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Market Wrap-Up by Chris L. Haverkamp Date: 02/03/12 Estimated Update: 02/06/12 Company: Paragon Investments, Inc. Phone: 888-452-8751 eMail: info@pitrader.com Website: www.ParagonInvestments.com

Fundamental: March Wheat finished down 11 1/2 at 662 3/4, 11 1/2 off the high and 5 3/4 up from the low. July Wheat closed down 5 1/2 at 691 3/4. This was 5 3/4 up from the low and 5 3/4 off the high. March wheat closed sharply lower on the session as the market corrected part of the steep gains from the past two sessions. The weakness in European wheat futures and ideas that the cold weather in Europe will subside soon and not cause too much damage to the winter wheat crop helped to pressure the market early. A turn from higher to lower on the day for the US dollar helped support a recovery bounce from the early lows but sellers were active late in the day to drive the market to new lows for the day. Net weekly export sales for wheat came in at 518,900 metric tonnes for the current marketing year and 35,200 for the next marketing year for a total of 554,100 which was a bit higher than expected. Sales of 231,000 metric tonnes are needed each week to reach the USDA forecast. The European Union granted export licenses for 178,000 tonnes this week which pushed cumulative sales for the 2011/12 season to 8.1 million tonnes as compared with 12.6 million last year by this date. Technical: March wheat was lower, consolidating after the new high for the move yesterday. This higher action seemed to confirm an upside breakout above the downtrend line drawn off last fall's highs, but today's action is wanting to test just how strong that breakout is. The Elliott Wave theory shows this an ABC correction that would imply another leg down. Support should be the previous resistance at the 100-day moving average of 645.6. The low-range close below the pivot point suggests a bearish bias for Friday. Directionals look like they are turning over from near overbought conditions to favor the sell side.

Live cattle futures were lower on Thursday. Profit taking controlled the day. The new contract highs in the deferred contracts looked lofty, especially amid the lack of cash cattle trade. Futures direction will likely follow cash, but there seems to be little confidence in picking the direction of cash. The weak beef market, both price and movement, suggests that the packer should be able to demand lower prices. Cattle owners are touting smaller showlists and the short bought packer situation as reasons to hold out for higher prices. It would seem that weights should be on the increase, but not seeing that in the Actual Weekly Slaughter reports yet (granted that is two week old data). Cattle slaughter was pegged at 119,000 head, suggesting that packers continue to reduce slaughter schedules. Ash Wednesday is less than three weeks' away, commonly the start of weak consumer demand for beef. There seems to be little interest in featuring beef before then which doesn't speak well for beef demand holding up beef and cattle prices. Feeder cattle futures were lower, following live cattle for the most part, but the main sell factor being profit taking after new contract highs posted yesterday. The action today put inside days on the chart. Traders will be content to consolidate here until they know what the fed cattle cash market is going to do. Higher fed cattle prices are needed for profitable feeding margins, which would help to continue fueling feeder demand. With lower prices, unprofitable margins, and weaker feeder demand, then it won't matter as much about the tight feeder cattle supplies, likely going to see a correction in the strong uptrend in feeder futures over the last two months. Lean hog futures were mostly lower on Thursday. Follow-through buying, then profit taking, then more spec buying, and then a weak finish made for a small roller coaster ride today. The session highs scored new contract highs in the deferred contracts. The most active April contract put a reversal top on its chart after failing to take out resistance at the 100-day moving average of 90.85. Cash fundamentals seemed to offer something for both sides of the trade, but this was bearish for futures which hold premiums beyond February. The outside markets were mixed as well. Profit-taking was likely a big part of today's finish and will likely be a part of Friday's trade, especially if there continues to be only minor help to the buy side from cash or the outside markets. Milk futures were sharply lower on Thursday. The big double-digit losses following the big losses on Wednesday made for huge down moves on the charts for the spring contracts. Follow-through selling, sell stops, and lower product prices were the reasons for today's selloff. The bearishness seems like it should be overdone. The March milk contract has fallen more than $2 since the early January reversal top. This week's drop looks like a third wave lower, so after a fourth wave correction the Elliott Wave theory is calling for another 50 cents to $1 drop to put in a fifth wave bottom. The same thing can be said for the April and May contracts. Fundamentally the large spring production could easily justify such a move if demand doesn't keep pace.

