EARLY WEEK COMMODITY MARKET THOUGHTS

1)     MACRO-LED SELL-OFF COULD INTENSIFY:  Most Micro-Fundamental/Supply-Demand “Bulls” in grains and livestock are justifiably looking for a quick bottom in this market, especially if export demand is seen as improving on the recent price-slide, but also in the case of grains because rains for the early crop have been sparse—and goodness knows we need good, timely rains across the whole belt if we are going to raise a 166 bu/acre corn crop! I would urge caution, however, on jumping back in on the “buy side” too quickly, however, especially with Daily Chart Stochastics now becoming very “Oversold”. And I say this because we have to acknowledge that starting last week, the Macro-Markets are actually assessing and starting to price-in a Greece possibly leaving the Euro-Currency—AND IF THIS OCCURS WE HAVE TO BE PREPARED FOR THE EURO TO DROP TO PARITY TO THE US DOLLAR IN MY VIEW. Second, the ECRI Research Institute just projected a return to a Global Recession last week—matching my assessment. In their note, they wrote, “For the last 3 months, year-over-year growth in real personal income has stayed lower than it was at the beginning of each of the last 10 recessions. In other words, this is what personal income growth typically looks like early in a recession.”(SA,5/13/12). In the totality, I would be of the mindset that these Macro-issues will take another two weeks at least to work through the market—especially if the S&P 500 closes below its 100-day Moving Avg of 1344 today, as it looks like it could.

1.     I think it’s also worth noting that the EU represents about 18% of China’s export market, so if you’re in a mindset that the Emerging Markets can help lead the global economy out of recession, like they did back in ’08-09, I would say that it’s going to be much tougher for them to do this due to less policy choices and inflationary pressures. This helps explain, I think, the fact that China eased their monetary policy over the weekend yet the Hang Seng Index fell back below 20,000  on a closing basis. The Hang Seng—to me—becomes another key leading indicator along with Gold in terms of trying to assess whether the overall market has priced-in enough negativity.

2)     IN THE NEXT TWO WEEKS, SHORT-COVERING RALLIES IN COMMODITIES ALWAYS A POSSIBILITY DUE TO TECHNICALS, BUT THEY ARE PROBABLY GOING TO BE FADED IN MY VIEW. And this is where I would differentiate between corn and hogs as being “Undervalue” compared with soybeans or crude:  it would be my view that both fund-length/short and fundamentals put the corn and hogs in the best spot for a medium-term low coming once we get passed the Macro-negativity. But for other commodities like beans, rallies should be used to get catch-up hedges in place. Hogs, for example, should benefit from lower fuel prices in the coming weeks, and with some major meat firms reporting handsome profits, I think that the demand-side for pork is looking-up.

1.     AND THEN, BY THE END OF MAY/1ST OF JUNE, BE PREPARED TO LIFT PAPER HEDGES IN MOST OF THE AG SECTOR & POTENTIALLY GET SOME OWNERSHIP ON CASH SALES IN PLACE AS WE HEAD INTO THE JUNE REPORT.

2.     FEED HEDGERS SHOULD BE VERY READY TO GET THE NEXT 6 MONTHS OF THEIR NEEDS FOR MEAL & CORN & FUEL FILLED BY THE 1ST WEEK OF JUNE AS WELL.

3)     Planting Progress Should Be Much More Advanced This Week:  I’m putting corn at 93% up from 71% last week, and Beans at 52% up from 24% from last week. Some producers have called-in this past weekend ad this morning and suggested that dryness on newly planted fields is starting to affect Emergence—I doubt that USDA will pick this up but I’ll be looking for it in any case.

4)     A THOUGHT ON USDA’S NUMBERS LAST WEEK:  I fear that USDA is becoming more inconsequential to the trade due to their assessments so far this Spring—and I say this because they are not only dropping yield data out of their statistics in corn for last year, they are more important to me going against the “Cardinal Rule” of commodities:  high prices and low prices cure themselves through supply-demand reacting.

1.     Take for example the new-crop bean exports; USDA projects 1.505 Bln. Bu. Exports for ‘12/13—a record even though the US Gulf Price is near the highest it’s been since mid-2008:  $550/ton. When it was last above $550/ton in Jun’08, US Exports for that MY were 1.28 Bln. Bu. Similarly, the last record we had in US Exports was 2010, at 1.501 Bln. Bu—when prices were approx. $360/ton. How can we expect record prices and record exports? It is possible but a rare event in commodities, based upon my experience.

-Mike Zuzolo, Global Commodity Analytics & Consulting LLC

3548 S 9th Str, Lafayette, IN  47909  USA

765 471-1600 | Globalcomm2@comcast.net | www.globalanalytics.biz

General Risk Disclosure—There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options. Options Risk Disclosure—The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results Information Disclaimer—The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction. Prices could already have factored-into them the seasonality or cycles of the market. Copyright, 2012 Global Commodity Analytics & Consulting LLC

Pre-USDA Market Thoughts: Grain Export-Demand Continue To
Improve As Macro-Fundamentals Point More Convincingly Toward A Double-Dip
Recession

Grains Highlights: In my weekly copy to
subscribers & clients, I’ll look in more detail of the continuing split
relationship between improving export demand for all three of the major grain
sectors–corn, beans, and wheat–this past week, and a worrying trend of poor
economic data here in the US and elsewhere which suggests to me more and more
that the global economy is headed-for a double-dip. In fact, I would
suggest to the reader that if it had not been in part for the 136 Mln. Bu. of
weekly corn export sales & 63 Mln. Bu. of weekly bean export sales, then
the grains would have not been able to withstand the heavy sell-off attempt on
Friday and held-onto their medium-term technical support levels. (I think that the
upcoming report also likely helped keep some additional price support in place
as well).

For instance, take the copper and crude oil markets as we
closed-out this past week: in copper, the Financial Times reported mid-week
that China could become an exporter later in the year due to excess inventories
and high global prices. This, to me, is a very big “warning flag”
about the slowing overall commodity demand occurring in the world’s biggest
consumer of copper. Second, we saw the US weekly inventories of crude oil go
above their 5-year average peak last week; at 376 Mln. Bbls, US crude stocks
are 3% higher than last year. Most serious was forward-looking economic data
suggesting another slow-down: the monthly Unemployment Report showed that
the Labor Participation Rate dropped to 63.6%, the lowest since 1981. In
addition, April Retail Sales were the worst since 2009 & the US Non-Mfg.
ISM Report for April came in at 53.5, barely expanding (with 50 being an
indication that no expansion is occurring). All of this information helped push
the crude oil down to levels not seen since February, and help it to get close
to its major support of the 200-day Moving Avg. in lead-month June Futures.

