Chart of the Day: the CRB and Oil Prices

By Marc Chandler

Commodities are very much the center of attention in the financial markets. The first Great Graphic, created on Bloomberg, is the CRB index. Through last Friday (March 7) it had rallied 13.5% since January 9.

It gapped higher on March 3and gapped lower earlier today, leaving a bearish island top in it wake. Technical indicators like the RSI and MACDs have turned lower. The gap extends from yesterday’s low (304.75) to today’s high (303.72). Completing the gap and moving above it would negate this bearish views. In late morning activity, there was an attempt to close the gap but it was rebuffed and the CRB returned to the middle of its range. We suspect is break away gap, meaning that it is unlikely to be filled in the near-term.

The CRB index also gapped higher on February 19. This gap has not been completed. In can be found between 298.55 and 299.29. A move to this area will be the first bearish objective. The next one is 294.50 We suspect there may be potential toward 290.

The lower chart, also from Bloomberg is a chart of the May US crude oil futures contract. The rally was not as impressive as the one in the CRB. It did not gap lower and there is not island gap, but the technical condition appears almost as bearish. The RSI and MACDs are trending lower.

It closed yesterday at the psychologically and technically important $100 a barrel level, but follow through selling today has seen it loss another 2%. It has moved toward the 61.8% of the rally off the the early-January though early March high (found near $96.60). That rally has carried oil up a little more than 15%.

Today’s sell-off may have been aggravated by conspiracy theories sparked by the unexpected announcement by the US Department of Energy. It said it would sell up to 5 mln barrels of crude oil from its strategic reserves as a test of its systems. It is the first sale since 1990 specifically for test purposes. It will off sour crude and bids are due March 14.

The test apparently has been subject of internal discussion for some time and was timed to be the most helpful for refineries in term of their maintenance schedule. The 5 mln barrels is roughly equivalent to the US daily import of crude oil and about 25% of the US daily consumption.

Many observers initially linked the release of the strategic reserves to confrontation with Russia over Ukraine and Crimea. Yet, 5 mln barrels is a drop in the bucket, so to speak and it is not clear, in any event, how much the announcement weighed on prices, which were already moving lower before announcement. If the US were really trying to depress oil prices, the amount would have been bigger and, more than likely, it would have tried coordinating with Europe as was the case when the last time the reserves were tapped. In 2011, in response to the civil war in Libya, in coordination with Europe, the US sold 30 mln barrels of oil from its reserves.

At the present, none of the major currencies, including some crosses, are particularly closely tied to the CRB in general or oil prices in particular. Sterling against the yen may be about the best (highest correlation with oil) and that is only about 0.28 correlated ( 60 day percentage change basis) We have looked at a number of emerging market currencies and the results were similar results.

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Deluded Currency Cultists Believe The Dollar Is Invincible

by Brandon Smith

At the onset of the derivatives collapse in 2007/2008 it would have been easy to assume that most of America was receiving a valuable education in normalcy bias.

In 2006, the amount of ego on display surrounding mortgage investment was so disturbingly grotesque anyone with any true understanding of the situation felt like projectile vomiting. To watch the smug righteousness of MSNBC and FOX economic pundits as they predicted the infinite rise of American property markets despite all evidence to the contrary was truly mind blowing. When the whole system imploded, it was difficult to know whether one should laugh, or cry.

The saddest aspect of the credit crisis of 2008 was not the massive chain reaction of bankruptcies or the threat of institutional insolvency. Rather, it was the delusional assumptions of the public that the grand mortgage casino was going to go on forever. There is nothing worse than witnessing the victim of a Ponzi scheme defend the lie which has ultimately destroyed him. As much as I am for people waking up to the nature of the crisis, there comes a point when those who are going to figure it out will figure it out, and the rest are essentially hopeless.

The cultism surrounding the U.S. economy and the U.S. dollar is truly mind boggling, and by “cultism” I mean a blind faith in the fiat currency mechanism that goes beyond all logic, reason and evidence.

In recent weeks it has become more visible as global financiers play both sides of the Ukrainian conflict, luring Americans into a frenzy of false patriotism and an anti-Russo-sports-team-mentality. My personal distaste for Vladimir Putin revolves around my understanding that he is just as much a puppet of the International Monetary Fund and international banks as Barack Obama, but many Americans hate him simply because the mainstream media has designated him the next villain in the fantasy tale of U.S. foreign policy.

