The Softs Review
For the week of November 14, 2011

By Jurgens H. Bauer

As traders saw last week, the news stories out of Europe seem to move all markets. Same is true among the softs, but most members of the complex seem unprepared to rally on anything more than short covering at this time. As a result look for a similar week with a downside bias. Cotton and coffee options expired on Friday, with no major surprises. We often see coffee prices drop after such an expiration, so even with some bottom pickers gaining confidence, don't rule out a severe drop, especially if helped by outside market forces.

Sugar values have a mixed tone and now there are concerns about production slow downs occurring which may have a supportive effect. The world still faces a projected surplus so the down trend may resume, but not likely with the vigor traders have seen.

Cotton may have received a short lived perk up as the week approached its end, but fundamentals are still negative and as a result the trend should be lower. Use rally efforts to establish short positions.

Cocoa is the biggest dog among the softs and while I understand the sensitivity there to the British Pound, supplies are more than adequate and therefore likely to continue to drag values down, so selling any temporary strength seems in play.

The big issue right now is liquidity and as long as it remains lower than normal expect volatility to remain high and for prices to move around quickly based solely upon the flow of orders. Good trading, but caution is advised. Keep positions small.

***chart courtesy Gecko Software’s Track n’ Trade Pro
Past performance is not necessarily indicative of future results.

The Grains Review
For the week of November 14, 2011

By Matthew Pierce

Welcome back from the weekend to a rather unexciting and uneventful trade. Not to say there are not events unfolding but there is nothing I see as overly dramatic to spark any major move in agriculture. This was expressed overnight with corn trading in a tight range slightly higher on the close with CZ-H at 9.75. This occurred late in the session with a range of 8.25-10. Very erratic to say the least. I would look for a trade between 9.25-9.75 to start today. The flat price situation feels like a bullish situation due to 100,000 contracts in fresh open interest added, crude oil prices hovering dangerously close to $100.00 and talk of a shift right back to beans in South America with corn plantings in Argentina lagging way behind. This makes the trade more interested to the upside than to the downside from current levels. Traders may see a bit more consolidation pressure in CH with daily technicals offering more downside pressure. As the daily chart is riding just under the 200-day MA, the weekly chart is riding just under the 38% retracement level at $661.50. Weekly indicators are neutral to positive in the bottom end of the range. This is a decent explanation for the recent rash of long term corn buying. Of all the commodities on the floor, I think corn still holds the best opportunity for a rally. Beans continue to struggle with the demand picture.

This morning saw NOPA come out at 141.179 million bushels crushed in NOV versus the average trade guess of 142.25. If compared with last year at 151.9, I get the idea that demand for meal and oil is weak at best. I see this as supportive both products and if you look at Palm oil, I think you have to favor bean oil over meal moving forward. With July share approaching 35%, I cannot support a bullish bias in share. It may work if crude continues well above $100.00 but that will likely increase crush which will hammer basis as the pipeline fills. As for beans outright, I do not see all kinds of hope for bulls. Trade will probably bounce today due to a hold of the range low on Thursday and Friday. The counter to this is increased acreage talk in Brazil and Argentina as corn plantings lose out. The Chinese interest is weak at best with those long looking to defer shipments until JFM - not cancel, just delay. They can always speed them up again if the market changes. A consistent move by Chinese buyers. The one supportive factor for beans is the weekly chart which is holding the 200-day MA. The last time they tested this level a $1.20 rally ensued in a week. Overall I feel puts are the best way to try to play this market. You get to play your short bias while buying volatility at really low levels. In wheat, the outlook is grim even for HRW. Not that things are all good in the HRW region but there is nothing fresh and nothing on the weather front here to scare anyone. There are no rains expected in central to western growing regions for the next 10-days. Technically wheat is looking for March to hold 634.25 and if so, a rally over the weekly 200-day MA could scare shorts. The only real change for wheat to rally is corn. Look for the inverse in favor of corn to continue to widen but wheat will rally if and only if corn does.

Overall this week appears to be another dominated by money flow and information out of Washington and Europe. Fundamental data is limited to the standard crop progress and export sales with Friday afternoon offering a look at Cattle on Feed which should be interesting. Remember that the USDA doesn’t believe we are feeding anything based on their constant attack on feed usage so this report will be entertaining.

Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.