Paragon Investments, Inc.Wednesday, June 13, 2007

888-452-8751www.piitrader.com Corn:Fundamentals: 

CBOT July corn futures ended 11 cents higher Wednesday on strong trader and speculative buying spurred by the bullish tone emanating from the sharply higher wheat market and corn’s own positive chart pattern. Wheat’s scaling of fresh price highs in both Paris and the US reaffirmed the prevailing mood that the agricultural arena remains propelled by global concerns characterized by strong worldwide demand and only limited production expansion potential.

Dryness in the Eastern Corn Belt also continues to offer support to corn prices, as current forecasts continue to predict only limited rainfall across key growing regions where more plentiful moisture is required. July corn’s chart pattern was another key driver behind Wednesday’s gains, after prices vaulted beyond the 100-day moving average in place around $3.99 ½ per bushel to spark a round of automatic stop-loss buying.

This burst of technical activity steered July futures beyond the 44 mark for the first time since late March, and brought into view other potential overhead targets such as the $4.10 and $4.15 areas. Whether or not this market has the legs to get to those levels remains to be seen, as traders remain acutely aware that there is a near-record 90.454 million acres of US farmland being dedicated to corn production this year. However, the strong global demand that commanded the large acreage in the first place remains intact, so a large output figure is required if global corn inventories are to avert being depleted at a quickening rate. Sticking with demand statistics, another weekly export sales report is due Thursday and should reveal more about the state of foreign interest in US corn. Analyst estimates are running from 400,000 to 700,000 metric tons, and last week’s total was 569,200 tons. Aside from the sales total, traders will remain fixated with weather reports, and generally speaking until extensive rains actually douse the dry areas of the Corn Belt traders will remain highly reluctant to hold on to any short exposure for the foreseeable future.

Technicals:No technical comments today


Recommendations:

Speculative:NONE

Hedge Positions: 
3-9-07: Bought December $4.00 Puts / Sold December $5.60 Calls @ ~$.25 Soybeans:
Fundamental: The soybean market was the laggard of the agricultural markets Wednesday as it took a backseat to the sharp price rises in wheat and corn. July soybeans ended the session down ¾ cents, and new crop November down ½ a cent. Early weakness stemmed from forecasts that were somewhat less threatening and offered some mild relief to drier sections of the east, and slightly cooler temps, but the buying frenzy in wheat and corn eventually aided the bean market in limiting losses.

There really wasn’t much of a story for the beans today, other than sharply lower Malaysian palm oil markets overnight that added to the weakness in both soybean oil and bean futures. The market was set to continue its downward correction until the buying frenzy in wheat and corn showed up to help prop up soybean futures to near unchanged levels. News wise, it was non-existent during the session, but it was noted that midday basis quotes were a bit weaker. Other than that, the trade is looking forward to the NOPA crush figure Thursday, along with another round of weekly sales. NOPA soybean crush numbers are expected somewhere in the area of 143-146 million bushels, while trade estimates are looking for soybean sales in the neighborhood of 150-250,000 tons, meal sales around 50-125,000 tons, and oil sales in the neighborhood of 0-10,000 tons.

Aside from the sales, the weather will remain a key driver of this market, and the bottom line is that the Eastern Corn Belt and Delta remain dry and will deteriorate further unless an all-encompassing rain event moves through and replenishes soil moisture levels. For now at least, it would seem that the beans are going to take a backseat to corn and wheat while they work out their fundamental and technical issues. On the product front, further fallout in the palm oil market could lead to additional weakness in bean oil futures that could also weigh on the beans themselves. Meal futures, meanwhile, could be set to gain from any further oil pullbacks as traders reverse recently established long oil versus short meal spreads.

Technicals:
No technical comments todayRecommendations:

Speculative:
NONE

Hedge Positions:
3-9-07: Bought November Soybean $7.80 Put / Sold November $10.40 Call @ ~$.35

 Wheat:Fundamental: 
US wheat futures scaled fresh 11-year highs Wednesday on both the CBOT and KCBT as strong positive technical momentum combined with continuing concerns about global production prospects sparked heavy bursts of speculative buying and short covering. Fresh concerns have emerged regarding the state of hard red winter wheat crops in the US Southern Plains as rains continue to hamper harvest progress and leave the crop increasingly vulnerable to disease.

Meanwhile, crops in the Ukraine, Australia and China are under dryness stress due to a lack of rains, and concerns about production totals in those areas continue to limit wheat’s downside price room. Demand news has also been supportive for wheat lately, especially reports that India may hold a tender to import up to 2 million metric tons of wheat by the end of the month. Also, US exporters may raise the price of wheat they’ve offered so sell to Iraq on the back of the recent extensive climb in global wheat values. From a technical or chart perspective, July wheat values on the CBOT have put on an impressive show in recent days, surging more than 60 cents a bushel since last Friday’s close and settling Wednesday 69 ¾ cents higher than they did just one week ago. Much of this strength has been fueled by forced short covering, as traders holding short positions scramble to limit to their losses amid a strongly rising market.

As a decent number of shorts remain in this market, more such buying could well be seen in the days ahead that could allow the current impressive price rally to persist. However, as strong as the upside momentum has been, various indicators tracking the price have now entered deep into overbought territory – signaling that a pullback is possible at some point. But for now this market clearly remains in the grips of a bull run, so sellers are likely to stay scarce for a while longer yet. Analyst estimates for Thursday’s export sales report run from 200,000-400,000 metric tons, and 312,100 tons were sold last week.Technicals:


No technical comments today
Recommendations:
NONE

Speculative:NONE 

Beef....There was light cash trade in NE at lower money which indicates the seasonal low in the cash market has not been established yet. The NE cash occurred at 141 on the hot beef, down 3.00 from last week. The beef was lower at noon which contributed to general selling pressure in live cattle futures. In feeders, as corn moved to within 15 cents of fresh contract highs, aggressive selling pounded this market to new recent lows. We’re starting to hear that placements might be up during May on the next cattle on feed report. All together, the negative fundamental news in tandem with the bearish technical pattern has the bearish trader in charge. Today’s kill was pegged at 126,000 compared to 127,000 last year. The closing beef report was a mess with the choice beef cutout down 1.79 at 147.58. Movement, however, was good at 373 boxes and 134 trim.

Pork....A pullback tied to profit taking in lean hog futures allowed futures to pull back today following two days of impressive gains. Seasonal pork demand should support the dressed pork as hog numbers taper off and average weights continue to decline. Look for firm to higher cash into early next week. Today’s kill was pegged at 383,000. The weekly kill is running below last year. Look for further seasonal strength heading into the early July time frame. Expect support in the July hogs on either side of 7500. June hog futures go off the board on Thursday. Today’s late cash report confirmed good strength in the cash market out west with the eastern cash near steady. Simply put, higher corn should translate into higher hog prices. Tonight’s pork cutout value surged, closing up 2.11 at 76.99. This should put some real starch in the futures on the opening bell. In fact, the electronic trade saw the bids rally about 40 points on the cutout news. 

Positions:

New Recommendations:None