NEAR-TERM MARKET FUNDAMENTALS: Several factors suggest that the soybean market could struggle to add much more premium over the short-term including a less threatening weather outlook, news of a slowdown in unloading grain shipments in China and news of a much larger than expected net long position from fund traders in the COT reports. At the port in Dalian China an explosion at an oil pipeline has caused the closing of 80-90% of the shipping berths including iron ore and Agricultural imports. South Korea is tendering to buy 25,000 tonnes of non-GMO soybeans. Argentina crush in May jumped to 4 million tonnes, up 11% from last year. The market continues to find support from fears of stressful weather during the sensitive pod-setting period for US soybeans in early August. Traders are also concerned with the potential sharp drop in production of higher oil-yielding crops in Canada and Europe and from concerns for the sunseed crops in Russia. November soybeans posted a new high for the move early on Friday only to close lower on the session. The market ran out of buyers on the early advance and November soybeans pushed lower on the day before firming into the close. This came amid firmer bids for cash soybeans at the Gulf which traders said was in response to strong demand. While China is still a strong importer, spot basis levels in the US fell 10-15 cents in many locations due to increased producer selling. Evening up ahead of the weekend was considered a major feature on the day with some light to moderate activity in the old crop/new crop soybean spreads with old crop gaining on new crop on the day. Some forecasts call for hot and dry weather to last through the end of July and into early August, which was considered supportive on a day marked by profit taking. The weather forecast to start this week is far less of a concern for the soybean crop as the crop can do well in a hot and wet environment as compared with concerns for a hot and dry week ahead. The northern Corn Belt cools down for a few days and then temperatures jump back to the mid-90′s later this week. The ridge moves across the country in the next few weeks but there appears to be plenty of rains for the delta and southern half of the Corn Belt to see the potential for improving crop conditions ahead. Traders see a 1-2% decline in crop ratings tonight. The Commitments of Traders Futures and Options report as of July 13th for Soybeans showed Non-Commercial traders were net long 59,789 contracts, an increase of 58,094 contracts. Commodity Index traders held a net long position of 175,212 contracts, an increase of 5,932 contracts for the week. For meal, Non-Commercial traders were net long 60,185 contracts, an increase of 12,212 for the week. The Nonreportable traders were net long 15,102 contracts, an increase of 2,997 contracts for the week and this pushed the Non-Commercial and Nonreportable combined traders net long position to 75,287 contracts, up 15,209 contracts for the week. For Soybean Oil, Non-Commercial traders were net short 18,108 contracts, a decrease of 18,174 contracts for the week. The Nonreportable traders were net long 263 contracts, an increase of 7,367 contracts on the week. Commodity Index traders held a net long position of 104,171 contracts. This represents a decrease of 2,077 contracts in the net long position held by these traders.

TODAY’S GUIDANCE: A much wetter forecast for the drier areas of the US along with the COT report which showed aggressive buying and a hefty net long position from fund traders are forces which could pressure the soybean market over the near-term. Farmer selling is on the rise and prices are favorable and unless the rains in the forecast for the coming week do not materialize, the market may be close to a near-term peak. Some traders think there is too much rain in the forecast but crop conditions are likely to improve this week and next week if the weather comes in as expected to start this week.

TODAY’S MARKET IDEAS: Trend-following fund traders were aggressive net buyers of 57,660 contracts for the week to shift to a net long position of 34,057 contracts which is higher than expected. Selling resistance for November soybeans comes in at 986 1/2 with key resistance at 993 3/4. Look for set-back to at least 955 early this week. December oil support is back at 38.40. December meal looks vulnerable to a set-back to near 278.60 with selling resistance today at 289.20.

This content originated from - The Hightower Report.

