2012 Bi-Weekly Market Briefings
SOYBEANS are in the process of extending the recent downturn. Technical selling precipitated by the turmoil in the Middle East pushed soybeans through several layers of support. A November close below $12.70 would bring support at $12 and then, perhaps, $11.25 into play. Improving crop prospects in South America and a couple of cancellations by China initiated the downturn right before the Presidents’ Day holiday. Concern built over the weekend, with the activities in Libya sending crude oil sharply higher. Investment funds then began liquidating positions, accelerating declines. The question is whether they will re-establish positions at some point.
CORN declined, but seems to be reacting slower than soybeans and wheat. Fundamentals have been pushed to the side as investment funds react to technical and psychological factors. How deep the decline goes will be determined by these reactions. Supplies will be extremely tight, and this market will need additional acreage in 2011. December corn could test support at $5.50 and then, perhaps, even $4.80.
A sell-off sent July WHEAT below trend line support near $9. Further declines are likely, as traders fear there will be sales cancellations if the chaos in the Middle East continues or broadens. There is still uncertainty about this year’s U.S. crop, but even that won’t offset the current world situation. Heavy liquidation by funds has done significant damage to the chart picture. July futures have support in the $7.90–$8 range, but inability to hold this area would suggest potential testing of support near $7.
The recent upturn in RICE had little fundamental support and was driven primarily by investment funds seeking to capitalize on rumors of smaller U.S. plantings. Instability in the Middle East has taken the wind out of the sails. Now, funds are divesting and prices are falling dramatically. Ample Asian supplies at lower price levels have garnered much of the available business. Indications that importers like the Philippines will purchase less rice this year have added pressure. May futures may test support at $13.70, while September appears headed toward $14 or lower.
Just like all the other commodities, COTTON is plummeting from lofty heights as the mass exodus from long positions heightens. Tight stocks are still a factor, and the market will need more cotton in 2011. Some additional acreage has already been claimed for cotton. The allure of very profitable price levels brought some additional acres before the downturn began. The market has experienced a number of ups and downs in its wild ride to record levels. The magnitude of the current move suggests the top has been made, and the market will make a major correction. December has trend line support around $1.12. Failure to hold this level will suggest a possible move to old support/resistance near $1.
CATTLE futures reacted negatively to last week’s cattle-on-feed report. The Feb. 1 inventory indicated big placements and almost 6 percent more cattle on feed when compared to last year. Downside movement has accelerated this week, as commodities get hammered all across the board. Cattle had gained perhaps too much ground above cash prices, as well. Feeders have turned their focus away from sharply lower corn and, instead, are following live cattle lower. April feeder cattle have charted a potential island reversal, and it looks like a test of support around $124.75 is possible.
HOG futures have been chopping along just under contract highs, but have seen some weakness in recent days. The June contract has charted two key reversals in the past two weeks, which certainly indicates that a momentum shift is occurring.
June has now gapped below the sharp uptrend line that has supported the market since December, signaling that further weakness is likely. Weakness may be short-lived, however. In the spring, supplies usually decrease, and domestic demand usually increases.
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