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Watching for a slowdown in downturn

Agriculture.com Staff 02/05/2010 @ 4:52pm

Wheat:  Though US wheat prices have narrowed their premium to the competition, world traders are still suggesting there needs to be more to go. Wheat prices are still being underpinned by concerns there is too much old crop. Tuesday’s crop report is expected to trim ending stocks from 976 to 973 million bushels. Allendale suggests a 15 million bushel decline will be seen. In the big picture, this market has reached, and is currently under, our official price projections. On the July, that price was 519 and on the December it was 562 (Chicago contracts). That does not mean we suddenly turn bullish. It simply means we will start watching the charts and other factors for a sign of any type of “slowing” in this downtrend. For the week, March Chicago closed down 3/4, KC closed down 2 1/2, and the Minneapolis contract finished up 1 3/4. That is a good first sign.

Direction: Though we remain bearish wheat, we will begin to pick our selling spots more closely…Rich Nelson

Working Trade(s): (12/10) Sold Mar KC wheat 580 call 16 1/8, risk to 18, objective 0. Closed 1/8. (01/29) Bought March Chicago wheat /sell March corn 120, risk 109, objective 139. Closed 121.75.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Advanced Charts Direction: Chicago Wheat paused today after a very volatile week, settling unchanged from Friday to Friday. Target is still 4.59 in the March contract…Paul Georgy

Vital Technical Indicator: the next schedule projected major turn day in store for wheat is February 16.

Closing Hogs Commentary

Lean Hogs: Though futures did close lower today, this market did a very fair job of holding its ground. This morning’s shock that China would apply anti-dumping duties to US chicken was a blow. Between the Russian poultry problem, and not the Chinese, wholesale pork traders are spending as much time watching chicken prices as they do in pork. One thing helping this market is those calls for heavy 1 to 2 foot snows in the east. In our morning comments we noted this could affect slaughter at three big plants. One of those is the nation’s largest pork plants. Wrapping this up here, we turned bearish in January after the Russian poultry talks fizzled out. This week we turned neutral suggesting pork prices had fallen enough to account for the Russian issue. We are still a little concerned about the added problem that this China issue could bring. Also of interest, Thursday’s trading volume was a miniscule 17,369 contracts. Typically, this market will go searching for volume quickly after seeing that volume level. For trading we will go-with a high volume breakout either way here…Rich Nelson

Trade Recommendation(s): · (02/05) Sell April 65.80 stop or buy 67.35 stop, risk 1.10 from entry, objective 3.25 from entry.

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