Open threats from Russia that they will dump U.S. treasury bond holdings and the dollar’s world reserve status if NATO interferes in the Ukraine have been met with wildly naive chest beating from dollar cultists.  I am beginning to see the talking points everywhere.

“Let them dump the dollar, Russia’s holdings are minimal!” Or, “Let them throw out Treasuries, they’ll just be shooting themselves in the foot!” are the battle cries heard across the web. I wish I could convey how insane this viewpoint is, especially in light of the fact that many alternative economic analysts, including myself, have been predicting just such a scenario for years.

Despite the childish boastings of the dollar devout, there is an extraordinarily good possibility that the life of the greenback will be snuffed out in the near term. Here are the facts…

1) Russia will not be alone in its decouple from the dollar system. China, our largest foreign creditor, and India (a supposed ally) have clearly sided with Russia on the Ukranian issue. China has stated that it will back Russia’s play in the event that sanctions are brought to bear by NATO, or if a shooting conflict erupts.

2) China has already been slowly dumping the dollar as a world reserve currency using bilateral trade agreements with numerous countries, including Russia, India, Australia, Brazil, Germany, Japan, etc. These agreements allow FOREX currency swaps and export/import purchases to be made with China without the use of the dollar. China has been preparing itself for a divorce from U.S. economic dependence for at least a decade. The idea that they would actually follow through over political tensions should NOT surprise anyone if they have been paying attention.

3) A total drop of the dollar or U.S. treasury bonds by Russia and China would send shock waves through global markets. Russia is a major energy supplier for most of Europe. China is the largest export/import nation in the world. If they refuse to accept dollars as a trade mechanism, numerous countries will fall in line to abandon the greenback as well. The fact that so many Americans refuse to acknowledge this reality is a recipe for disaster.

The only advantage the U.S. has traditionally offered in terms of international trade has been the American consumer, whose unchecked debt spending partly fueled the rise of the industrialized East, not to mention the biggest credit bubble in history. The role of America as a consumer market is collapsing today, however. The mainstream media and the Federal Reserve can blame the steady decline in retail sales on the “weather” all they want, but negative indicators in global manufacturing often take many months to register in the statistics, meaning, this destabilization began long before the days turned cold.

4) China has been shifting away from export dependency since at least 2008, calling for a larger consumer based market at home. This process of enriching the Chinese consumer has almost been completed. The lie that China “needs the U.S.” in order to survive economically needs to be thrown out like the utter propaganda it is.

5) China (and most of the world) has ended new dollar purchases for their FOREX reserves, and has no plans to make new purchases in the future.

6) China executed the second largest dump of U.S. Treasury bonds in history in the past month.

7) Russia, China, and numerous other countries, including U.S. “allies”, have been calling for the end of the dollar’s world reserve status and the institution of a new global basket currency using the IMF’s Special Drawing Rights (SDR). Even Putin has suggested that the IMF take over administration of the global economy and issue the SDR as a world currency system. This flies in the face of those who argue that the IMF is somehow “American run”. The truth is, the IMF is run by global banks and no more answers to the U.S. government than the Federal Reserve answers to the U.S. government.

8) The Federal Reserve has been creating trillions of dollars in fiat just to prop up U.S. markets since 2008, and we are still seeing a considerable decline in global manufacturing, retail, personal home sales, and a general malaise in consumer demand. Without a full audit, there is no way to know exactly how much currency has been generated or how much is floating around in foreign markets. Any loss of world reserve status would send that flood of dollars back into the U.S., most likely ending in a hyperinflationary environment.

9) Another rather dubious argument I see often is the claim that the Federal Reserve and the U.S. Treasury could simply “negate” a Treasury dump by refusing to acknowledge creditor liabilities. Or, that they could simply print what they need to snap up the bonds, much like the German government tried to do during the Weimar collapse. Unfortunately, this plan did not work out so well for the Germans, nor has it worked for any other nation in history, so I’m not sure why people think the U.S. could pull it off. However, this is the kind of cultism we are surrounded by. These folks think the U.S. economy and the dollar are untouchable.