The USDA reports this morning were considered bearish with the market called 8-12 cents lower on the opening. Quarterly stocks as of March 1st came in at 1.27 billion bushels which was about 65 million bushels more than traders expected. Soybean planting intentions came in at 78.098 million acres as compared with 78.5 million expected and 77.5 million last year. While the plantings number was slightly below expectations, the hefty stocks number eases traders fears of tightening ending stocks for old crop. This also means that beginning stocks will be about 60 million bushels above trade expectations.

PRICE OUTLOOK: Traders see the stocks number as bearish as this will boost both old crop and new crop ending stocks estimates for upcoming supply/demand reports and we could also see adjustments higher in world ending stocks which are already at the second highest in history. November soybean resistance comes in at 930 3/4 with 895 as initial downside objective and then 880 1/4.

Corn

The USDA planted acreage and March 1st stocks reports were considered bearish with the market called 3-5 lower on the opening. Planting intentions came in a bit below expectations at 88.798 million acres as compared with trade estimates near 89.2 million and 86.5 million last year. However, the need for the extra acres may come into question with the bearish grain stocks numbers. Stocks came in at 7.694 billion bushels which was near 200 million bushels above trade expectations and a whopping 740 million bushels above last year. The stocks number should lead to a sharp revision higher in old crop ending stocks in the next supply/demand which means a higher beginning stocks number for the 2010/11 season.

PRICE OUTLOOK: The report is clearly bearish with resistance for December corn now at 385 with 370 3/4 as initial downside objective. July corn looks set for a further break to 356.

Wheat

Today’s USDA reports were considered negative across the grain complex. In wheat, acreage was higher than expected, but quarterly stocks came in slightly below trade expectations. Traders are looking for the wheat market to open 2-4 cents lower. The USDA pegged all-wheat acreage at 53.8 million, about 500,000 acres above the average trade estimate. Last year’s planted area for all-wheat was 59.133 million acres. Spring wheat area was pegged at 13.9 million acres this morning, about 500,000 above trade expectations. Winter wheat was also bumped to slightly above trade expectations at 37.7 million. Stocks as of March 1st were 1.352 billion bushels in wheat, about 15 million below trade expectations. This compares to stocks of 1.040 on March 1st, 2009.

PRICE OUTLOOK: The overall negative tone of the reports could pull May wheat back down to new contract lows. If so, this would mark the fifth day in a row that May wheat has made new lows. The question then may be whether trend-following funds will add to their near-record large net short position at these price levels, or whether they will be more interested in covering shorts on weakness.

This content originated from - The Hightower Report.

An improved global macro economic outlook and a slightly weaker US Dollar appear to have given the copper bulls the initial edge today. With the Chinese on an extended holiday and the copper trade seeing a very minor labor orientated supply side threat overnight, it is clear that the bull camp has more ammunition than the bear camp. However, the copper market did see some negative supply side news late last week and with the weakness see at times in the US equity markets last Friday, the macro economic optimism today seems somewhat surreal. However, seeing the Greece debt situation put under control for 30 days seems to have given the bull camp an added measure of confidence. In fact, seeing some very impressive earnings news from Barclays overnight has clearly added to the macro economic bullishness and if the scheduled US numbers can add to the bullish look on the economy, there might be little to prevent the March copper market from rising back above the even number $3.20 level. The Commitments of Traders Futures and Options report as of February 9th showed the Non-Commercial and Non-reportable combined position to be net long 11,897 contracts, which was a reduction of the net long by 6,594 contracts from the previous report. Therefore the copper market shouldn’t be held back by an overbought technical condition today.

This content originated from - The Hightower Report.