Now, contrast this macro-malaise with the fact that US
CIF/Gulf Corn rallied to over $1/bu. on Friday’s trade, as the export market
heated-up to a level not seen since June of last year–a time when livestock
liquidation, ethanol plant slow-downs, and fears of the market running-out were
peaking. How could this be if we have 801 Mln. Bu.? First, China is buying;
second, we don’t likely have 801 Mln. Bu. of ’11 corn without adding ’12
supplies in September to the total. I noted from a colleague’s comment on
Friday, when I asked him, that Cedar Rapids Basis for corn had jumped to +50
over the July. I believe we’re entering a period of 30-45 days where cash corn
is going to be tougher to come-by; weekly stocks figures would suggest that
last week. USDA reported major terminals held 26% less corn than a year ago,
19% less wheat, but 267% more beans.

Speaking of beans, I thought that this past week’s Commodity
Week Program that I was on was very enlightening when it came to my idea I’ve
been talking and writing a lot about this year: price elasticity of demand.
On the program, two South American experts both agreed that the effects of
the extended high prices in soy has indeed brought-on increased acreage
estimates in both Argentina and Brazil. Similarly, the same high price in soy
has likely started to trim demand in my view, especially if we head-into
another double-dip recession, with the EU at the focus. As one of the guests
commented, a weaker EU economy is likely to slow Argentina’s soymeal exports to
their #1 customer: the same EU.

To Listen To This Discussion, Go to my Media Tab on
my website and click the WILL-Radio Emblem: this will take you to the
WILL-Radio website where you can find the Commodity Week Button.

Heading Into Next Week: Where Does All This Leave Us? I
continue to be of the view that over the Medium-Term, without the USDA
“feeding the bull” this week, or without a shift to a hot/dry weather
pattern in the coming 30 days, it is likely to be difficult for grains to
continue to fight a potential macro-led decline in commodity and equity prices.
Similarly, I am becoming more and more convinced that high bean prices are
starting to cure the problem of low current supplies. In addition, an early
wheat harvest here in the US–in what appears to be a potential record
crop–could also lend extra pressure as we head deeper into May. I think that
the corn made some real headway this past week and the spread looks very good;
but I’m concerned that among the outside markets, a potential top in beans, and
early harvest of a big wheat crop, the corn doesn’t have the stand-alone
strength to hold-up if the others fail. THIS PAST WEEK ALSO SHOWED US HOW
POWERFUL THE TECHNICAL INDICATORS ARE, AND THIS IS WHAT I’LL ESPECIALLY
CONCENTRATE ON IN MY WEEKLY COPY TO CLIENTS & SUBSCRIBERS. So don’t
forget to sign-up for a free copy of my report on the website if you’d like
one.

Livestock Commentary: Hog Prices Dive To New Contract
Lows For June Futures. Are Markets Trying To Force Liquidation?

While cattle were able to find support off of very strong
weekly export sales (which indicated to the market at least for now that the
Mad-Cow issue hasn’t hurt foreign demand for our beef), the hogs continued to
plummet at the end of the week after having a brief rally attempt. Why is this
occurring? Could it be the weaker cash markets and negative packer margins?
After all, this week we saw a major break in the Unleaded Gas Futures Prices,
but the hogs barely noticed. I do suspect that weaker economic growth continues
to weigh on the fund-related trade in the hog pit; but I’m starting to think
that an even bigger issue–and the main reason June Futures sought-out new
contract lows this week–is that a tighter corn & soymeal supply could be
causing the futures market to ready and prepare the hog sector for liquidation.
I’ll be doing more analysis on the prospect of this in the coming weeks. I
would also suggest that, after going to the grocery stores and looking at new
restaurant menus, the pork demand isn’t likely to worsen domestically. I think
the price is just too good not to attract consumers. For instance, this weekend
I purchased top-cut boneless loin steaks for $2.99/lb. This is an item that
normally sells for $4.59/lb. I think sales like this will bring in the consumer
because, on a pound-for-pound basis, it beats both poultry & beef. And if
the gas futures remain lower, I’d be looking for relief at the pump by the
Memorial Day Holiday to help out as well. That leaves the grain prices and
available supplies as my major focus for the livestock sector…

Don’t forget, if you’re reading this copy on a 3rd
Party Website, visit my website at www.globalanalytics.biz
and click on the WILL-Radio Link on the News & Media Tab: it will
take you to this past weekend’s Commodity Week Program featuring two South
American commodity experts. Just scroll-down on the WILL page and look for the
Commodity Week audio.

–Mike Zuzolo, President

General Risk Disclosure-There is substantial
risk of loss in trading futures and options, therefore you should carefully
consider whether trading is appropriate for you in light of your experience,
objectives, financial resources and other relevant circumstances. The
information above is not meant to be advice to buy or sell futures and options.

Options Risk Disclosure-The purchaser of options should be aware that he could
lose all premium paid for such options as well as any commissions and fees.
Further, purchasing deep-out-of-the-money options have a remote chance of
becoming profitable. The writer or seller of options should be aware that there
is unlimited risk and could result in such seller being required to maintain a
futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results.

Information Disclaimer-The information and data contained herein was obtained
from sources deemed reliable. Their accuracy and completeness is not
guaranteed. Any decision to purchase or sell based upon such information is the
responsibility of the person authorizing the transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC

Weekly Review—GRAINS

Overview of Last Week: The grains–wheat and corn–led the market higher to start the week, on both supply & demand-led concerns and
bullishness; but by the end of the week–with no confirmation of Chinese corn buying and the wheat weather looking less cold to the SRW crop–the wheat and corn were faltering while the beans picked-up the slack and were re-energized. So that, by the end of the week, the Meal was leading the beans higher with new contract highs in May Meal, and the spreaders were back buying beans & selling corn/wheat. Adding to the strength in soy was a tremendous weekly export sale for the Meal, coupled with reduced crop expectations in Argentina for both beans and corn. Friday added-to the bullishness in beans, as rumors circulated that even though Brazilian farmers were selling-into the rally fairly aggressively, Brazilian exporters were offering no sales to China. Brazil has since come-out on Reuters and said that the rumor “…doesn’t have the slightest foundation”, but the technical damage to the bears was already done in the old-crop beans. The July-Nov Bean Spread was making new
multi-month highs while the July-Dec Corn Spread was making multi-month lows on Friday. This left the feed-grains very vulnerable and the Nov. Beans just under their 20-day Moving Avg. of $13.56 1/4–a level that if penetrated I will pull-back on my ’12 bean hedge recommendations on paper positions.

