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On October 10 at 11:00 a.m. CDT, the USDA will release its World Agriculture Supply Demand report.

Soybeans:

November soybeans lost 1.50 cents on extremely heavy volume of 341,199 contracts. Remarkably,volume was the second-highest of 2014, the highest being on February 27 when 427,926 contracts were traded and November soybeans closed at $11.55 1/2. Additionally, volume exceeded that of June 30 when 337,009 contracts were traded and November soybeans closed at 11.57 1/4. On October 7, total open interest increased by 9,952 contracts, which relative to volume is approximately 15% above average meaning that new short sellers entered the market on the rally and drove prices moderately lower at the close. The November contract lost 2,305 of open interest, which makes the total open interest increase more impressive (bearish). November soybeans made a high of 9.55, which slightly takes out the September 22 high of  9.54 3/4. As this report is being compiled on October 8, November soybeans are trading 9.75 cents lower and has made a daily low of 9.26 1/2, which is above the contract low of 9.04 made on October 1. Stand aside.

Soybean meal:

December soybean meal advanced $3.70 on heavy volume of 110,724 contracts.Volume was the highest since September 11 when December soybean meal lost $8.00 on volume of 128,146 contracts and December soybean meal closed at 329.20. On October 7, total open interest increased by 3,791 contracts, which relative to volume is approximately 40% above average meaning that aggressive new longs were entering the market in substantial numbers and driving prices to a new high for the move (316.80), which is the highest print since September 19 when December soybean meal closed at 315.40 after making a daily high of 320.20.

Making the total open interest increase more impressive was the fact that the October contract lost 745 of open interest, December 2014 -2772. For the past 2 days, soybean meal has advanced $13.80 and total open interest has increased by a massive 7,700 contracts. On October 6, December soybean meal advanced $10.10 and total open interest increased by 3,909 contracts whereas soybeans advanced 30.00 cents and total open interest declined by 1,146 contracts. As this report is being compiled on October 8, December soybean meal is trading 2.70 lower and has made a daily low of 307.10, which is above its contract low of 295.10 made on October 1. December soybean meal remains on a short and intermediate term sell signal. Stand aside.

Soybean oil:

December soybean oil lost 35 points on heavy volume of 115,101 contracts.Volume was the strongest since September 25 when December soybean oil lost 2 points on volume of 126,544 contracts and total open interest increased by 785 contracts. On October 7, total open interest increased by 913 contracts, which relative to volume is approximately 60% below average. The October contract accounted for loss of 243 of open interest, December 2014 -11,654. We consider the total open interest increase to be bearish, although we are not bearish soybean oil. As this report is being compiled on October 8, December soybean oil is trading 10 points lower and has made a daily low of 32.82, which is below OIA’s key pivot point for October 8 of 33.09. For longer-term traders, we continue to like buying May 2015 soybean oil and selling December 2015.Other than that, stand aside.

Corn:

December corn advanced 8.00 cents on heavy volume of 331,965 contracts.Volume was the strongest since August 12 when 561,340 contracts were traded and December corn closed at 3.69. On October 7, total open interest increased by 4,467 contracts, which relative to volume is approximately 45% below average, but the fact that open interest increased on a price advance is very positive. The May 2015 contract accounted for loss of 505 of open interest. October 7 marked the 2nd day in a row that corn prices advanced along with open interest. This definitely indicates that short sellers are digging in and refusing to liquidate. The upcoming USDA report on October 10 will let us know who is on the right side of the market.

As this report is being compiled on October 8, December corn is trading 1.50 cents higher and has taken out yesterday’s high of 3.42 1/4 with a slightly new high of 3.43 1/2.In order for December corn to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for October 8 of 3.38, and the low for October 8 has been 3.37 1/2. As we said in yesterday’s report, we think December corn is the most likely candidate for having made a seasonal low on October 1 of 3.18 1/4. Continue to stand aside.

Chicago wheat:

December Chicago wheat advanced 14.75 cents on heavy volume of 108,182 contracts.Volume was the strongest since September 3 when 116,346 contracts were traded and December Chicago wheat closed at 5.35 3/4. On October 7, total open interest declined by a massive 10,082 contracts, which relative to volume is approximately 300% above average, meaning that liquidation was off the charts heavy. The December contract accounted for loss of 7,887 of open interest, March 2015 -1833, May 2015 -972. In short there was liquidation across the board as prices advanced to their highest level since September 12 (5.09 1/4). It appears that panicked short sellers were liquidating in heavy numbers as prices moved higher. As this report is being compiled on October 8, December Chicago wheat is trading 1.75 higher and has made a daily high of 5.11 3/4, which was yesterday’s key pivot point. Today’s key pivot point is the same as yesterday’s, and December Chicago wheat must make a daily low above 5.11 3/4 in order to generate a short-term buy signal. Unless there is a surprise in the upcoming USDA report on October 10, a short-term buy signal appears unlikely.