Corn Futures Fundamental: March Corn finished up 1 at 643, 4 off the high and 8 3/4 up from the low. May Corn closed up 1 1/4 at 649 1/2. This was 9 up from the low and 3 1/2 off the high. March corn closed 1 cent higher on the day after choppy and volatile trade. Weakness in wheat clashed with strength in soybeans and strong export news to keep the trade choppy. The market pushed lower on the opening but ideas that the cash market is still tight, better than expected export news and a turn from higher to lower for the US dollar helped spark a rally to slightly higher on the day into the mid-session. Improved weather for South America was seen as a negative force for the lower opening. Weekly export sales for corn came in at 912,000 metric tonnes for the current marketing year and 63,000 for the next marketing year for a total of 975,000 which was higher than expected. As of January 26th, cumulative corn sales stand at 65.9% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 59.6%. Sales of 457,000 metric tonnes are needed each week to reach the USDA forecast. On top of the weekly sales, private exporters reported a sale of 107,340 tonnes of US corn to Japan. In addition, a Taiwan feed group will tender on Friday for 47,000 to 60,000 tonnes of corn from the US or South America for March/April shipment. Open interest in corn was up 9,811 contracts to push to the highest level since late November. Technical: March corn was slightly higher, seeing both sides of unchanged as it consolidated after making a new high for the move on Wednesday. The close was above mid-range and the pivot point to suggest a bullish bias. Stochastics favor the buy side as they are trending higher, but the RSI action is choppy with a mid-range value that could support a move in either direction. The last two sets of extremes posted over the last three months give trend lines that define support at 602 and resistance at 657. Key support looks to be the December low of 576.25. Key resistance would be this month's high of 664.25. Moves outside of those ranges are needed to define direction.

Fundamental: March Soybeans finished up 1 3/4 at 1217, 8 off the high and 10 3/4 up from the low. May Soybeans closed up 1 1/4 at 1225 1/2. This was 10 1/4 up from the low and 8 off the high. March Soymeal closed up 1.1 at 323.4. This was 3.6 up from the low and 3.8 off the high. March Soybean Oil finished up 0.01 at 51.19, 0.15 off the high and 0.33 up from the low. The market opened sharply lower and shot up to early highs which were moderately higher on the day only to close 8 cents off of the highs but slightly higher on the day. A turn down in the US dollar and a bounce in equity markets plus a firm cash basis level helped to support a strong recovery from the opening to trade moderately higher on the session into the mid-day. Weakness in wheat helped to pull the market off of the highs. On top of the weekly sales news, Taiwan buyers are in the market for up to 60,000 tonnes of US or South America soybeans for late March shipment. Net weekly export sales for soybeans came in at 308,400 metric tonnes for the current marketing year and 60,000 for the next marketing year for a total of 368,400. Cumulative soybean sales stand at 75.8% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 82.2%. Sales of 268,000 metric tonnes are needed each week to reach the USDA forecast. Meal sales came in at 74,700 metric tonnes as compared with a weekly average of 96,000 tonnes necessary each week to reach the USDA forecast. Oil sales were 6,700 metric tonnes as compared with 10,000 necessary each week to reach the projection. Traders see improving weather in Argentina this week and rains for the dry areas of southern Brazil by late in the weekend and early next week. Technical: March soybeans were slightly higher on Thursday, moving up to test resistance at the downtrend line drawn off the recent highs, currently at 1226.5.The close got above the 100-day moving average, above mid-range, and above the pivot point to suggest a bullish bias for Friday. It is not certain that the trade won't go back below that resistance like last week. Support is the uptrend line drawn off the previous swing lows, which is 1186 for tomorrow. Directionals have taken on a choppy, sideways pattern, holding mid-range values that could support a move in either direction. Bulls need a move above the January high of 1244.75 to continue the uptrend. Bears need a move below the January low of 1150 to get the trend in their favor.

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