05.30.12

Filed 5.31 at noon

                            Last                                Last Week (5.23.12)

July Crude                  87.46                          89.90

July Heat                    273.57                        281.55

July Gas (Blended)    275.76                        280.15

Weekly supply and demand figures from the Department of Energy were delayed by a day because of Monday’s observance of Memorial Day. Crude prices broke down to seven month lows as traders factored out the probability of a stimulus package from China.  Crude also reflected the ongoing European sovereign debt crisis and the possibility of an economic contraction in the EU. European consumer confidence readings were also lower. Brent crude traded at its lowest level since December 2011. Crude also reflected accelerating borrowing costs of Italy and Spain. A stronger dollar has also put pressure on crude prices. Ever expanding US oil production is another negative for this market. US crude output rose by 90,000 barrels a day to 6.24 million for the latest reporting week. Pump prices have yet to reflect wholesale price reductions for gasoline. Traders are speculating that this week’s supply/demand figures will show supplies at levels not seen since 1990. The combination of a stronger dollar and a weaker Eurocurrency has squeezed value out of commodities almost across the board. OPEC continues to seem eager to see lower prices through ramping up production but many doubt that they will be able to sustain the current levels of increased production.

Now for the charts…

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July Platinum          1404.80           1414.10

Gold was higher than last week at this time even as the EC fell to its lowest level since July 2010. Some traders were using gold as a hedge against the sovereign debt situation in Europe. Spanish debt yields climbed as that country’s central bank governor resigned a month ahead of schedule. Still, the metal is lower on the year after

11 consecutive yearly gains. Recently, gold has found buyers looking to hedge against a potential financial contagion as a result of a European credit event. Thursday morning’s numbers regarding the ADP private jobs forecast was a negative as was the second look at Q1 GDP. Friday the 31st is first notice day for June gold futures.

As for the gold chart, we have a stochastic crossover and a triple bottom. Buyers and sellers seem skewed slightly to the buy side. Platinum looks the worst of the three charts.

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SOFTS

                                    Last                             Last Week

July Coffee               164.40                                 166.90

July Sugar                19.48                                   19.51

Coffee trades to a 20 month low, Vietnam raised their export forecast by over 3% even as producers are holding back product to try and raise prices.

The uncertainty in Europe and the potential for a serious economic contraction occurring as a result of a negative credit event has kept pressure on most commodities, especially sugar. The progress being made in the Brazilian harvest is expected to pressure prices. Traders are looking for an increase in global surpluses. Also,

pressure on the Brazilian real, trading at a three year low versus the dollar, has resulted in more sugar being offered for sale.  Lower gasoline prices have diverted cane sugar production away from ethanol production.

Neither chart suggests a buying opportunity.

Support                       Resistance

July Coffee              162.50                         169.00

July Sugar                 18.75                            20.00

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Last                       Last Week

July Soybeans               13.766                          13.654

July Corn                       5.602                            6.046

July Wheat                     6.516                            6.682

Soybeans were higher in price than a week ago as the condition of the US crop deteriorated as hot, dry weather stressed the crop. 89% of the crop is in the ground. 72% of the corn crop was in good to excellent condition, down from 77% from last week. Corn was down about 11% for the month on the idea that farmers are expected to come in with a record harvest. Year on year production is expected to see an increase of 20% to 14.79 billion bushels as acreage will be at levels not seen since 1937. Yield is now expected at 165 bushels per acre down from a projected 169 a week earlier. Dollar strength has made the US crop more expensive by comparison to other producing nations.

The corn chart continues to reflect dollar strength and crop size.

Soybeans look constructive in price action.

Wheat is still under the pressure of a massive doji.