The U.S. Dollar traded higher once again today closing 82.929

INTERNATIONAL FUTURES GROUP

NEW WORLD TRADING-CHINA

LET US SHOW YOU THE FUTURES

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

2010-07-21

The U.S. Dollar traded higher once again today closing 82.929, up .224 for the day. The Euro got everyone excited trading as high as 1.3029 before take a tumble and closing .0065 lower finishing at 1.28930 for the day. September Crude finished near the highs of the day closing at $77.58, up .68. We again found the commodity markets to be in search of new news to trade, or maybe just growing cautious as we approach July 23, and the release of the European stress test report. We continue to believe that the report may have a greater tendency to do more harm than good. If the report sounds overly positive no one will believe it, and if the report is even slightly worse than expected the trade may over react as they did during the Greek debt crisis. We have become a little suspect ourselves given the pre-report assurances that the vast majority of the banks will easily pass. We became especially suspicious yesterday when a Greek official predicted that the Greek banks would pass without a problem. Were they the only banks in Europe that didn’t lend money to Greece?

Quarterly reports continued to be released today and it was not one of the better days. Goldman Sachs net income plunged 83%, but one has to take in account the fine paid which it paid to the government. It is interesting to note that many of the banks disappointed the market because of a drop in trading income. To make matters worse neither the markets not the banks have a concrete idea how the new regulations will impact their earnings from trading.

As expected new house and apartment construction took a big drop. There was a great quote from M. Cary Leahey, a senior economist at Decision Economics, "It is hard to imagine confidence recovering to healthy levels until the housing market experiences much less distress".

As obvious as that conclusion seems to be, it also seems to get lost when people look for an improvement in the economic growth rate.

So we will repeat our conclusions from last nights letter, "We hate to side like a broken record but we continue to view the commodity market much the same as we have the last several weeks. Grains will be impacted by weather and rumors of weather, the U.S. Dollar, Gold and U.S. Treasuries will find support under the market every time the investing public loses confidence and seeks safety. Crude in our view will continue to be range bound. We continue to believe that Sugar will work higher, and certain other markets will provide opportunities in both option strategies and inter and intra market spreads."

Keep in mind that Fed Chairman Bernanke testifies tomorrow on Capital Hill.

CORN

Corn futures followed through to the down side as forecasts continue to suggest good growing weather for much of the US Corn Belt for the foreseeable future. Since the majority of the US corn crop has or will pollinate under good conditions it makes one think that the U.S. is going to have a good sized corn crop even with the lower than expected acres. We continue to see farmer selling of old crop corn which is leading to the sagging spreads. Basis levels continue under pressure. Open interest has yet to reflect any appreciable liquidation despite the futures price losing nearly 24 cents since its high of last Thursday. As of this writing it is hard to dispute the USDA’s projection 163.5 bushels per acre. We believe demand for US corn will be better compared than what the USDA has projected but as of this writing we are trading supply, not demand. Without a problem with the weather futures will be hard pressed to stage a rally much better than the $4.00 level unless we start trading demand. China weather has improved and crop conditions should be improved. This spring we were trying to trade the arrival of new Chinese demand for US corn. We think there is still the possibility to see Chinese demand in the coming marketing year but it is contingent on the size of their corn crop. The US can still see better demand for its corn given the recent talk around other parts of the World having problems with their respective coarse grain production. The bottom line, if growing conditions stay good US corn prices will decline into the harvest season prior to mounting a demand led rally.

The technical look suggests corn prices honoring minor support levels at about $3.85-$3.86 (December). The inability, however, of the trade to reject those lows suggests lower prices remain to be seen over the near term.

Daily Support & Resistance

Sept Corn: $3.69 - $3.79

Dec Corn: $3.82 - $3.93

SOYBEANS

Beans sagged early on Tuesday but came back to the plus side late in the day because of bull spreads involving old crop and rebounding bean oil prices. The strength in bean oil is coming from hot premiums in South America (demand) which in turn suggests U.S. bean oil origin is once again becoming close to being price competitive. Basis levels for U.S. beans are soft but steadying up. The export market clearly shows the need for beans. Our information suggests the US crusher has about a 2 to 3 week supply of beans. If the crusher has that kind of supply the strength in old crop beans will not be as acute as we saw in July since only the exporter is caught being short for now. Do not construe this as bearish for old crop beans; old crop beans still have room to move higher as the exporter still has to find old crop beans and that won’t be easy once the U.S. producer realizes that old crop beans still have life to them. Once the processor runs out of those beans we could be close to new crop beans coming out of the Delta. I still think the Sept/Nov spread is a sale against 20 cents.

Current weather and forecasts will act as a heavy weight on new crop beans. As long as the weather cooperates new crop beans will have a tough time matching last week’s highs. If the short term forecasts are accurate we can probably figure on an improvement in conditions for next Monday. Bean oil led the rally late Tuesday – we are not fans of bean oil led rallies in soybeans. The Census Bureau will give us new crush data Thursday night. The last NOPA report showed some pretty big bean oil stocks – will the Census Bureau concur?

The technical look suggests old crop beans are once again divorcing themselves from new crop. We just don’t see August beans staying down. Their strength will buoy new crop to a certain extent but not enough for new crop beans to resume the trend they say before the weather moved in. Bottom line – buy August beans on breaks to suggested support levels – sell new crop beans on rallies to suggested resistance levels. I’ll ask the question once again – are September beans old crop or new crop?

Daily Support & Resistance

Aug Beans: $10.04 - $10.27 (?)

Nov Beans: $9.66 - $9.83

Aug Meal: $298.50 – $306.50

Dec Meal: $280.00 - $285.50

Aug Bean Oil: $38.15 - $38.85

Dec Bean Oil: $38.85 - $39.50 　　

WHEAT

European prices appear to be in a consolidation or correction phase. Egypt selected 120KT of Russian origin wheat (so much for Russia’s possible moratorium on exports) in an over night tender. Given the fact that Russia is still selling wheat begs the question, "Just how decimated is the Russian wheat crop?" Basis levels for US wheat continue to be under pressure as cash wheat is moving almost freely. We are hearing that elevators in the spring wheat areas are still full with last year’s crop so storage space in those areas will be at a premium when harvest starts.

Current weather and forecasts suggest US spring wheat will continue to develop in fine form. The August production data will almost certainly show another increase in crop size. How much a US increase in production offsets declines in foreign production will be a hotly debated subject between now and August 12th.

The technical look has daily momentum data rolling over into a sell signal. Shorter term technical data suggests a minor up flagging effort off of Tuesday’s early lows. Since the U.S. wheat market has been a follower for most of the recent rally it will continue to take its cue from wheat markets elsewhere. That means a quiet trade for much of the night, at least up until when the European market opens at about 2:00AM central time in the U.S.

Daily Support & Resistance

Sept Wheat: $5.65 - $5.84

Dec Wheat: $5.95 - $6.14

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.

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