DOLLAR: Not surprisingly the Dollar is catching a distinct flight to quality bid this morning. In addition to ideas that global equity prices were ahead of reality, the market seems to have seen a downshift in economic readings, with the US retail sales report and Michigan sentiment readings late last week being joined by a slack UK private housing report and lackluster attitudes toward the Chinese recovery in the overnight headlines. Apparently the currency markets are uninterested in suggestions from Japan that they are poised to climb out of the recession in the next quarter. In fact, with the UK and now the US, seemingly adding slightly to their quantitative easing efforts, the markets are suspecting that the slow down threat remains in place. With a large US financial institution failing over the weekend and the failure apparently the biggest of the year, that clearly rekindles financial market flight to quality interest in the Dollar. With the August 11th Commitment of Traders with Options report for US Dollar showing the Non-commercial position to be net short 10,110 contracts, with the Non-reportable position net short 1,693 contracts, that made the “combined” spec and fund position net short 11,803 contracts as of early last week. Therefore the September Dollar looks to be poised to rise to the late July highs of 79.81, but we doubt that the Dollar is going to completely throw off the downward bias that has been in place since early March.

EURO: The Euro is clearly under a liquidation watch, as the markets have once again rekindled concerns for the recovery. We would suggest that weakness in equities at the end of last week and into the opening this morning, were the result of ideas that the equity markets were ahead of reality and to see equity prices fall consistently throughout this week, might require fears of a failed recovery effort. However, in the near term slumping sentiment looks to apply pressure to the Euro and that could easily send the September Euro down to the first consolidation support zone of 140.00 on the charts. With the August 11th Commitment of Traders with Options report for Euro showing the Non-commercial position to be net long 17,551 contracts, with the Non-reportable position net long 18,905 contracts, that made the “combined” spec and fund position net long 36,456 contracts as of early last week. Therefore from a technical basis, the Euro would seem to retain at least a couple more days of long liquidations selling pressure.

YEN: The yen clearly seems to be a currency in vogue, with strength being seen in the Yen recently in the face of strength in equities and the currency also being bid higher in the face of slumping equities. Clearly the Yen is garnering some flight to quality type buying and that in combination with mostly upbeat macro economic views toward the Japanese economy looks to give the Yen an additional flight to quality benefit. Near term upside targeting in the Yen is seen at 106.41 and perhaps even higher if the anxiety being thrown off by the equity markets intensifies.

SWISS: A big range down extension in the Swiss clearly suggests that the Swiss, Euro, Pound and Canadian are all set to lose in the face of an economic letdown in world equity markets. While the Swiss looks to follow the lead of the Dollar and the Euro in the coming trading sessions, we would be surprised if the September Swiss didn’t fall quickly back to the 92.00 level in the coming trading sessions.

POUND: In addition to deteriorating macro economic views, the Pound also seems to be getting pressure from news of a privately generated housing survey. With the Pound into the August highs, technically and fundamentally overbought, that seems to set the stage for a slide to at least 162.63. In order to see a full washout in the September Pound, down to the 160.00 level, probably requires extensive liquidation carnage in global equity markets!

CANADIAN DOLLAR: Since the Canadian has already seen an aggressive liquidation washout to the even number 90.00 level this morning, a good measure of the macro economic disappointment is probably already factored into prices. However, it would appear as if the negative outlook toward the global recovery, is still destined to play out over the coming trading sessions and that could put the September Canadian down to the 89.31 level in the coming two trading sessions.

TODAY’S MARKET IDEAS: Expect the Yen and Dollar to extend overnight gains for at least the first two trading sessions of the new week.

This content originated from - The Hightower Report.

