concerns of more slowing. In fact, the markets seem to be in need of some additional assistance to shake off the slowing influences and that assistance doesn’t look to be forthcoming in the action today. Therefore, we suspect that the September Pound is poised for a near term slide back down to consolidation support on the charts at 161.85 and perhaps even a further slide later this week down to 160.00.

CANADIAN DOLLAR: With another new low for the move overnight, it would seem like the near term trend remains down. Not surprisingly the Canadian continues to correlate tightly with the overall macro economic view in the marketplace and that would seem to leave the bear camp generally in control for at least another trading session. Aggressive traders should look to sell an Existing home sales inspired bounce in the September Canadian Dollar this morning.

TODAY’S MARKET IDEAS: Slowing fears might not be definitive enough this morning to leave the Dollar and the Yen in control, but as the week progresses we suspect that Dollar and Yen bulls will prevail.

This content originated from - The Hightower Report.