Yes, the Fed and the Treasury could hypothetically erase existing liabilities, but what dollar cultists do not seem to grasp is that the dollar’s value is not built on Treasury purchases. The dollar’s value is built on faith and reputation. If a nation refuses to pay out on its debts, this is called default. A default by the U.S. would immediately damage the reputation of bonds and dollars as a good investment. Global markets will refuse to purchase or hold any mechanism that they think will not earn them a profit. How many investors today are anxious to jump into Greek treasury bonds, for instance?

Finally, it is unwise to operate on the assumption that foreign creditors will accept dollars as payment on U.S. Treasury bonds if they believe the Federal Reserve is monetizing the debt. When Weimar imploded under the weight of currency devaluation, many foreign governments refused to accept the German mark as payment. Instead, they demanded payment in raw commodities, like coal, lumber and ore. Expect that China and other debt holders will demand payment in U.S. goods, infrastructure, or perhaps even land.

10) Most treasury holdings in foreign coffers are not long term bonds. Rather, they are short term bonds which mature in weeks or months, instead of years. Dollar proponents constantly cite the continued accumulation of treasury bonds by other governments as a sign that the dollar is still desirable as ever. Unfortunately, they have failed to look at the nature of these bond purchases. When China rolls over millions in short term bonds and replaces them with other short term bonds, this does not suggest they have much faith in America’s long term ability to service its debt. It would also make sense that if China had plans to remove itself from the dollar system, they would move into short term bonds which can be liquidated quickly.

11) China is on the fast track to becoming the largest holder of physical gold in the world. Russia has also greatly expanded its gold purchases. Whatever losses they might suffer from a dump of their Treasury bond investments; it will be more than made up in the incredible explosion in precious metals prices that would follow.

12) The most common argument against the dollar losing world reserve status has been that such a shift would be “impossible” because no other currency in the world has the adequate liquidity needed to replace the dollar in global trade. These people have apparently not been paying attention to the Chinese yuan. China has been quietly issuing trillions in yuan denominated bonds, securities and currency around the world. Current estimates calculate around $24 trillion created by the PBOC and the banks under its control.

Mainstream talking heads are calling this a “debt bubble.” However, this debt creation makes perfect sense if China’s plan is to create enough liquidity in its currency in order to offer a viable alternative to the U.S. dollar. Linking the yuan to the IMF’s basket currency would complete the picture, forming a perfect dollar replacement while dollar cheerleading-economists stand dumbstruck.

13) China's retreat away from dollar denominated investments has left a hole in the U.S. bond market.  Recently, that negative space was filled by an unexpected source; namely Belgium.  A country whose GDP represents less than 1% of total global GDP buying more U.S. bonds than China?  The whole concept sounds bizarre.  Here is the capital coming from?

Think about it this way - Belgium is the political center of the European Union and a haven for international financiers.  There are more corporate cronies, lobbyists, bureaucrats, and foreign dignitaries in Belgium than in all of Washington D.C.  But more importantly, Belgium struck a deal with the IMF in 2012 to begin pumping SDR denominated funds into "low income economies".  I would suggest that this funding flows both ways, and that now, the IMF is feeding capital into Belgium in order to buy U.S. Treasury Bonds.  That is to say, the IMF is going to start using smaller member countries with limited savings as proxies to purchase U.S. debt using IMF money.

The ultimate danger of the IMF (run by internationalists, not the U.S. government) pre-positioning itself as the primary buyer of U.S. debt is that when the U.S. finally defaults (and it will), the IMF is likely to become the "guardian angel" of the U.S. economy, offering aid in exchange for total administrative control of our financial system, and the institution of the SDR as a world reserve replacement for the dollar.

14) The serious prospect of regional conflict or world war over tensions between the Ukraine and Russia, Japan and China, the U.S. and Syria, the U.S. and Iran, the U.S. and North Korea, etc., could make the effort of exposing the plan to shift economic power into a one world system centralized under the IMF almost meaningless. How many people will truly care about the financial power grab by banking elites if it drifts under the surface of catastrophic engineered wars?  They'll be too busy hating and fighting artificially created boogeymen to pay attention to the real globalist culprits.