Heading Into Next Week: I am torn by the market here in the short-term, because of what I wrote in the “Other Commodities”
Section, as well as due to the planting weather not being nearly ideal enough to encourage continued market-talk of a huge corn crop this year: the temps. are just too cold in the most recent GFS & the rainfall is too questionable given the dryness in the Central and Western Corn Belt. Yet the corn charts and spreads in particular look very poor and damaged from this past week’s trade, while the soy charts appear re-energized. I am also concerned about the downside in wheat after this coming week, because the Kansas Wheat Tour will begin, and based upon clients-producers comments from the HRW region, the crop is looking the best it has in many year–early, yes, but that too could be construed as bearish if we have no cold or excessively wet weather in the next 10-20 days, in my view. Therefore, given this conflict in the corn, I’m going to suggest to clients to give the market this coming week to turn itself around (just like I did with the hogs last week when they broke hard to the downside
as April Hogs went into expiration); now that the May options are off the board, let’s see if the weekly charts–and the index funds–can right
themselves and take-up some additional long positions. Most important, let’s see if we can get confirmation of whether China purchased US corn or not: my instinct would say that if weather is turning against the new-crop, if they need corn, they should be coming-in sooner rather than later. And I say this recognizing that there are still about 9.5 MMT of US Export Sales of corn left on the books.

The other factor I think is supportive enough to allow the corn to come around this week is the fact that the US Dollar slipped below its
50-day Moving Avg. this week on a closing basis: this is something that goes against my analysis. I have been of the view that as we headed into the middle of the calendar year that the Greenback would be the currency of choice. Maybe the Emerging Market moves mentioned in the copy below had some beneficial effects on currencies which will play-out in the commodities more this coming week. I at least want to be on the look-out for this.

Weekly Review—LIVESTOCK

I’ve been waiting for a turnaround in the hogs for 3 weeks now, led by either cash markets picking-up or a break lower in gasoline prices.
Last week, we saw gas prices go lower and talk of improving cash demand due to retail featuring–yet the hogs continued lower. That means to me that this week needs to be a sharply higher week for the hogs in order to contain more longer-term damage, especially given that the Cold Storage Report for Pork showed a 2% decline from February levels–and I think this helps explain why packers have been slow to bid-up, but it also suggests that product is moving. Hams in particular were down nearly 30% and this strongly says to me that the Easter seasonal wasn’t bad at all! Thankfully. So, with the weather promoting grilling-out and the gasoline prices here in Lafayette down about 25 cents in the last two weeks, I think we’ll see the cheaper prices at the meat-counter turn-out to be beneficial for the pork sector. China has also been quoted as saying they will begin stockpiling pork in their domestic reserves, so I think this could be taken as friendly as well.

As for cattle, the monthly cattle-on-feed report didn’t show too much difference from the trade guesses–no surprises is supportive I think.
Also, I noted that dressed weights for slaughter-ready cattle were down 3 lbs. compared with the prior week, and I think this is very supportive given that weekly production thus fell 4.6% compared with the same time last year. With the cattle having a better technical week than the hogs last week, I am encouraged and think that the stronger stock market–if it holds–should help give the cattle more upside this coming week. I do think, however, that the outside markets are likely to play a bigger role in the markets as we head into summer grilling season, so be on the look-out and read the copy below.

Weekly Review—OTHER COMMODITIES

This past week we saw re-surface the bias of a “risk-off” trade once again. The possible major cause? I think it primarily hinged upon the new IMF World Economic released mid-week, and its more detailed analysis of Europe; in it, the IMF stated, “The April 2012 Global Financial Stability Report underscores the continued high risks to financial stability relative to six months ago, despite policy steps to contain the euro area debt and banking crisis. In the euro area, sovereigns and banks face significant refinancing requirements for 2012, estimated at 23% of GDP. Deleveraging pressures are also likely to stay elevated, as banks undergo $2.6 Trillion in balance sheet reduction over the next two years”(Page 5). Now,
when you read something like this as an analyst, I immediately thought of the deleveraging as being synonymous with deflation. And in deflationary environments, hard assets such as commodities are not usually good assets to hold. And I would point-out that the fears from last week’s Chinese GDP figure were also very fresh in the market’s mind, I believe, as new copper inventory data in China was released–showing that copper stocks in that country at an all-time high at around 3 Mln. Tonnes. China consumes approximately 40% of the world’s copper.

So, we juxtapose this macro-economic data from the IMF up against three major features to this past week’s trade–features I might add
which should/could ignite a fresh round of commodity index fund buying: (1) China expands their currency trading range, with the idea that allowing their currency to appreciate will increase their domestic consumption of goods…which they likely need given the slower advanced/developed countries such as the US, Europe, and Japan. (2) India’s central bank cuts their interest rate (3) Brazil, too, cuts its interest rate to the lowest level in 2 years. These actions by three of the four BRIC’s strongly suggest to me that the Emerging Markets are very concerned about slowing GDP and feel the need to do something about it–because in part they feel they can since inflationary pressures are
less of a concern.

Don’t forget to visit my website at www.globalanalytics.biz and sign-up for a free 2-Week Trial of my Daily-Weekly Market Update

–Mike Zuzolo, President

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether
trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options.

Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any
commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results.

Information Disclaimer-The information and data contained herein was obtained from sources deemed reliable. Their accuracy and
completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the
transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC

 ·        Last week showed us very clearly two distinct markets when it came to the overall risky assets such as the commodities and equities; Tuesday’s trade was a “risk-off” trade due to concerns of recent economic data in China coupled with an increasing problem with the EU sovereign interest rates again—this time in Spain. We saw as a result major chart support in a number of charts I track on the paid subscription level be tested.

·        Alas, when this occurred on Tuesday, we started to see rhetoric from both FED officials and the Chinese Central Bank start to get ramped-up about more easing of monetary policy, or QE. And in fact, the Chinese announced on Sunday night that they were relaxing their trading band on their Yuan currency in the aftermath of disappointing Q1 GDP of 8.1%. When this rhetoric increased at mid-week, the markets jolted higher and moved to test some key resistance…whether it was in the DJ-UBS Index, the Soymeal, or the July-Nov. Bean Spread. The point in the outside markets is this:  they are looking weaker to me and more vulnerable again. Because of this, technicals are extremely important as we move deeper into planting and deeper into summer grilling season for the meats. I am preparing clients and subscribers for another round of Macro-led weakness as we head into June—which if it becomes a reality similar to late last year, then I would expect most Agr. Commodities to go lower in a general sell-off, and most notably the soy complex if China doesn’t continue to buy our product more aggressively.

