The Softs Review
For the week of November 28, 2011

By Jurgens H. Bauer

During the holiday shortened week soft commodity prices continued to drop. And as prices drop, so has open interest, which signals that it is covering of positions fueling the drop. Cannot see any reason to expect prices to go up with economies slowing down and interest in ownership lacking. For now, besides occasional bouts of trade buying, it is doubtful that unless funds receive motivation to own long positions prices will continue to trend lower.

That being said, as you can see, the dollar is down big as traders begin the new week and all soft prices are higher. Several markets had been oversold so the possibility that prices could rebound somewhat, but only from a technical perspective was available. Any rally of that sort provides a selling opportunity as these markets are trending lower. Therefore, my read is to sell into this rally. Those who are short could cover on extreme weakness, and look to re-enter from the short side on any bounce.

Currently the long put spread in sugar is working and those premium subscribers with that recommended position should look to take any unrealized profits as was suggested on Friday, although the 120 level was not reached, and it's doubtful it'll see it today given the strength. As a whole the Soft complex looks to be trending lower. I don't adhere to the belief that the Euro is saved and we've seen the end to dollar strength. Europe's recovery move is only a part, Black Friday sales is another. Doubt that either will be sufficient to last.

The precipitous drop in cocoa prices had been screaming for a technical bounce. Had been tempted to seek a long term position, and waited till after the holiday. The drop in the British Pound helped things along. Coffee has grown so thin that it makes traders nervous and a head fake move can be violent. I remain bearish on Sugar, same with cotton.

And this quote served up from one of my readers, "“Witnessing the Republicans and the Democrats bicker over the U.S. debt is like watching two drunks argue over a bar bill on the Titanic.”

***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 28, 2011

By Matthew Pierce

Coming back from the holiday week it’s all good again. There is no real change on the fundamental front with demand quietly there for both corn and beans domestically and internationally. Something to watch today is how many million bushels of corn China takes after taking 17 million in their last two weeks. Outside of this factor, corn demand is coming from Ethanol on the domestic side with margins exceeding 80-cents on average. Bean demand remains from China with the rest of the world eerily quiet. On the wheat front it's Japan surprising many with their demand. This is attributed to switches from corn into feed wheat. On the supply side traders will see the final USDA progress report today offering corn harvest progress and winter wheat conditions. After today look to private forecasters for updates on both SRW and HRW. Looking at weather they have a small issue in Argentina with the central region drying out over the next 11-15 days with no real break seen. This will stress the wheat and corn more than beans which are more in the northern regions of the country. The bean plantings north of BA are moving along following recent rains with 46% estimated in the ground. In Ukraine the old crop harvest is all but complete with the government raising their total production number to 55MMT which is about 1-2 MMT above their previous estimate. This does not count the winter crop which is still experiencing problems due to drought and high winds. These are the only real fundamental impacts with the overnight rally and expected day session rally more heavily influenced by crude, the Euro and equities following black Friday. The Euro situation is improved today with no implosion over the weekend but reports of a mild recession will limit any upside interest. Add to this more bond sales coming from Portugal, Spain and Ireland and the gains will likely be limited. Crude is higher on oversold sentiment and growing tension between the world and Iran. Iran threatened to “hit” Turkey if the US or Israel attack. An interesting ploy but it did make the world step back just a bit. Crude oil is trading right back at $100.00 (basis FEB) offering a reason for all commodities to rally today following the recent beat down. On the technical side markets have dramatically oversold conditions across the board which is one reason for the recent rash of selling in corn and bean oil. This is wrong. I will stand up and say it loudly. The conditions right now for a rally in corn are almost perfect in my eyes. The growing conditions in the southern hemisphere support beans more than corn right now and with the continual acreage shifts I have heard about in Brazil and Argentina there is little reason in my mind to pressure corn any more. I am not a fan of CHI wheat, meal or beans as much as I am a bull in bean oil and corn. With volatility where it is, I think there is a reason to look at calls in BOH and CH this week looking for a move by year’s end.

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.