The U.S. Dollar traded higher today with the

INTERNATIONAL FUTURES GROUP

LET US SHOW YOU THE FUTURES

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

2010-07-20

The U.S. Dollar traded higher today with the September U.S. Dollar closing marginally higher at 82.705. Technically the U.S. Dollar Index is finding support as it closes in on the 200 day moving average. Fundamentally Moody’s cut of Ireland’s credit rating which Standard and Poor’s had announced previously, and the re-emergence of Hungarian rumored credit problems also supported the dollar. Other than the Agricultural markets reacting to the ever changing weather outlook commodities proved to be a fairly featureless day. Crude Oil did have some significant movement which we believe was related to the August Crude Oil contract expiring tomorrow and yet at the end of the day September Crude Oil closed up .52 at $76.90. If you recall we issued a special notice on the potential for higher Sugar markets several weeks ago and Sugar continued to rally on Monday closing at 17.61 finishing .51 higher for the day.

In our view the commodity markets continue to watch the equity markets for underlying direction. Quarterly reports continue to be impressive on the surface but analysts remain skeptical, questioning the impact to the third quarter reports given the slow down in the growth of the U.S. economy. The National Association of Home Builders reported that its confidence index declined to 14, the lowest since the first quarter of 2009. We continue to wonder why these projections seem to surprise anyone. With another 1,000,000 homes projected to be foreclosed this year, with as many a 3,000,000 already foreclosed and either on the market or in the shadow market we find that it amazing that the index is as high as 14. It just seems logical to us that there will be a natural progression of events as this economy recovers, people have to get back to work, confidence among the U.S. consumer has to increase, banks need to regain their confidence to lend, then there will be a drastic reduction of foreclosed homes on the market, and then there will be greater demand to build new houses.

We hate to sound 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.

CORN

Welcome to the wonderful world of weather forecasting. The big & hot dry that some were alluding to late last week for late this coming week is not currently being forecasted. Adding to that is the call for some pretty big rains for this week. China is receiving very goods rains in its major corn producing areas (maybe too much when it is all over later this week?). The net result of all this was corn prices down 10 – 13 cents with the nearby leading the way lower. Basis levels are soft from recent movement as well as the idea of more to move as more and more producers are seeing what appears to be successful pollination. The trade is up in the air as to how the USDA will rate the US corn crop this PM; I have heard slightly lower ratings to unchanged to slightly better ratings.

US Corn Condition & Progress

18 State Average – 72% GE (-1%) vs. 71% year ago

Silking – 65% vs. 30% year ago vs. 47% ave

Dough Stage – 8% vs. 4% year ago vs. 7% ave

Iowa – 69% GE (-2%), 62% silking, 0% dough

Illinois – 67% GE (+2%), 89% silking, 18% dough

Nebraska – 84% GE (-2%), 60% silking, 2% dough

Minnesota – 90% GE (+2%), 59% silking, 0% dough

Indiana – 62% GE (unch), 81% silking, 0% dough

Kansas – 70% GE (-3%), 76% silking, 14% dough

S. Dakota – 73% GE (-2%), 18% silking, 0% dough

Crop conditions maintain "status quo". Given this week’s weather I have to think next week’s condition report will be no worse than this one. 65% of the nation’s corn is now in the pollination stage with many other states further along. With this in mind it will be difficult to turn the flat price back higher to resume the recent uptrend (unless weather does a 180 degree turn). The best the market will do is to try and consolidate as it digests World crop developments and different demand scenarios for the coming marketing year.

The technical look shows decent looking support down at the $3.81 level. Given crop conditions and this week’s weather I’m not there is much out there to keep us from going to that level in relatively short order. $4.00 has once become a formidable looking hurdle on the upside.

Daily Support & Resistance

Sept Corn: $3.74 ($3.70) - $3.88

Dec Corn: $3.86 ($3.81) - $4.00

SOYBEANS

The hot & dry that some had been alluding to later this week and beyond is no longer in the forecast. Temps are stilled called to be above normal but not to the extent some had called for late last week. In addition a great portion of the US soybean growing areas are forecasted to see good rains over the near term. It appears the only areas that will see the previously forecasted hot & dry are areas of the Delta. Bull spreads are working involving old crop just because old crop beans are still tight and tough to originate. Basis levels, however, are under pressure as last week’s rally did shake some old crop beans loose. China continues to buy old crop beans whether they are from SA or the US. Like corn the trade is quite mixed on their views of crop conditions; I have estimates of slightly better vs. slightly easier. Forecasts are such that moving forward that good conditions should prevail in the heart of the US soybean growing region.