Grains & Livestock Observations:

·        This past weekend, I’ve recommending increasing ’12 Bean hedges with clients-subscribers.

·        For corn, I am preferring to stand-pat at the 30% level and see how the market trades after the weekend weather system moved through:  generally speaking, after talking to clients, rains were plentiful in the Western Corn Belt but disappointing as we move across the Central and into the Eastern Belt. I also see very cold weather now being projected up North in MN, SD, and ND; in addition to this, the 6-10 day model is dry again. I do not normally make hedging recommendations based upon weather, however, for corn this year—because I feel that the trade has already started/partially priced-in the 96 Mln. Acres and a 162-164 yield, weather means a lot more…that weather better meet the bears’ expectations or the new-crop price is not likely to fall until after July 4th/pollination. I recognize, however, that the corn isn’t likely to hold-up its price if beans, wheat, and the outside markets are moving lower: it too will fall with those other complexes in my view. Because of this, I will recommend to hedge more on paper for the short-term if the Dec. Corn takes-out its March 30th lows on a close. But as the market falls toward $5 Dec. Futures, I will be very eager to recommend lifting those hedges and getting feed-buyers covered in their long feed positions heading into summertime.

·        For wheat, the prices are more concerning due to the pace at which some clients in HRW and SRW country are telling me that they will likely be harvesting 4 weeks early: if this happens, we can expect a harvest low 4 weeks early as well…and that’s what we may be starting to see in the wheat currently.

·        Similarly, I see a pattern like this developing in the livestock markets: the hogs have yet to find their Easter Seasonal and are now struggling technically due to renewed fund-led liquidation. Like the corn, they should be closer to a low than a top, but if the outside markets weaken I can’t expect them to find strength on their own given their own weak cash markets and Micro-Fundamentals (not to mention the higher gas prices likely chewing into demand domestically). For this reason, like the corn, if the hogs take-out their recent lows, I will be forced to get some paper coverage in place.

·        Cattle, to me, are starting to figure-out a trading range—a range that they will likely work all summer long. We’ve seen the trading range bottom, I think, and now this next two weeks I think we’re likely to see the trading range top. The monthly cattle chart is an excellent source of reference and should be viewed at least once per week in my view just for perspective.

Please be sure to go to my website, www.globalanalytics.biz to sign-up for a trial subscription to my daily & weekly email copy. I’ve also started a new monthly Global Commodity Monitor, which focuses on commodities from a broader range. Currently, I am working on Part 2 of a three-part special report on China’s commodity demand in 2012 as they shift their political leaders. Call me for details on either of these two products or my consulting/brokerage services on the website.

-Mike Zuzolo, Global Commodity Analytics & Consulting LLC

3548 S 9th Str, Lafayette, IN  47909  USA

765 471-1600 | Globalcomm2@comcast.net | www.globalanalytics.biz

General Risk Disclosure—There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options. Options Risk Disclosure—The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results Information Disclaimer—The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction. Prices could already have factored-into them the seasonality or cycles of the market. Copyright, 2012 Global Commodity Analytics & Consulting LLC

Overview of Last Week: A major test of the weekly commodity index chart support–specifically the DJ-UBS Grains Index–occurred mid-week this past week, with that key support holding. Because of this, and also because of the late-week turn lower in the US Dollar, I think these were the two primary drivers to keeping the market from falling even more than it did. Even with the late-week rebound in prices, July Corn ended 25 3/4 lower, July Beans 9 lower, and July Wheat finished the week 12 3/4 lower. Do you notice the trend? Last week we saw the return of the inter-commodity spreads of buying beans/selling feed-grains. Why? Simply put, I think that the lower Argentina Agr. Ministry bean production forecast, the Argentine truckers strike, and the fact that weather in South America still hasn’t settled-down all added-up to a renewed supply-side fear by the soybean trade that a sufficient risk premium in both old-crop and new-crop futures had not yet been added as we approach the acreage report on the 30th. And even though this makes sense from a supply-side, it does not when looking at demand; beans saw yet another week of weekly export sales falling below trade guesses, falling 56% below the 4-week average. As for the YTD Export Inspections, they continue to be about 25% below year-ago levels for the beans. Compensating for this weakness in the beans, however, has been a continued strong push in demand for both Malaysian Palm Oil as well as a strong demand base for Meal–Crush Margins in Chicago at the end of the week, in fact, were registering around 60 cents all the way into September. Thus, the beans won another week against the corn and wheat.

Heading Into Report-Week: As we approach the big reports on Friday, I’ll be laying-out several strategies to clients, focusing on both old-crop & new-crop corn, as well as new-crop beans. Specifically in the beans, hedgers with bought puts/short calls in the November will be recommended to roll-up their bought puts to increase/improve their floor price…especially after Monday’s Weekly Export Inspections and to see if Monday brings any confirmation of the rumored Chinese soy purchases of last week (Here again, with the Gulf Basis in beans finding good support, the trade psychology was quick to assume that China was buying more US beans). By Wednesday, I expect to make the roll recommendation for clients, or faster if May Beans can’t hold the critical support tested from last week at $13.62.

1. Why Roll-Up The Bean Puts? Technically “Overbought” Daily & Weekly Charts, continued signs of an economic slow-down in both Europe and China, and a lack of export demand all suggest to me that the past 4 months of Nov. Beans climbing on Dec. Corn has pushed a huge amount of risk-premium into the bean futures. Take, for instance two issues this past week: (1) The Nov. Bean/Dec. Corn Ratio jumped to levels not seen since November, 2010, to 2.37: that means that Nov. Beans are 2.37 times the price of Dec. Corn. If we were to go back to the November Lows in this Ratio of 1.83, at $13.25 Nov. Beans, Dec. Corn would be $7.24/bu.! This suggests risk-premium is indeed in the market, especially given that corn YTD export inspections are off only 3%. (2) One of the big newswire organizations released new-crop, 2012 acreage figures just before Friday’s close; these figures showed an average estimate of 94.65 Mln.
2. Corn Acres & 75.43 Mln. Bean Acres. This compares with 94 Mln. and 75 Mln. by the USDA in February…and it also suggests to me that the trade, who I believe is trading 75.3 Mln. based upon contacts in Chicago and other sources, that the rally in new-crop beans over corn has indeed pushed more bean acres into the mix. That is, unless, corn-planting weather starts 2-3 weeks earlier than normal thanks to Mother Nature.