CRUDE OIL MARKET FUNDAMENTALS: Crude oil has extended gains in the overnight trade finding price support from outside market influences, but also from a more optimistic demand view. A bounce back in equities overnight is certainly feeding into the macro economic recovery theme which has lifted June crude oil to the highest price level since early January. Hope that economic conditions are improving has enabled the oil market to push aside its clearly bearish fundamental setup and instead focus on the longer-term prospects for a recovery in oil demand. In fact, a more positive oil demand view is being fostered by news that China’s oil imports in April rose to a near record daily rate. Crude oil prices are also being supported by the IEA chief saying the agency does not plan to lower oil demand in its forecast to be released on Thursday. Part of the gains in oil seem to be on expectations that today’s EIA short-term energy forecast will have a less pessimistic outlook. The weak action in the Dollar also seems to be boosting the appeal of oil as an inflation hedge with sidelined investors now starting to flow back into oil on ideas that energy markets will be quick to respond to any macro economic improvements. With the market focused on the macro economic picture and seemingly little concerned over predictions for another sizable jump in oil stocks in this week’s inventory report suggest bullish sentiment in oil is becoming entrenched. While today’s EIA report could add to volatility this session, the market’s bullish bias suggest price dips off the EIA news may be short lived and attract new buyers. But we still suspect the key to higher oil prices will largely depend on seeing more equity market gains. If equities trade higher, then the bullish technical setup in June crude oil is likely to lift the market into a higher $62.57 to $65.00 price range.

PRODUCT MARKET FUNDAMENTALS: GASOLINE: June gasoline has seen a choppy two sided trade overnight as the market seems to be running into some technical overhead resistance near the $1.71 price level. But the market is also finding support from a refinery problem in Texas and from positive outside market influences. Today’s US trade data is likely to offer more insight on the economy and if it supports the market’s view that economic conditions are showing signs of improvement, it could be enough to push June gasoline to a new high for the move. Another stumbling block for the bull camp may be the EIA’s oil demand report. But given the market’s bullish bias and buying interest coming in on yesterday’s price dip suggest any setback off the EIA or trade news may be short lived.

HEATING OIL: Outside market strength is keeping June heating oil well supported and in a good technical position to take out the March highs. However, with the trade expecting another jump in distillate stocks, today’s US trade news and EIA demand report may need to come out positive to lift June heating oil above key resistance at the $1.5364 price level. A rally above the March high would then put the market on track for a move back to $1.60. The fundamentals are bearish for heating oil, but like crude oil, this market has the potential to trade higher if equity market gains continue to feed bullish oil demand sentiment.

TODAY’S ENERGY MARKET GUIDANCE: The bull camp has the early edge mostly due to the firmer equity markets and a weaker Dollar. But price action could turn volatile and the bull camp’s resolve may be challenged by today’s trade data and EIA oil forecast report.

This content originated from - The Hightower Report.

Net weekly export sales for corn, came in at 1,107,700 metric tonnes for the current marketing year and 200 for the next marketing year for a total of 1,107,900.

As of January 22, cumulative corn sales stand at 53.3% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 60.1%. Sales of 654,000 metric tonnes are needed each week to reach the USDA forecast.

WHEAT:

Net weekly export sales for wheat, came in at 23,500 metric tonnes for the current marketing year and -80,000 for the next marketing year for a total of -56,500.

As of January 22, cumulative wheat sales stand at 82.1% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 80.1%. Sales of 264,000 metric tonnes are needed each week to reach the USDA forecast.

SOY COMPLEX:

Net weekly export sales for soybeans came in at 526,100 metric tonnes for the current marketing year and 6,100 for the next marketing year for a total of 532,200.

As of January 22, cumulative soybean sales stand at 80.5% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 77.1%. Sales of 184,000 metric tonnes are needed each week to reach the USDA forecast.

Net meal sales came in at 201,700 metric tonnes for the current marketing year and none for the next marketing year for a total of 201,700.

Cumulative soybean meal sales stand at 47.4% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 52.7%. Sales of 112,000 metric tonnes are needed each week to reach the USDA forecast.

Net oil sales came in at 21,500 metric tonnes for the current marketing year and none for the next marketing year for a total of 21,500.

Cumulative soybean oil sales stand at 32.5% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 61.0%. Sales of 15,000 metric tonnes are needed each week to reach the USDA forecast.

COTTON:

Net weekly export sales for cotton, came in at 107,200 running bales for the current marketing year and 6,600 for the next marketing year for a total of 113,800.