I have been pointing out for quite a long time that globalists need a “cover event”; a disaster, an economic war or a shooting war, in order to provide a smokescreen for the collapse of the dollar. Alternative analysts have been consistently correct in predicting the trend towards the dump of the dollar. Years ago, we were laughed at for suggesting China would shift towards a consumer based economy and away from U.S. dependence. Today, it is mainstream news. We were laughed at for suggesting that nations like Russia and China would drop the dollar as a reserve currency. Today, they are already in the process of doing it. And, we were laughed at for suggesting that Russia or China would use their debt holdings as leverage against the U.S. in the event of a geopolitical conflict. Today, they are openly making threats.

I have to say, I’ve grown tired of the dollar cultists. How many times can a group of people be wrong and still argue with those who have been consistently right? The answer is that zealots never actually escape their own delusions, even when their delusions lead them and those around them to ruin. I suspect that in the face of complete dollar collapse, they will still be rationalizing the chaos and pontificating on our "lack of understanding" while the theater burns down around them.

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Why the ECB Should Buy American

by Jeffrey Frankel

CAMBRIDGE – The European Central Bank needs to ease monetary policy further. Eurozone-wide inflation, at 0.8%, is below the target of “close to 2%,” and unemployment in most countries remains high. Under current conditions, it is hard for the periphery countries to reduce their costs to internationally competitive levels, as they need to do. If inflation in the eurozone as a whole is below 1%, the periphery countries are condemned to suffer painful deflation.

The question is how the ECB can ease policy, given that short-term interest rates are already close to zero. Most of the talk in Europe concerns proposals to undertake quantitative easing (QE), following the path taken by the US Federal Reserve and the Bank of Japan. This would mean expanding the money supply by buying member countries’ government bonds – a realization of ECB President Mario Draghi’s “outright monetary transactions” scheme, announced in August 2012 in the midst of growing uncertainty about the euro’s future (but never used since then).

But QE would present a problem for the ECB that the Fed and other central banks do not face. The eurozone has no centrally issued and traded Eurobond that the central bank could buy. (And the time to create such a bond has not yet come.) By purchasing bonds of member countries, the ECB would be taking implicit positions on their individual creditworthiness.

That idea is not popular with the eurozone’s creditor countries. In Germany, ECB purchases of bonds issued by Greece and other periphery countries are widely thought to constitute monetary financing of profligate governments, in violation of the treaty under which the ECB was established. The German Constitutional Court believes that the OMT scheme exceeds the ECB’s mandate, though it has temporarily tossed that political hot potato to the European Court of Justice.

The legal obstacle is not merely an inconvenience; it also represents a valid economic concern about the moral hazard that ECB bailouts present for members’ fiscal policies in the long term. That moral hazard – a subsidy for fiscal irresponsibility – was among the origins of the Greek crisis in the first place.

Fortunately, interest rates on Greek and other periphery-country debt have fallen sharply over the last two years. Since he took the helm at the ECB, Draghi has brilliantly walked the fine line required to “do whatever it takes” to keep the eurozone intact. (After all, there would be little point in upholding pristine principles if doing so resulted in a breakup, and fiscal austerity alone was never going to return the periphery countries to sustainable debt paths.) At the moment, there is no need to support periphery-country bonds, especially if it would flirt with illegality.

What, then, should the ECB buy if it is to expand the monetary base? For several reasons, it should buy US treasury securities. In other words, it should go back to intervening in the foreign-exchange market.

For starters, there would be no legal obstacles. Operations in the foreign-exchange market are well within the ECB’s remit. Moreover, they do not pose moral-hazard issues (unless one thinks of the long-term moral hazard that the “exorbitant privilege” of printing the world’s international currency creates for US fiscal policy). Finally, ECB purchases of dollars would help push down the euro’s exchange rate against the dollar.

Such foreign-exchange operations among G-7 central banks have fallen into disuse in recent years, partly owing to the theory that they do not affect exchange rates except when they change money supplies. But in this case we are talking about an ECB purchase of dollars that would change the euro money supply. The increase in the supply of euros would naturally lower their price. Monetary expansion that depreciates the currency is more effective than monetary expansion that does not, especially when, as is the case now, there is very little scope for pushing short-term interest rates much lower.

Depreciation of the euro would be the best medicine for restoring international price competitiveness to the periphery countries and reviving their export sectors. Of course, they would devalue on their own had they not given up their currencies for the euro ten years before the crisis (and if it were not for their euro-denominated debt). If abandoning the euro is not the answer, depreciation by the entire eurozone is.