Weekly Review—LIVESTOCK

I’ve been expecting a turn higher in the Hogs for 2+ weeks now, yet they continue to go lower in the futures even though the CME Cash Index closed Friday at a $2.32 premium to the lead-month April Futures. Why haven’t the hogs found support? I think the primary reason is that Commodity-Trading Funds continue to sell/liquidate longs because they see very little packer demand show-up in the cash market…for both the cattle and the hogs. Last week’s numbers show that they are right in their assumption: weekly Beef Production was off 2.2% from the previous week while the Weekly Pork Production lost 1.9%, with slaughter coming-in at 2.132 Mln. Head. Weekly Beef Export Sales were the best in a decade on Thursday, and this did seem to slow the selling-down in the cattle market. However, Friday’s Cattle on Feed Report suggested to me that the Live Cattle could resume a down-trend in relation to the Feeders, since Marketings were lower than trade estimates, coming in at only 98%. I think this is especially disappointing if the gasoline prices continue to go higher in the next week, and given that the Easter Seasonal has concluded, we have little to rely upon in the hogs too. The biggest issue that has turned the overall meat complex weaker, in my view, is that the fuel prices going higher is likely to drive meat consumption lower–even though the summer grilling season has started to come alive earlier than normal. Therefore, if we don’t find some good support in these markets, and Commodity Trading Funds don’t stop selling by the close on Tuesday, I may have to recommend some June Bought Puts for summer marketings to clients.

Weekly Update–Corn Planting Weather

The markets have seen a big switch in the GFS Model in the past week–that to a cooler and somewhat wetter forecast as we head-into the 1st week of April. Temperatures are more normal for this time of year, so they aren’t super cold, although I do see for our area of north-central IN the temps. could dip to 37-39 degrees for April 2nd through April 6th, with highs only reaching into the mid-60s. I know that many farmers are telling me that their ground temps. are plenty warm, but I’m wondering if this won’t slow the process of planting super-early down a little bit…I hope it does for the farmers’ sake (I’m very nervous that we will “rush it” this year in trying to get the biggest yields and end-up really causing yield declines instead…this is a big reason why I’m hedging much more in paper positions for ’12 corn currently versus cash-related sales).

The western corn belt looks warmer than the Great Lakes, so we could start to see some heavy planting after the report if the rains aren’t too heavy.

Don’t forget to visit my website at www.globalanalytics.biz and sign-up for a free 2-Week Trial of my Daily-Weekly Market Update

–Mike Zuzolo, President

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options.

Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results.

Information Disclaimer-The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC

Weekly Review—GRAINS

Overview: In their totality, I thought that the grains acted very similar in price action this past week as they did after the USDA report the prior week of trade: that the wheat–once again led by both supply & demand fundamentals–was able to carry the corn higher. Whereas the USDA report lowered global ending stocks and increased US exports on the report just over a week ago, this past week we saw the same thing happen…only with Egypt, Iran, and other countries stepping-in on the demand-side, while at the same time supplies were once again being threatened by potential supply-related problems in the EU, Russia, and even here in the US Southern Plains…as weather models shifted to a more dry bias for the key growing areas of HRW. In fact, I think the continuation of friendly wheat fundamentals for a 2nd week in a row had a major role to play in the corn rally once again this past week–because, to me, since the wheat supplies are tightening globally, this means less feed-wheat competition. And I think this was confirmed by the report of US Corn Sales to Unknown Destinations finally being confirmed on Monday. In other words, improving corn exports out of the US this past week help confirm that wheat supplies are indeed getting more tight and therefore more dear to exporting countries. The net-result was a July Wheat in Chicago rallying over 23 cents, July Corn jumping over 26 cents, and most important to me, Dec. Corn Futures was able to rally back to its trading-range resistance of $5.75–up just over 15 cents on the week. I see the wheat as the major factor to this past week’s gains in corn, and therefore I see it as a major source of leadership as we head into this week’s trade. And as I’ll point-out on my weekly copy to clients-subscribers this weekend, once I get updated weather forecasts from one of my meteorological consultants, if wheat and weather suggest hedging ’12 Corn this week, I’ll make plans to do so. I recognize that Chinese Spot Corn on the Dalian Exchange is just under $10/bu. US-Equivalent, but I also would suggest that without demand “feeding the bull”, the corn is still a follower of the beans and wheat at this time, and seasonals work against them all for the next 60 days without weather aggravating planting.

Soybean Analysis: In this past week’s analysis to clients, I made a couple of observations which I think could be useful to the blog-reader: (1) That I got the strong sense from contacts in Chicago (which made sense to me based upon production experience) that beans were trailing and following the corn this past week with the intention of trying to hold-onto new-crop acres: with planting weather turning so warm so early in the season (and seed companies fretting about producers jumping into the tractor too early this year), the idea in “Chicago” is that if corn planting starts early, it will continue for a longer period of time…so that corn planters will continue to roll at the expense of potential bean acres. This bias and logic really resonates with me and helps to understand in part why beans wanted to rally this week. In addition to this, weekly export sales were very strong, and this–coupled with concerns in SA and reductions in crop size down there by popular analysts–helped underpin the front-end futures as well, in my view. (2) The second point I think that is worth noting after this week is to point-out what a fund-led market can look like when it tops, and try to compare the Gold to the potential move down likely to come in the bean complex. From the end of December to the end of February (60 days roughly), the Gold Market was able to rally over $250/ounce. Within 14 days, however, we saw over 60% of this premium pulled-out of the Gold–this, to me, is a tell-tale indicator or “footprint” of the fund-driven markets, and a wonderful example of what we in the Ag. Sector need to be vigilant for in the not-too-distant future…and I highlight beans because I continue to see the beans as the one being driven most by the Commodity Trading Funds.

a. Am I Correct In This? Reuters reported on Friday that the Soybean Futures-Options CFTC COT Data shows the Net-Long Position by Managed Money for a 6th straight week, to a 13-month high. Yes, I believe I’m correct in this assumption about who’s driving the beans higher. Managed Net Longs in Futures-Options are now at 176,091 Contracts as of the most recent CFTC data.