As of January 22, cumulative cotton sales stand at 76.9% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 66.6%. Sales of 95,000 running bales are needed each week to reach the USDA forecast.

BEEF:

Weekly US beef export sales for the week ending January 22 came in at 7,800 metric tonnes making it 74,100 metric tonnes for the year. This compares to year ago weekly sales of 30,100 metric tonnes and 109,800 for the year. Before Mad Cow (2003) cumulative sales as of this week were 139,500 metric tonnes.

This content originated from - The Hightower Report.

Or Listen Here

This content originated from - The Hightower Report.

Or Listen Here

This content originated from - The Hightower Report.

CRUDE OIL MARKET: While January crude oil has been able to rebound after being pushed to a new low for the move overnight, we still see limited upside potential for this market, while downside risk remains in place. With no critical economic news out early today some short covering in crude oil may be possible this session if US equity markets can build on initial overnight gains. A report that Russian oil exports in November fell to the lowest level in 4 years may have also helped the market trim overnight losses. But there are still a number of factors that will keep the path of least resistance down for energies and we think rallies in Jan crude oil back over $50 should be considered a selling opportunity. The November 25th Commitment of Traders report with Options for Crude Oil showed the “combined” spec and fund position net long 88,073 contracts, leaving the market with ample selling capacity.

Crude oil is being undermined by the uncertainty of OPEC’s next move, since Saudi Arabia’s comments regarding cartel member compliance to lower quotas is raising some doubt that another production cut will be agreed upon at the Dec 17th meeting. It also seems as if the UAE isn’t sticking to their quota since they are offering more crude oil to Asian customers next month and that appears to be undermining the cartel’s efforts to tighten supplies. In fact, with some traders expecting US crude oil stocks to rise by nearly 2 million barrels in this week’s inventory report, any additional effort by OPEC to tighten supply may be seen as too little to late.

Clearly global macroeconomic conditions are worsening given yesterday’s data showing significant weakening in US, Europe and even China manufacturing levels and that leaves the outlook for oil demand very grim. In fact, China is likely to remain a net fuel exporter due to record domestic product stocks and that will certainly undermine OPEC’s efforts to tighten global supplies. Given Bernanke’s grim economic outlook yesterday and with the prospect for weak outcomes in the rest of the US economic data being released over the balance of the week (including Friday’s employment report), we suspect there will be enough fodder to leave the energy bears in full control.

GASOLINE: Jan gasoline has been able to recover from overnight lows as we suspect the firm action in equity markets is providing some price support. But with Auto sales out later today expected to show a severe contraction, it seems as if the prospect for a recovery in gasoline will be limited. In fact, this week’s economic news will likely leave the demand outlook bearish and with traders expecting a nearly 1.5 million barrel rise in gasoline stocks, it is clear that the market’s fundamental setup still favors the bear camp. With the Nov 25 COT report with options for gasoline showing the combined fund and spec net long position at 43,088 contracts this market still appears to have ample selling capacity left. Therefore, given the number of negative factors facing this market this week it won’t be surprising to see Jan gasoline retest the November low.

HEATING OIL: January heating oil has also been able to bounce after being pushed to a new low for the move, but we see little to suggest that a significant low has been set. Certainly the recovery in US equity markets is taking some of the sting away from yesterday’s bearish reports on global manufacturing. The market may also be garnering some support from a cold Midwest temperature outlook. But with China set to stay a net diesel exporter and some traders expecting a nearly 1 million barrel rise in distillate stocks in this week’s inventory report, rally attempts are likely to be short lived. The November 25th Commitment of Traders report with Options for Heating Oil showed the “combined” spec and fund net long position at 13,396 contracts. But with global economic conditions set to worsen before getting better, we suspect the “combined” spec and fund position for heating oil will eventually shift to a large net short.

TODAY’S ENERGY MARKET GUIDANCE: The market can bounce but it probably can’t throw off the down trend pattern.

This content originated from - The Hightower Report.