US Soybean Condition and Progress

18 State Average – 67% GE (+2%) vs. 67% GE year ago

Blooming – 60% vs. 41% year ago vs. 56% ave

Podding – 18% vs. 0% year ago vs. 15% ave

Iowa – 69% GE (unch), 70% blooming, 19% podding

Illinois – 62% GE (unch), 64% blooming, 15% podding

Minnesota – 84% GE (+1%), 63% blooming, 7% podding

Missouri – 46% GE (+2%), 35% blooming, 9% podding

Nebraska – 77% GE (-3%), 51% blooming, 7% podding

Indiana – 62% GE (unch), 65% blooming, 24% podding

Ohio – 59% GE (+1%), 64% blooming, 15% podding

Arkansas – 45% GE (unch), 69% blooming, 39% podding

Louisiana – 56% GE (+1%), 86% blooming, 66% podding

Mississippi – 59% GE (+5%), 92% blooming, 77% podding

Overall the soybean crop appears to be doing pretty well. This week’s weather will continue to help. Going forward the forecasts look okay for continued decent crop development. The current forecasts do suggest the Delta soybean area may get stressed as we move forward. Is the Delta crop enough to provide support to the entire new crop price structure? As of this writing I don’t see the product markets offering much help in the way of support. The bottom line – as long as the weather cooperates rallies are meant to be sold.

The technical look suggests the "shine is off of the rose". Cooperating weather will provide the resistance. The mid-high $9.70’s (November) is setting itself up as decent short term resistance. Bull spreads involving old crop should be able to perform. Here’s a question for you, "Is September old crop or new crop?" I think we can get away with selling the Sept-Nov spread as close to 20 cents over as one’s patience will allow.

Daily Support & Resistance

Aug Beans: $9.99 - $10.19

Nov Beans: $9.60 - $9.88

Aug Meal: $300.00 – $3.08

Dec Meal: $281.00 - $289.50

Aug Bean Oil: $37.50 - $38.35

Dec Bean Oil: $38.25 - $39.15 　　

WHEAT

Flat price wheat succumbs to selling pressure from the corn and soy markets. There is still a great deal of concern as to production in the EU, Russia and the FSU as weather in the latter two areas is still hot & dry. The weather stress in the EU has been alleviated some over recent days. The concern over foreign exporters’ production, however, is lending support on hard breaks such as we saw on Monday. For most of last week the US wheat futures’ markets took their cue from the action in the European wheat futures’ markets and that will probably continue. In lieu of the horror stories we are hearing out of Russia the word on the street is don’t be surprised if they place a moratorium on exports until more is known about their crop size. The other side of that story is that given their large crops of the past two years they may still have grain to export later on in the season. Word out of Argentina is that they may have suffered some freeze damage over the past weekend on some of their new crop. The western Australian wheat areas are forecasted to move into a dry pattern over the near term. The US spring wheat crop is expected to maintain its great condition.

US Winter Wheat Harvested – 71% harvested vs. 69% year ago vs. 74% ave

US Spring Wheat Condition & Progress

6 State Average – 82% GE (-1%) vs. 73% GE year ago

Headed – 87% vs. 80% year ago vs. 91% ave

Crop conditions are almost old news here. We know the US has a good crop and should be able to offset some of the foreign producers’ losses; just how much remains an unknown. Until we have a better handle on that "unknown" prices will try and maintain the rally; in other words scale down buying will be featured. If the rest of the grain sector declines wheat prices will be hard pressed to further the current rally. My bias is to sell rallies on 50% retracements to last weeks’ highs. As of this writing $5.90 (September) looks like decent short term resistance.

Daily Support & Resistance

Sept Wheat: $5.71 - $5.90

Dec Wheat: $6.01 - $6.20

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.

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