The euro’s exchange rate has held up remarkably during the four years of crisis. Indeed, the currency appreciated further when the ECB declined to undertake any monetary stimulus at its March 6 meeting. Thus, the euro could afford to weaken substantially. Even Germans might warm up to easy money if it meant more exports.

Central banks should and do choose their monetary policies primarily to serve their own economies’ interests. But proposals to coordinate policies internationally for mutual benefit are fair. Raghuram Rajan, the governor of the Reserve Bank of India, has recently called for the advanced economies’ central banks to take emerging-market countries’ interests into account via international cooperation.

ECB foreign-exchange intervention would fare well in this regard. This year, the emerging economies are worried about a tightening of global monetary policy, not the policy loosening that three years ago fueled talk of “currency wars.” As the Fed tapers its purchases of long-term assets, including US treasury securities, it is a perfect time for the ECB to step in and buy some itself.

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Historical Result of our Super Commodity Strategy

 

Click on the image to access the detailed results of Super Commodity

Weekly grains update

By Jeffrey T. Lewis

• Brazilian crop agency Conab said March 12 that it cut its estimate for the 2013-2014 soy harvest because of a drought in some growing areas.
• Brazilian farmers will grow 85.4 million tons of soy in the current season, according to Conab, which in its February report had forecast a crop of 90 million tons. The 2012-2013 harvest was 81.5 million tons.
• Conab also cut its forecast for the two 2013-2014 corn harvests compared with the February report, to a total of 75.2 million tons from 75.5 million tons. That compares with a harvest of 81.5 million tons in the 2012-2013 season.
• The worst drought in about 40 years in the states of Sao Paulo and Minas Gerais is harming Brazil's soy, coffee, sugar and orange crops.
• Brazil is the world's biggest producer of sugar, coffee and oranges, and the second-biggest producer of soy, after the U.S.
• Sao Paulo and Minas Gerais states together are Brazil's biggest producers of oranges, sugar cane and coffee, while Mato Grosso state is the biggest producer of soy.
• Conab cut its estimate for Sao Paulo's soy crop to 1.9 million tons from 2.1 million tons in its February crop report, and reduced the estimate for Minas Gerais' crop to 3.3 million tons from 3.8 million tons in February.
• Conab raised its estimate for Mato Grosso's production to 26.4 million tons from 26.2 million tons in the February report. For another big soy-producing state, Goias, Conab cut the forecast to 8.6 million tons from 9.5 million tons.
• Conab publishes the reports monthly, and it's possible the agency will cut its soy estimate even more. The survey for the March report was carried out from Feb. 16 through Feb. 22.
• The soy harvest is near its peak in March, and heavy rains in Mato Grosso since the end of the most recent survey have made it difficult for equipment to enter the fields. Some of the soy could already be starting to rot on the ground, and that situation could grow worse if the rains in Mato Grosso don't let up, agronomists say.

WHEAT

General Comments: Wheat was higher on ideas of good demand and worries about dry weather in the southwestern Great Plains. Parts of Texas are too dry, and the dry área extends north into some parts of Kansas. Crops in southern regions of this área are coming out of dormancy. The dry áreas had been expected to get some badly needed precipitation from the storm that passed through the Midwest, but the storm tracked north of the dry áreas. Current US forecasts call for moderating temperatures as Spring tries to arrive.

However, the overall pattern supports colder than average temperaturas overall for the foreseeable future, especially in the Eastern half of the country. US export demand has been solid, but the potential world competition has been the primary negative for US prices as the US wants to remain competitive in world markets. Ukraine remains a feature, and the government there said that crop áreas in Crimea will not get planted. But, the rest of the country is expected to plant normally. Charts show that Wheat futures held some support áreas and might try to move higher today.

Overnight News: The southern Great Plains should see dry weather. Temperatures should average near to above normal. Northern areas should see dry conditions. Temperatures should average mostly above normal. The Canadian Prairies should some snow Saturday, otherwise mostly dry conditions. Temperatures will be near to below normal, but western áreas could see above normal temperaturas this weekend.

Chart Analysis: Trends in Chicago are mixed to up with objectives of 668, 682, and 692 May. Support is at 656, 637, and 636 May, with resistance at 667, 679, and 692 May. Trends in Kansas City are up with objectives of 740, 759, and 768 May. Support is at 725, 707, and 703 May, with resistance at 738, 742, and 750 May. Trends in Minneapolis are up with objectives of 724 and 742 May. Support is at 706, 687, and 663 May, and resistance is at 716, 719, and 742 May.

