CottonCotton spent the week consolidating after last week’s sharp sell off in conjunction with equity prices. Specs may have realized this week that they may have thrown the baby out with the bathwater. The trade was nervous that a slowing economy would hurt US demand. However, cotton faces a double booster of growing global demand combined with some serious acreage competition in 2008. Farmers are busy readying planting intentions for the Spring and with record high prices in corn, wheat and soybeans, cotton looks to get the short end of the stick. This means less cotton in the fall which should be long term supportive to prices. We expect funds to begin reestablishing longs at this weeks consolidation level. However, we don’t see premiums high enough to write any puts as of yet.
Orange JuiceJuice saw very little change this week as market participants wait for the USDA to announce Florida’s estimated crop size early this month. While last month’s figure was unchanged from the prior months at 168 million boxes, some estimates have this month’s figure 2-3 million boxes lower which could lend support in coming sessions.
CocoaWhile many commodities in the softs patch saw this week’s prices consolidating, cocoa was one of the week’s big winners as new contract highs were scored on Friday at $2337 per ton basis the March contract. This puts the market up $125 per ton on the week. While bullish fundamentals are deeply entrenched in this market, we’ve heard rumblings of producers are finally looking to sell this rally as beans will once again flow out of the Ivory Coast. With growers willing to sell at current levels, a pullback in prices can be expected in the near term.
SugarSugar prices consolidated this week as the world awaits direction from the energy markets. Producers worldwide will be implementing sugar production towards food more than earlier estimated if energy prices continue to work lower.
CoffeeIn addition to cocoa, coffee enjoyed price strength this week as New York Arabica prices were dragged up kicking and screaming by London Robusta. Vietnam, the world’s second largest robusta producer continues to hold Robusta beans off the market as the world waits for the Brazilian harvest to begin. As this is still 2-3 months off, Vietnam remains the only game in town. Continued strength could be an opportunity to write distant calls in coffee as we expect the world to be awash in fresh supply when the Brazilian crop arrives in earnest.
James Cordier and Michael Gross Liberty Trading Groupwww.OptionSellers.com(800) 346-1949(813) 472-5760 (International)
Would you like more information about selling options in the commodities markets or building a portfolio based on the option selling approach? Feel free to call or visit us on the web at www.OptionSellers.com and request your free Option Sellers Information Pack.
***The information in this article has been carefully compiled from sources believed to be reliable, but it's accuracy is not guaranteed. Use it at your own risk. There is risk of loss in all trading. Past performance is not necessarily indicative of future results. Traders should read The Option Disclosure Statement before trading options and should understand the risks in option trading, including the fact that any time an option is sold, there is an unlimited risk of loss, and when an option is purchased, the entire premium is at risk. In addition, any time an option is purchased or sold, transaction costs including brokerage and exchange fees are at risk. No representation is made that any account is likely to achieve profits or losses similar to those shown, or in any amount. An account may experience different results depending on factors such as timing of trades and account size. Before trading, one should be aware that with the potential for profits, there is also potential for losses, which may be very large. All opinions expressed are current opinions and are subject to change without notice.
