Reporting season continued today as J.P. Morgan’s quarterly report showed a $4.8 billion dollar profit

INTERNATIONAL FUTURES GROUP

LET US SHOW YOU THE FUTURES

LEE A. GAUS, STEVEN D. ERDMAN, THOMAS E. FRITZ

2010-07-16

The major news in the commodity markets on Thursday centered on weather in the Former Soviet Union, parts of Europe and threats of hot extremely hot weather moving into parts of the U.S. Midwestern grain belt. For that discussion refer to the grain oilseed sections below.

Reporting season continued today as J.P. Morgan’s quarterly report showed a $4.8 billion dollar profit well above street estimates. Even this was considered somewhat disappointing as the improvement came from a decrease in losses from loans and not from trading profits. Google issued its quarterly report after the close reporting a profit of $6.45 a share, below the $6.52 a share that was expected. The SEC reached a settlement with Goldman Sachs for $550,000,000 for which we say; "good trade Goldman-Sachs so what was the net profit after the fine".

It appears as if China has slowed its growth as official word from China puts the quarterly growth at 10.3% down from the first quarter growth of 11.9%. For the time being it appears as if the Chinese have been able to slow the increase in property values while not derailing their general recovery. It may be worth reading the article carried in Wednesday’s New York Times discussing underlying concerns with Chinese Banks and stability of loans made.

The U.S. Dollar closed under pressure in the face of weak economic data and what appears to be a slowdown in the growth of the U.S. recovery closing at 82.743, down .855 for the day. Initial jobless claims were lower than expected dropping 29,000 down to 429,000 which is the lowest since August 2008. Some of the drop is being credited to seasonal factors. The Fed reported that the industrial production rose 0.1% in June but manufacturing fell 0.4% the first drop in three months.

CORN

It’s all about the weather and the developing forecasts! Corn futures moved into new high ground for the current move, the best prices we have seen the first week of March, with the best closes we have seen since mid-March. Weekly export sales were deemed good. We have a great deal of old crop left to ship and the exporters need quality # 2 Yellow Corn; not # 3 Yellow Corn. The CBOT allows # 3 Yellow Corn to satisfy delivery specifications because of that there is not a spread trade situation here. The question becomes can the exporter originate enough #2 Yellow Corn and move this much corn as time is getting shorter?

Old crop corn continues to move on the rallies and the basis remains steady to strong. The rally in the new crop has attracted some new hedging but not as much as one might expect. There is still a great deal of good looking new crop corn out there. The issue is if an extended hot and dry period does develop it will impede kernel filling and further stress the corn that was planted late due to the big June rains. Monday’s Crop Progress report is expected to show close 60% pollination. Open interest is rising due to the new speculative participation. In the end it will come down to the developing weather. This afternoon rains popped up in east central Illinois and moved into north central Indiana, radar maps are suggesting some pretty good rains.

Many private forecasters are suggesting there is the potential for a hot and dry scenario to develop beginning mid-next week. If the hot dry situation develops the issue becomes the length the situation lasts. Forecasting weather for 3-5 days out is one thing, after 7 days out it can be anyone’s best educated guess. The National Weather Service is recognizing "hot & dry" developing in the southwestern reaches of the Corn Belt (Kansas) but nothing too extreme elsewhere, at least not to the extent of the private weather services.

The technical looks extremely strong, but this is a weather market and we live and die every forecast between tonight and Friday’s close. The futures price is modestly overbought at present values. Buying a combo of cheap options (volatility has increased noticeably) seems the best way to move into the weekend.

Daily Support & Resistance

Sept Corn: $3.84 - $3.98 (?)

Dec Corn: $3.95 - $4.10 (?)

SOYBEANS

Weekly export sales were great but the primary focus is now the developing weather. Will a hot dome set itself up over the Midwest later next week? Bull spreads did lose some ground but the old crop beans’ futures price still performed quite well on their own. The U.S. bean basis is mixed in the interior, still rather firm for export. If the weather does not turn hot and dry new crop futures will fall, old crop will not. If the weather does turn hot and dry the new crop futures price will perform better compared to the old crop, but old crop will still perform. Thursday’s action still had old crop beans 21 ½ cents higher; the best prices since the second week of January. Old crop still appears to be the safest play for further upside price action because of its demand base and is not susceptible to the possible changes in the forecasts.

The technical look is great across the board bull spreads honored suspected support levelsdespite the focus being in new crop. Weather markets are emotional and can/will change without a moment’s notice. The bottom line is how will the weather develop going forward. The Sunday night/Monday updated forecasts will go far in dictating where prices go in the near term. Friday’s positioning is long cheap puts and calls; being ready for whatever the forecasters throw at us.

Daily Support & Resistance

Aug Beans: $10.05 - $10.31

Nov Beans: $9.74 - $10.00

Aug Meal: $303.00 – $311.50 ($314.50)

Dec Meal: $284.00 - $296.50

Aug Bean Oil: $38.10 - $38.75

Dec Bean Oil: $38.80 - $39.75 　　

WHEAT

The attitude is that the EU and the FSU are still losing production/crop size which at last guesses put the loss at 20%. The trade is wavering struggling to determine if the increases in U.S. production will offset the losses in the EU and FSU. Only time will tell on this one; the Australian crop still appears to be in good condition. Weekly export sales were not note worthy; so far we are not seeing any indication that the U.S. is getting a better share of the World export market. The speculators are in control and they will continue to be in control until we have a better understanding of how big the losses in the aforementioned areas total.

Basis levels for US wheat have been under pressure because the rally has attracted some pretty decent movement. The guys who have opted to store wheat, at least some, are thinking about moving it given the rally in the futures’ price, especially in the Soft Red Wheat sector (there appears to be a lot of low quality Soft Red Wheat out there and the rally in the futures price helps offset the deep discounts). The futures’ price action has become the most emotional we have seen in many months. Is it justified; we have the number one international crop that was projected to be extremely bearish for a long time and all of sudden it may not be that bearish after all. The wheat market has caught a lot of people, specs and end-users alike, leaning the wrong way.

The technical look is still very positive even though yesterday we suggested the values were over done. We learned many years ago never stand in the way of emotion and the wheat market has a definite history of being emotional. Even soybeans are having a tough time staying up with this market. Wheat options are not the most liquid vehicles out there but as of this writing, for the fundamental bears, it’s the only way to approach this market.

Daily Support & Resistance

Sept Wheat: $5.75 - $6.08

Dec Wheat: $6.04 - $6.32

A word to the Wise

Seasonal Risk Disclosure--Seasonal demand & News are always factored into all Commodity markets price at any given time. There are no advantages being implied in the news & information contained in our material.

Material Statements of Opinion --All statements of opinion are based on information are based on information that is beleived to be accurate but is not gauranteed. There are no advantages being implied in the news & information contained in our material.

Past performance is not indicative of future results.　 The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time.　 This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed.　 There is no warranty, expressed or implied, in regards to this information for any particular purpose.　 There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors.　 Investors should consider these RISKS 　 and evaluate their suitability based on their financial conditions.　 No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL.　 This information is provided freely and is NOT in the capacity of a trading advisor.　 NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information.　 Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.