CORN AND OATS

General Comments: Corn closed higher in "Turnaround Tuesday" trading. There was no real news to push prices one way or another, but the strng rally in Wheat added some support to Corn prices. USDA might be forced to increase demand projections down the road. USDA cut domestic demand by cutting feed demand in a move that showed the devastation being caused to the hog Heard by the PED virus. Wire reports a couple of weeks ago showed that about 4.0 million pigs have already been lost, and Live Hog futures have been trading significantly higher ever since. Oats were higher after two sharply lower days as the Canadian government moved to forcé the railroads to move more grain to ports and the US on Friday. The move could ease the tight supply situation here in just a few weeks. The US relys on Canadian Oats and most come by rail. Weather in the Midwest will trend to mostly below normal through the weekend. The weather remains good in South America. The market will keep a close eye on the planting progress of the Winter Corn crop in Brazil as planting is delayed.

Overnight News:

Chart Analysis: Trends in Corn are mixed to down with objectives of 461 and 438 May. Support is at 473, 470, and 465 May, and resistance is at 485, 492, and 502 May. Trends in Oats are down with objectives of 414 and 354 May.  Support is at 416, 414, and 394 May, and resistance is at 438, 445, and 446 May.

SOYBEANS AND PRODUCTS

General Comments: Nearby Soybeans and products closed lower in taalk of Chinese cancellations of purchases in Brazil and significantly weaker cash markets there. New crop months were nigher for no apparent reason, and it looks like bear spreads were very active. Overall, the market seems to have run out of some of its bullish steam since the crop reports were released. USDA increased export demand, but cut the domestic demand and increased imports to keep ending stocks a Little higher than the trade had expected. The cut in domestic demand came as less Soybean Meal demand is anticipated due to the reduced hog numbers. Less Soybean Oil demand was also anticipated due to the potential for less biofuels demand. There were more unconfirmed reports that China had cancelled purchases of up to 2.0 million tons of Soybeans from Brazil. China has had a very hard time getting out of purchase Contracts here so it is pushing Brazil. The reports might not be confirmed, but premium levels remain weak. Reports indicate that China has overbought Soybeans and need not buy more anytime soon. The harvest is active and should be more than 50% done in Brazil. Speculators overall remain very long Soybeans and Soybean Meal on ideas of tight supplies here in the Midwest, and began to liquidate some of these longs yesterday.

Overnight News:

Chart Analysis: Trends in Soybeans are mixed. Support is at 1402, 1388, and 1377 May, and resistance is at 1426, 1436, and 1445 May. Trends in Soybean Meal are mixed to down with objectives of 421.00 and 392.00 May. Support is at 438.00, 432.00, and 430.00 May, and resistance is at 450.00, 459.00, and 465.00 May. Trends in Soybean Oil are mixed. Support is at 4310, 4280, and 4190 May, with resistance at 4480, 4520, and 4580 May.

CANOLA AND PALM OIL

General Comments: Canola was higher on speculative buying. Farmers were scale up sellers. Traders think Canola is cheap compared to Soybeans, and some have been buying Canola and selling Soybeans as a spread. Canada annolunced a free trade pact with South Korea that could support canola demand. Traders remain bearish on the logistical problems that plague the Canadian Prairies that makes selling Canola and other farm products very difficult. These problems should ease in coming weeks as the Canadian government is now forcing railroads to move grain. Canola is cheap compared to other oilseeds and can move higher once the grain finally starts to move. Palm Oil was sharply lower on follow through speculative long liquidation. Ideas of crop losses from current dry Malaysian weather provide some support. Hwever, traders are worried about demand with Chinese economic weakness. Ideas are that they might buy less if the economy there continues to weaken., Plus, they have over bought in Soybeans and should have plenty of Soybean Oil to replace Palm Oil imports. Private export data was disappointing for thefirst third of the month. Ideas are that demand will only increase over time as Indonesia implements new bio fuels mandates involving Palm Oil.

Overnight News:

Chart Analysis: Trends in Canola are mixed. Support is at 442.00, 432.00, and 428.00 May, with resistance at 460.00, 467.00, and 473.00 May. Trends in Palm Oil are mixed to up with objectives of 2920, 2950, and 3030 May. Support is at 2860. 2825, and 2810 May, with resistance at 2920, 2950, and 2980 May.

