GENERAL COMMENTS:
The Dollar Index continues to push lower, the gold market made new all time highs, and the Dow Jones moved above 10,000, at least for a while. The crude oil moved up to the highest level since last November and the charts suggest that a move to $89 is likely. The outside markets are definitely supportive right now, and that cannot be ignored.

CORN:
Trend: Short Term Up – Long Term Up
Sentiment: Freeze, harvest delays, lower yields?

The December corn gained almost 10 cents this week, so the uptrend is alive and well. The outside markets were supportive this week, which helps, but there are a number of other concerns as well. First of all, the corn crop isn’t entirely mature, which along with the wet weather is holding back harvest progress. Next you have the concern about how many bushels may have been lost to the freeze and finally early yield reports don’t exactly support the idea of a record national average corn yield.

On the charts it looks like we the potential to see a deeper correction, but so far the $3.68 -$3.69 area is holding as support. Besides that I think we will have to see some open harvest weather in the corn belt to bring pressure to the corn. So far it looks like there will be some decent weather over the weekend, but it is far from being a certainty. The extended forecasts call for above normal precipitation, so farmers are going to need to get something done this weekend. If they don’t we could have a very strong day on Monday as harvest delays and failure to replenish supplies take the forefront in the news.

Action: At the money December put options are a good precaution in case the weather improves and we start to see a lot of harvest activity and good yield numbers. I wouldn’t want to be aggressively short futures right now because the momentum of the market is definitely up.

WHEAT:
Trend: Short Term Up – Long Term Up
Sentiment: Following the corn and beans.

The December KW gained 25 ½ cents this week, so it wasn’t exactly a follower of the corn, but since there still isn’t much bullish fundamental news out there I have to look at the wheat as a market that is just tagging along for the ride.

Short covering by the trading funds can still take this market a lot higher, but it is going to take further weakness in the US Dollar and further strength in the corn and soybeans to really make it happen. At the moment I am still looking at this rally as a chance to sell call premium. Things are different now than they were at the beginning of the century, but I keep looking at our ending stocks figure and the last time it was this high we had futures below $3.00. I don’t think that is going to happen now, but I think that the upside potential in the wheat market is definitely limited.

Action: The July KW $7.00 call settled at 17 cents on Friday. That is a good option to sell. Sell the $4.00 put on a break at 15 or better and you have collected some good money if the July KW stays inside a $3.00 window.

SOYBEANS:
Trend: Short Term Up – Long Term Up
Sentiment: A pause after the big move up

November soybeans gained 13 ½ cents this week, but with the exception of Monday the bean market struggled to move up. Demand is still great with export sales coming in at 654,500 MT and soybean meal over 400,000 MT, so there is good underlying support, but I still think there is fear that the crop is very large and we won’t be able to use enough of it. A move back to the $9.50 area looks likely in the short run, barring further wet weather.

Early yield reports have been variable. A week ago it seemed that most of the reports were quite favorable and seemed to suggest that USDA might be too low in their yield estimate, but this week the production comments seemed to become more negative. Harvest is slow, just like the corn, so it will take more time to get a full grasp on yield.

Action: Dry weather will equal harvest pressure, which makes the January $9.60 put a good buy.

CATTLE:
Trend: Short Term Up – Long Term Up
Sentiment: Good news for a change.

There was $84 cash trade in TX, which is an improvement and the choice boxed beef gained almost $2.00. Also the live cattle and feeder cattle futures charts look fairly friendly now.

The December LC were .85 higher for the week, but more importantly moved through trend line resistance that has been in place since July. Friday’s high was just below the 40-day moving average, so it looks like the $86 - $86.50 area is going to be strong resistance as we start the week. A close above $86.50 sometime next week should be viewed as bullish and all we really need is to see a higher cash cattle market next week to get that done.

The cattle on feed report was about like expected with on feed at 101%, placements at 105%, and marketings at 96%. The most interesting thing is that for the first time in 18 months the on feed number is above a year ago. The big placement figures we have been seeing have finally caught up to us. Keep in mind though that the on feed number is still not large and cattle supplies are still relatively tight. The supply fundamentals are still bullish and maybe now we are starting to see that help the market.

Action: Be patient with hedges. I would take a chance on the feeder cattle by buying the January $98 call and selling the $90 put.