Weekly Review—ENERGIES

We saw a sharp break in Crude on Wednesday, as rumors filled the newswires of the US and Britain both releasing strategic petroleum reserves in order to cool prices. These rumors were never confirmed, and by the time we got to Friday–with the Middle East “pot” starting to once again go to a “boil”, the Crude was rallying sharply and back to its previous week’s close by the end of trade in New York…and this even with a surprise stocks build in the weekly oil inventory data from the EIA. In my view, the weekly chart looks dangerously close to wanting to suggest a sharp rally, with a “bull-flag” starting to show-up on the daily charts as well. Obviously, this would likely be on a supply-led fundamental move if it were to occur, especially since we are dancing at just under $4/gal. Unleaded here in Lafayette, IN as we approach the 1st day of Spring. To give you an idea of what gasoline is already doing to our economy, the CPI Inflation data released on Friday showed that the increase in gas was responsible for 80% of the surprise inflation increase–we are not, as a Global Economy, likely to be able to tolerate much more of this price increase without seeing serious damage done to our GDP in key importing countries, such as the US, China, and EU. So, with that in mind, I’ll be working on a strategy for clients-subscribers to keep a floor underneath them in the Equities Markets using S&P 500 Futures/Options.

Weekly Update–Gold & Bonds

I’ve noticed this past week the big price break to the downside in both the Gold and US Bonds–and I think it’s we address this a little and remain vigilant on these two markets, because they are very good bell-weathers to where the Financial Market Psychology rests regarding FED Policy and Global Monetary Policy. As I’ll go into more detail with clients/subscribers, the fact that these two broke so hard this past two weeks suggests strongly to me that the market is coming to grips and adapting to the increasing likelihood of the end of QE and a return to a Macro-Economy no longer kept on “life support” by the world’s central banks. Thus, the world’s equity and commodity markets will have to stand on their own two feet from here on out, in my view, and this inevitably increases the potential for negative economic data or banking problems resurfacing causing dramatic swings and adjustments in risky asset values. WE NEED MORE NOW THAN EVER ANALYSIS WHICH FOCUSES AS MUCH UPON OUTSIDE MARKET CONDITIONS AS IT DOES ON MICRO-FUNDAMENTAL SUPPLY-DEMAND.

Don’t forget to visit my website at www.globalanalytics.biz and sign-up for a free 2-Week Trial of my Daily-Weekly Market Update

–Mike Zuzolo, President

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options.

Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results.

Information Disclaimer-The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC

Weekly Review—GRAINS

Let’s Review The USDA WASDE Report Highlights From Friday, Keeping In Mind That I Will Have More Detailed Analysis In My Weekly Wrap-up To Clients & Subscribers–Feel Free To Sign-up For A Free Trial On My Website Below If You’re Receiving This By Email.

1. Soybeans received a substantial South American production cut, however, this did not translate into increased demand for the U.S. (or any other country for that matter); in fact, the USDA not only kept our US ’11/12 Ending Stocks up at 275 Mln. Bu., they also reduced Chinese Bean Imports for a 2nd month in a row–THIS IS A STRONG INDICATION THAT MY THEORY OF ELASTICITY OF DEMAND IS TAKING-HOLD; in other words, the elasticity (sensitivity) of demand to price increases is likely higher than normal because of (a) a high historical price for beans at this time of year and (b) a weakening macro-economic environment for major buyers of raw materials/commodities: The Emerging Markets such as China, Brazil, and India. As I’ve been talking and writing about for 2+ months, I think that the beans look very vulnerable both fundamentally and technically; read more about it in my copy.

2. Wheat received the best report for demand that I’ve seen in over 6 months–not only did the USDA raise US exports by 25 Mln. Bu., they increased global consumption by 3.5 MMT–lowering the World Wheat Ending Stocks back to below 210 MMT. This is still 15% more World Wheat than we had a year ago, and Major Exporters Wheat Stocks are up 12% compared with a year ago; however, this decline in ending stocks did come as a surprise to the trade and helps confirm that some of the lost corn feed/industrial use is being soaked-up by wheat. I believe this makes the report overall very supportive for the wheat: now the question will be whether the Chicago Wheat can offset what is typically a seasonal weak time period heading into late-Spring. I would suggest that in order for this to occur, the wheat technicals need to improve; for instance, a move in lead-month wheat back above $6.57 3/4–the 200-day Moving Avg. on the Daily Continuation Chart–would be very good. As we saw on Friday, with wheat rallying, the corn had much more lift in price to it–especially in the lead-month futures, where cash remains very tight in the Central Corn Belt.

3. Corn didn’t receive any good news from the USDA Report, in my view; South American production actually increased and like the beans, US corn demand remained unchanged. However, did you notice that the soon-to-expire March Contract continues to hold a substantial premium over May Futures? I think this suggests very tight supplies and the need to bid-up at both the rivers and the Gulf in the next week or two. There were rumors of the Chinese buying old-crop corn on Friday’s trade, but these rumors could never be substantiated…let’s see if they will be this week. With the report behind us, I’ve laid-out a very simple plan of action for marketing ’12 Corn in my weekly update. We must keep in mind that World Coarse Grains Stocks/Use are still historically tight at 14%, and that Major Exporters Supplies are down 15% compared with March 2011.

Weekly Review—ENERGIES

With Unleaded Gas just under $4/gal. now here in Lafayette, IN, I have to give an update to the energies. Crude continued to rally on Supply-Side fears of tensions in the Middle East as well as a potential problem in one of Saudi Arabia’s pipelines this past week. Adding-to the higher bias was the Dept. of Energy, in their Short-Term Outlook, raising ’12 Crude Demand Expectations. I have to ask myself: why would they do this knowing that Japan, the EU, China, and other key countries are slowing, not growing, more than 2011? And if you look at Japan specifically, their increased need for fossil fuels is likely directly related to nearly all of their nuclear facilities no longer generating power–that’s not demand, that’s substitution.

I would suggest that the market is trying to price-in an increasing likelihood for tensions between Israel and Iran–that escalation is the path of least resistance at this point. With this in mind, we can’t leave off the table or exclude the possibility that the old highs of $114-$117/bbl. could be hit in the short-term. Under this scenario, ask yourself how Equities and Commodities are likely to handle this. I’ll also be watching for a big low in the Natural Gas technically in the next week–stay-tuned to the copy for updates on this analysis.

Lastly, As a special reward to the readers of this blog, since I have been traveling these past 3 weeks without commentary, I would like to invite you to download free of charge the inaugural edition of my new monthly analysis/newsletter, The GCAC Global Commodity Monitor on the “Newsletter/Subscription” Tab. This newsletter is specifically focused upon helping to better understand the Macro-Micro Linkages in the Global Economy as they particularly pertain to the commodity sector. There are instructions on how you can obtain a subscription to this newsletter: it has been very well received by those who have looked-at it, and for those who have been asking me to do analysis like this because of how I look at the commodity sector from a Macro- perspective. I hope you enjoy the trial! For those of you receiving this weekly update through a 2nd party, my website is www.globalanalytics.biz

–Mike Zuzolo, President

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options.

Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.

Past performance is not necessarily indicative of future results.

Weekly Review—Favorable Export Demand Trend Continues.       

Looking at the overall market this 3 weeks (this is my first post in 3 weeks since I have been traveling across the Midwest & Great Lakes to participate in meetings associated with Price Outlook and Crop Insurance), we have seen a gradual improvement in one of the 2 key demand factors which I’ve been highlighting all winter for commodities:  Index-Fund Related Buying Demand & Export-Related Demand. Export Demand for Grains and Livestock were notable healthy, and on a general Macro-Economic level, Weekly Jobless Claims falling to 348K puts this number at the lowest level since Feb. 2008. As a result, with US Equities leading the rally and challenging 4-year highs, we’ve seen the SP-GSCI Commodity Index hit 6-month highs this past week. The natural progression of this rally–if it to be extended in commodities specifically–should be an increase in Index-Fund related buying in the coming 1-2 weeks…the sooner the better in my assessment.     

Thus, in this week’s weekly copy to clients and subscribers, I will be laying-out the analysis of this possibility, and what the possible consequences for specific commodities could follow. I’ll focus especially hard on the Grains–since this is the time where crop insurance prices for the crop year are established (Base Price), and also look in-depth at the S&P 500 Index, since it is only 20 or so points from its May, 2011 high, and therefore near a 4-year high if this level is violated. It is especially interesting and worth noting that on Saturday the WSJ reported China has announced plans to cut its Reserve Requirement to its banks by .5% effective Feb. 24th (the same day we’ll receive new USDA 2012 supply-demand data from their Agr. Outlook)–and how this move by China helps confirm that their economic slow-down could be due to factors greater than the New Year Holiday in January…and therefore more serious. To give you an idea of where this weekend’s copy heading–in terms of analytical conclusions–it would seem to me that the S&P 500 and the Soy Complex both have had strong rallies which are now at levels of risk-premium that need to be justified:  that in order for these markets to go higher, they need new fundamental/demand bullishness to “feed” their rallies. For Feed-Grains, because new export demand has been seen in a significant manner this past week, I would be expecting a lot more out of this complex…especially in relation to the Dec. Corn being able to rally against the Nov. Beans in order to maintain a higher ’12 acreage base. I would also suggest that in order for the markets to see stronger, Index-Led rallies in the short-term, we need to see the spread-trading, which has been so prevalent in the markets these past 3-5 months, be less and outright buying being more prominent in the trade.     

Lastly, As a special reward to the readers of this blog, since I have been traveling these past 3 weeks without commentary, I would like to invite you to download free of charge the inaugural edition of my new monthly analysis/newsletter, The GCAC Global Commodity Monitor on the “Newsletter/Subscription” Tab. This newsletter is specifically focused upon helping to better understand the Macro-Micro Linkages in the Global Economy as they particularly pertain to the commodity sector. There are instructions on how you can obtain a subscription to this newsletter:  it has been very well received by those who have looked-at it, and for those who have been asking me to do analysis like this because of how I look at the commodity sector from a Macro- perspective. I hope you enjoy the trial!

For those of you receiving this weekly update through a 2nd party, my website is www.globalanalytics.biz –Mike Zuzolo, President

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options. Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.Past performance is not necessarily indicative of future results. Information Disclaimer-The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC

Weekly Review-Much News & Similar Overall Trend.

It seemed as though a lot of extra data and information hit the markets this week as I was logging 974 miles in traveling this past week, doing very interesting and well-attended meetings and panel discussions (My thanks to all of those who sponsored the meetings and also to those of you who took the time to come-out and visit) Commodities in particular seemed to get a lot of extra information as well this week: yet, as I look at my notes from the last 5 trading days–and the market price-action in many commodities–generally speaking, we had yet another week where early-week strength from strong fundamental news gradually gave-way to late-week profit-taking and more neutral to negative fundamental information hitting the markets. Agr. commodities were a little different in terms of price-action, it seemed to me, and a bit of an exception to the general weakening at the end of the week, although we did see some light profit-taking in wheat and beans on Friday.  When looking at their weekly closes, Wheat in lead-month futures was up 6%, corn up 5%, and beans up 3%: a very good week, with wheat especially noteworthy because it was able to move back above its pre-USDA report levels from mid-January. Other than the outside market fundamentals mentioned below, wheat also received more supportive supply-side news regarding Europe, Russia, the Ukraine, and Kazakhstan–and I would suspect some of this news wasn’t expected by the markets. Cattle also saw a similar thrust to the upside–Wednesday hitting close to $126/cwt again, which has been the top-end for the whole year in Feb. Live Cattle Futures. [More on Friday's cattle report by USDA and what it could mean for the markets in my weekly update to clients & subscribers]

Early-on, the most important/market-moving news we received, I think, was the FED policy announcement that they were looking-to keep interest rates historically low all the way into mid-2014 if they saw the need…with the idea that stimulating the economy to get jobs back was Priority #1. This FED announcement seemed to cause the financial and commodity markets to press the “Risk-On Button”, with Gold a noted mover to the upside and clearing $1725/ounce in lead-month futures…the best levels since early Dec. The FED also updated their 2012 economic projections for the US compared with their estimates from November in a separate report this week, which I’ll be covering in the weekly update as well.

What Was The Especially More Negative/Bearish Noteworthy News?–Unfortunately, as Has Been the Case for some weeks, Primarily Macro-Fundamentals: I’ll just go down the list.

1.  Italy & Spain were both downgraded by Fitch on Friday, with my noting that Spain’s updated Unemployment level of 23% is especially serious and potentially damaging to the EU economy

2.  At the World Economic Forum in Davos, Switzerland, a very down-bean assessment of Europe (and to a lesser degree Asia) was seen. In fact, Britain’s Chancellor remarked that Europe has “weeks to act” in order to avert something much more serious.

3.  Great earnings by Caterpillar mid-week were offset partially by rougher numbers for Proctor & Gamble; this seemed to match-up nicely with the 4th Qtr. US GDP coming-in below expectations, at 2.8%.4.  Japan continues to fight Deflation based upon their most recent consumer data issued this week.