RICE

General Comments: Prices closed higher, with old crop months leading the way. Much of the cash market remains tight, although mills in Texas appear to be covered. Much of the Mid South is trying to get fieldwork started and not interested in marketing. Texas producers are active with fieldwork amid a weaker cash market there. Both áreas should see drier and cool weather this week. California and what the producers will be able to plant remains an open question. Some very beneficial rains have hit California in the past week, but much more will be needed. Texas wáter problems are continuing as producers there return to the fields. Arkansas markets are quiet but firm. Asian long grain prices are steady. Charts show that futures may have reversed yesterday.

Overnight News: Mostly dry weather. Temperatures will average near to below normal this week and near to above normal this weekend.

Chart Analysis: Trends are mixed. Support is at 1533, 1520, and 1518 May, with resistance at 1544, 1549, and 1556 May.

DAIRY

General Comments: Dairy markets were mixed to higher in quiet trading. The market is tryingt to decide if it needs to rally more ori f it has done enough for now. Cheese and Butter are losing upside forcé. Milk made some new hioghs yesterday, but did not act like a new leg was needed at the end of the day. Cash markets remain generally strong, with export demand leading the way. Domestic markets are also strong as the weather remains cold and wet in many áreas. Some buyers are fighting the increased Butter prices, but willing to buy Cheese on price breaks. Milk and dried products demand is called steady right now. US production should start to increase as the Midwest gets warmer in the next few weeks. European production continues to increase, especially in the west due to better weather there. New Zealand production is strong, but dry conditions in Australia have hurt production there. Demand ideas for all dairy products remain strong, especially for Asia and especially China as the región and country import a lot of milk powder.

Overnight News:

Chart Analysis: Trends in Milk are mixed to up with no objectives. Support is at 2100, 2040, and 2020 April, and resistance is at 2145, 2180, and 2200 April. Trends in Cheese are mixed. Support is at 205.00, 202.00, and 199.00 April, with resistance at 210.00, 213.00, and 216.00 April. Trends in Butter are up with no objectives. Support is at 185.00, 182.00, and 180.00 April, and resistance is at 189.00, 192.00, and 195.00 April.

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Weekly softs outlook

By Jack Scoville

(NYBOT:OJK14)

General Comments: Futures closed a little higher as weather stays dry in Brazil and as crops remain short in the United States. Florida fruit sizes have been small and the Greening Disease takes more and more of a toll on crops. The weather is still good in Florida and the chances to freeze trees is less as the sun gets higher in the sky and daylight hours increase. The Greening Disease is working hard to keep overall production down. The disease will affect production for several more years. Brazil has seen weather might that be stressing trees as reports indicate that many áreas still need rain. Mostly dry weather is in the forecast for Brazil. More rain would be beneficial in Florida, but harvest conditions remain good. Harvest is starting to come to a close for early and mid Oranges. The Valencia harvest is expanding as the early harvest winds down. Blooms are being reported in South Florida.

Overnight News: Florida weather forecasts call for mostly dry conditions today, showers on Wednesday, then dry weather again. Temperatures will average near to below normal this week and near to above normal this weekend.

Chart Trends: Trends in FCOJ are mixed. Support is at 152.00, 150.00, and 148.00 May, with resistance at 157.00, 159.00, and 162.00 May.

COFFEE (NYBOT:KCK14)

General Comments: Futures closed higher again as Brazil stays mostly dry. Mostly dry weather is in the forecast through the weekend. Reports of increased offers from other Arabica producers above $2.00 per pound was seen, but tight markets overall kept futures from closing lower. London found more support on potential drought conditions in Vietnam and the possibility of production losses for the next crop. The lack of rain in Coffee producing áreas of Brazil over the last month has hurt Coffee production potential as the crop was forming cherries. Exports so far this year from Vietnam have been less than last year and might stay weak if the weather does not improve there. The market needs that Coffee to be exported to help fill the vacuum left by the poor production in Brazil. Trends are up in all three markets.

Overnight News: Certified stocks are higher today and are about 2.593 million bags. The ICO composite price is now 176.37 ct/lb. Brazil will get mostly dry weather. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get mostly dry weather, although some showers are expected in Eastern Mexico. Temperatures should average near to above normal.

