New York futures attempted to stage a recovery
rally yesterday, however, buying interest faded as heavy losses in outside
commodity markets weighed on ring traders late in the session. March closed
at 54.56 down 33 points. Futures opened slightly lower on follow through
commission house and local selling. Trade buying below 54.40 basis March
prompted ring short covering, which led to a moderate commission house buying
event. The early rally was attributed to a lack of overhead selling rather
than aggressive buying. The leading Memphis merchant contributed to the early
strength in selling both march and May puts. Some light trade selling capped
the advance above 55.30 basis March. Option activity turned bearish in volume
call selling in the afternoon to back prices down 40 points from the session's
high. Local long liquidation backed prices down 70 points in the last 15
minutes of the session. The March/May switch traded between 80 and 100 points
and went out 90 bid at 95 May over.
In options, the leading Memphis merchant sold 600 March 56 calls, sold 300
December 60 calls, bought 250 May 58 calls/sold December, sold 500 March 52
put/58 call strangles, sold 600 March 54 puts, 200 March 57 calls and 100 May
54 puts. Goldman Sachs bought 600 March 54 puts and Fimat bought 100 December
55 puts/sold 65 calls. UBS sold 150 March 54 put/56 call strangles. Man
bought 150 May 65 calls and bought 100 December 64 calls/sold 58 puts.
Volume: 12,231 Calls: 3,593 Puts:
The weekly USDA U.S. export sales were 57,600 running bales, which was 51%
below the previous week and 70% below the prior 4-week average. Major buyers
were Mexico 26,900, Turkey 9,600, Canada 8,100 and Thailand 5,000. Shipments
were 136,000 running bales or 7% below the previous week and 11% under the
prior 4-week average.
The cumulative exports now total 6,305,800 net weight bales versus 10,750,300
bales for the same period last year. On a weekly basis, 323,100 bales are
required to meet the 16 million bale USDA projection. Total seasonal shipments
now stand at 3,117,300 net weight bales and 429,400 bales are needed per week
to meet the USDA target.
Today's USDA weekly export sales report will only reinforce the growing
perception that U.S. export registrations will not meet the USDA's 16 million
Prices on the CNCE e-trading platform were 11 and 2 points lower in the
January and February contracts respectively.
The weekly AWP is 45.90 down from 46.67 last week.
The ICE announced that it anticipates the completion of its merger with the
NYBOT by mid January and will launch a side-by-side electronic trading
platform of the NYBOT's benchmark agricultural commodities for trade date
January 19, 2006. It has not been determined if options trading will be on
the electronic platform. The NYBOT open outcry market hours will not change.
Electronic trading will be offered around the clock each trading day for
Cotton No. 2 (CT), along with other NYBOT contracts. It is expected that the
electronic markets will be available from 8:00 p.m. EST the prior evening
until 6:00 p.m. EST of the trade date. The contract specifications and
commodity codes will remain the same for both floor and electronic contracts,
which will be fungible with one another. There will not be any changes to the
current NYBOT exchange fee structure.
An article from Investor's Business Daily reported that the Royal Bank of
Scotland Group's services index declined to 57.2 in December from November's
reading of 57.6. Most economists were anticipating the index to remain flat,
thought he gauge still points to solid growth. According to the article, "The
mild service-sector slowing may be due to higher interest rates, a January 1
sales tax hike in Germany and waning demand for European exports as the global
While the longer term trend remains up, the near term trend has turned down.
The collapse in U.S. energy prices this week has weighed heavily on U.S.
commodity price environment. While there is good continuation support visible
below 54.00 basis March due to a deflationary commodity price environment, one
should allow the potential for a retracement back to 52.00 basis March.
Support basis December is 54.00-52.00 and resistance