Therefore, As I will explain in my weekly copy, all-in-all, I would expect this coming week to be more difficult to “feed the bull” in equities and the financials, and also potentially be more difficult to “feed the bear” in the Dollar–which dropped to a 6-7 week low this week.

How Agricultural Commodities Are Likely to Continue To Trade In the Upcoming Week:  On the supply-side, weather looks a little more negative to prices:  as rains in the southern plains & in Argentina look to be a little more likely in the 5-7 day outlooks this weekend. For the demand-side, packer demand for livestock and export demand for feed-grains (not beans) were really strong and I am hopeful this will continue into the end of January. It’s interesting to note, having said that, that the CIF/Gulf Basis for corn is at a 10-year high for this time of year. In addition to this, the Univ. of IL did a study of the South Central IL Basis for Spot Corn and found that for this time of year, it’s not been this high in 37 years.            This strongly suggests to me that with historically-tight basis for corn, it may be a good idea for producers to lock-in their basis on ’11 sales at this time and maybe leave their futures-side open. {A word of caution on this, however: if you are reading this blog and are not a client or subscriber, I’m not recommending this to you; I want producers who take my recommendations to be educated on the subject and they really can’t be in my view if they are not already a subscriber or a client.}

–Mike Zuzolo, President

IF YOU LIKE WHAT YOU’VE READ HERE, CONSIDER GOING TO THE SUBSCRIPTION PAGE AND SIGNING-UP FOR MY DAILY/WEEKLY COPY. CHARTS AND MUCH MORE IN-DEPTH ANALYSIS ON THESE ISSUES WILL BE FOUND TO HOPEFULLY HELP YOU MAKE BETTER DECISIONS RELATED TO COMMODITIES. ALSO, BE SURE TO CHECK-OUT MY CALENDAR OF EVENTS TO SEE IF I MAY BE COMING TO YOUR AREA.

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options. Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin. Past performance is not necessarily indicative of future results. Information Disclaimer-The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC

GCAC WEEKLY MARKET OVERVIEW Weekly Review—Signs of Life Appear In Commodities. 

With the Dollar breaking about 2% from its highs and the S&P 500 moving to new 7-month highs, and back above the 1300 level, the commodity sector started to see a glimmer of the “Risk-On” trade again this past week. I found this to be a very supportive feature in light of the early-week news of downgrades in Europe and renewed fears of a Greek debt-default. With the outside markets supportive, commodities such as live cattle were able to make new all-time highs, soybeans were able to close up nearly 30 cents on the week, and Gold has flirted-with mid-December highs of $1671.80/ounce (recall at the end of Dec, we were down to $1525/ounce). Even copper, the recent “ugly duckling” of the metals market, has now hit levels not seen since last August—having run-up 12% in just w little over one week. Most of this strength in commodities can be traced-back to a steep 2%+ decline in the Dollar in the last week, in my view.

As such, for commodity sectors such as hogs and grains, I think it’s important that this elevated price in some key outside markets now bring-forth increased Index-Fund investment into complexes such as some sectors such as Agriculture. Natural Gas, as a specific commodity, has been especially hard-hit, dropping to 10-year lows this week due to continued bearish sentiment surrounding a warm winter, no real cold in 30-day and 60-day weather models released by NWS this week indicating continued warmer than normal temperatures through February for most of the country. Excluding these Micro-Fundamental challenges in supply-demand, the resurgence of the “Risk On” trade this past week is something I would like to see develop again next week—especially for those commodities still underperforming since last Fall. And one of the expectations building in the trade this past week was the idea that because China’s economy is likely floundering, the Chinese Govt. will bring-back some form of monetary policy easing next week ahead of the Chinese New Year. (China’s PMI as traced by HSBC was down a 3rd straight month, and its 4th Qtr. GDP was scrutinized very heavily by many economists as having slowed too much to handle a property bubble) It is here that the market needs to see action next week in order to continue to build upon and increase the “Risk On” mindset.

Grain Focus—Markets Found Demand & Funds…Can They Keep Them?  I will be starting my winter seminar circuit this week; for the next 45 days, I will be traveling across the Midwest, talking about the prospects for the ’12 Crop Year, and how best to try to handle such a multitude of factors affecting the prices for the crops. You can see my calendar on my website in case I’m coming to an area near you. The major point that I plan to stress at these meetings is this:  IT IS IMPERATIVE FOR THE PRICES IN 2012 THAT DEMAND—BOTH INDEX-FUND DEMAND AS WELL AS END-USER/EXPORT DEMAND—RETURNS TO THE MARKET BEFORE WE PLANT THE CROP. This is because if the northern hemisphere crop gets planted on-time, and private analysts across the globe are correct about 5-7 Mln. more planted acres for principal crops, it would seem logical to me that the trade would then be prepared to reduce the amount of risk-premium held in the new-crop futures…with the idea that supplies will once again be adequate. Especially if demand doesn’t return. As I said at a meeting in Pontiac, IL this past week: “We haven’t lost our opportunity to sell rallies in 2012, but without springtime planting delays, we’ll have fewer chances after Spring in my view.” And for this market rally to occur, because of the supply-problems in South America continuing, I would have to think that this potential demand-shift back to the buy-side may have shown itself this past week:  for both the index-funds and especially for the export/end-user demand. In my view, the potential for both end-user demand + index fund demand coming-in on a longer-term basis, and because corn, beans, and wheat all closed higher on the week, I’ve recommended to all livestock clients to get their feed needs for corn and meal booked for Jan-May. There’s lots more to write about, but I’ll save that for subscriber and clients…please consider signing-up today with a subscription to the newsletter. The type of independent analysis I do is something that I feel will help you make better, more confident decisions for your operation—whether you’re buying grain or selling it.

–Mike Zuzolo, President

IF YOU LIKE WHAT YOU’VE READ HERE, CONSIDER GOING TO THE SUBSCRIPTION PAGE AT WWW.GLOBALANALYTICS.BIZ AND SIGNING-UP FOR MY DAILY/WEEKLY COPY. CHARTS AND MUCH MORE IN-DEPTH ANALYSIS ON THESE ISSUES WILL BE FOUND TO HOPEFULLY HELP YOU MAKE BETTER DECISIONS RELATED TO COMMODITIES. ALSO, BE SURE TO CHECK-OUT MY CALENDAR OF EVENTS TO SEE IF I MAY BE COMING TO YOUR AREA.

General Risk Disclosure—There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options.

Options Risk Disclosure—The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin. Past performance is not necessarily indicative of future results.

Information Disclaimer—The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction.

Copyright, 2012 Global Commodity Analytics & Consulting LLC