Chart Trends: Trends in New York are up with objectives of 223.00 and 245.00 May. Support is at 201.00, 193.00, and 184.00 May, and resistance is at 210.00, 213.00 and 216.00 May. Trends in London are up with objectives of 2210, 2260, and 2310 May. Support is at 2135, 2100, and 2035 May, and resistance is at 2195, 2220, and 2250 May. Trends in Sao Paulo are up with no objectives. Support is at 240.00, 234.00, and 229.00 May, and resistance is at 246.00, 252.00, and 258.00 May.

SUGAR (NYBOT:SBK14)

General Comments: Futures were lower in New York and much lower in London. Futures remain in a trading range and traders are looking for news. Only light precipitation is likely this week in Brazil to support the Bulls, but there should still be Sugar aropund. Little offer was reported from Brazil, but Thailand has been selling Sugar at stable differentials. Demand news remains hard to find. Weather has improved in Sugar áreas of Brazil, but overall the región remains too dry. Rains now could help the crop recoup some of the losses but regular rains will be needed soon. Charts show that the overall tone is mixed as the market is in a consolidation phase. Weather conditions in key production áreas around the world are rated as mostly good except for the dry weather in Brazil.

Overnight News: Brazil could see dry weather and near to above normal tempertures.

Chart Trends: Trends in New York are mixed. Support is at 1780, 1745, and 1705 May, and resistance is at 1845, 1865, and 1890 May. Trends in London are mixed. Support is at 470.00, 467.00, and 464.00 May, and resistance is at 479.00, 485.00, and 490.00 May.

COCOA (NYBOT:CCK14)

General Comments: Futures closed higher and made new highs for the move on production concerns. Some bug infestations have b een reported in Camaroon that could cut production of the mid crop by 10%, and some are talking about the dry weather in Brazil, although the crop is at harvest there so that the dry weather could be beneficial. Mid crop conditions seem fair to good in the rest of West Africa and generally good in Southeast Asia.  Butter ratios remain strong on ideas of short supplies of Cocoa Butter in Europe and North America. Demand is strong as the Easter holiday is coming soon. Asian demand has been strong and Indonesia is importing beans for processing. A very good midcrop production is possible from Africa, but producers say more rain is needed, especially in central and northern areas. Some showers are reported in southern áreas that will help.

Overnight News: Mostly dry expected in West Africa, but a few showers are expected in southern áreas. Temperatures will average near to above normal. Malaysia and Indonesia should see scattered showers. Temperatures should average near to above normal. Brazil will get dry conditions or light showers and near to above normal temperatures. ICE certified stocks are higher today at 4.382 million bags.

Chart Trends: Trends in New York are up with objectives of 3095, 3115, and 3235 May. Support is at 2975, 2950, and 2900 May, with resistance at 3020, 3050, and 3080 May. Trends in London are up with objectives of 1935 and 2005 May. Support is at 1870, 1855, and 1825 May, with resistance at 1900, 1930, and 1960 May.

COTTON (NYBOT:CTK14)

General Comments: Futures were mixed, with nearby months a little lower and deferred months a little higher. Ideas that the US was pricing itself out of the market hurt nearby price action. There was Little in the way of news yesterday for traders, and the USDA reports had been largely anticipated by the trade. USDA projects tight ending stocks at the end of the current marketing year, and the domestic cash market has been strong due to very limited offers against the good demand. However, many think that demand can start to fade now with the high prices and buying interest is less at this time in futures. Brazil conditions are reported to be good in Bahia with warm temperatures, but the state needs rain and should get more this week. Warmer temperaturas are slowly returning to production áreas in the US and there has been some initial fiel;dwork done in far southern áreas.

Overnight News: Delta and Southeast áreas will get dry weather this week and showers this weekend. Temperatures will average near to below normal this week and near to above normal this weekend. Texas will see dry weather. Temperatures will average near to below normal this week and near to above normal this weekend. The USDA spot price is 86.68 ct/lb. today. ICE said that certified Cotton stocks are now 0.260 million bales, from 0.259 million yesterday.

Chart Trends: Trends in Cotton are mixed to up with no objectives. Support is at 90.70, 90.40, and 89.60 May, with resistance of 92.20, 92.80, and 93.40 May.

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