WTI crude oil:

November WTI crude oil lost $1.49 on heavy volume of 704,152 contracts. Volume was slightly above that of October 3 when November WTI lost 1.27 on volume of 698,905 contracts and total open interest declined by 2,857 contracts.On October 7, total open interest increased only 481 contracts, which is minuscule and dramatically below average. However, the November contract accounted for loss of 18,722 of open interest, which makes the minor total open interest increase slightly more impressive (bearish). We continue to be amazed by the lack of major open interest increases when WTI declines substantially. It appears that WTI is falling on its own weight, and as this report is being compiled on October 8, November WTI is trading 1.43 lower and has made a new contract low of 86.83, which is the lowest print since the week of April 15, 2013 (85.61).November WTI remains on a short and intermediate term sell signal. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.0 million barrels from the previous week. At 361.7 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 1.2 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.4 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories rose 1.1 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 3.8 million barrels last week.

Natural gas: OIA recommends the liquidation of bull call spreads if this has not been done already. We continue to like the long of February 2015-short April or May 2015 natural gas.

November natural gas advanced 5.9 cents on fairly heavy volume of 326,367 contracts. Volume was the strongest since September 25 when natural gas advanced 4.9 cents on volume of 336,126 contracts and total open interest declined by 12,828 contracts. On October 7, total open interest declined by a massive 11,511 contracts, which relative to volume is approximately 40% above average meaning that liquidation was extremely heavy on the minor advance. This is very bearish, and on October 8, natural gas is trading 10.2 cents lower and the February 2015-May 2015 spread has narrowed 3.7 cents.

The low for the February 2015-May 2015 spread, 26.9 cents premium to February 2015, was first made on July 22 and a subsequent test of this low occurred on September 23, but the market was unable to break it. As this report is being compiled on October 8, the February 2015-May 2015 spread is trading 32.3 cents premium to February 2015.

Cotton:

December cotton advanced 83 points on volume of 21,965 contracts. Volume shrank considerably from October 6 when December cotton advanced 1.91 cents on volume of 31,042 contracts and total open interest declined by 808 contracts. On October 7, total open interest increased by 488 contracts, which relative to volume is approximately 40% below average. Yesterday, December cotton made a high of 65.29, and this continued to be the high throughout the evening and day session of October 7 and 8. In order for December cotton to generate a short-term buy signal, the low must be above OIA’s key pivot point for October 8 of 64.38, and the low thus far has been 64.30. December cotton remains on a short and intermediate term sell signal. Stand aside.

Sugar #11:

March 2015 sugar advanced 5 points on light volume of 77,505 contracts. Total open interest declined by 5,171 contracts, which relative to volume is approximately 160% above average meaning that liquidation was heavy on the modest advance.October 7 was the 2nd day in a row that sugar prices advanced and total open interest declined. During the past 2 days, March 2015 sugar has advanced 59 points while total open interest has declined by 14,417 contracts, which means that short covering has been powering the market higher, not new buying. In order for March 2015 sugar to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for October 8 of 16.95.

Cocoa:

December cocoa lost $28.00 on fairly heavy volume of 27,651 contracts.Volume was the strongest since October 2 when December cocoa lost 82.00 on volume of 33,058 contracts and total open interest declined by 4,326 contracts. On October 7, total open interest declined by 868 contracts, which relative to volume is approximately 30% above average. For the past 5 days, open interest has declined every day bringing the 5 day total decline to 13,114 contracts while December cocoa has lost 249.00. As this report is being compiled on October 8, December cocoa has closed lower again, this time by 13.00 and has made a new low for the move at 3,030. At this juncture, it appears likely that cocoa is going to take out the September 11 low of 3,019, but we do not think the bull market in cocoa is over yet. The question is where will the market find support, especially since cocoa has shed huge numbers of longs, which should reduce selling pressure in the weeks ahead. On October 2, December cocoa generated a short and intermediate term sell signal. Stand aside.

Coffee:

December coffee lost 4.45 cents on volume of 23,753 contracts. Volume fell dramatically from October 6 when December coffee advanced 14.30 cents on volume of 35,376 contracts and total open interest increased 450. On October 7, total open interest declined by 394 contracts, which relative to volume is approximately 35% below average. The December contract accounted for loss of 735 of open interest. As this report is being compiled on October 8, December coffee has closed at 2.1445, down 1.90 cents. We continue to like the long July 2015-short March 2016 futures spread and on October 8, the spread has narrowed 15 points. December coffee generated a short and intermediate term buy signal on October 1.