Coffee, Sugar and Cocoa: March coffee closed at $2.2950, down 6.2c on long liquidation in front of the weekend and the strong dollar in which it is denominated. We could see price gains tied to Colombia downgrading its output estimate for the third time in four months and in front of the revival for La Nina weather patterns. I like the long side of coffee from here. March cocoa closed at $2,229 per tonne, down $58 as traders moved to the sidelines tied to concern over West Africa’s increased production estimates. With Ivory Coast and Ghana the largest producers we would await reports from those countries and Brazil and Indonesia before committing to purchases but we remain friendly towards cocoa. March sugar closed at 23.53c per pound, down 6 points and remains rangebound. We have been negative for sugar and see no reason to change our opinion unless some new fundamentals emerge.
Cotton: March cotton closed at 91.84c per pound, up 54 points on pre-weekend shortcovering after recent selling that took prices down from the $2.20 area. Reduced consumption expectations along with increase global stockpiles, the most since 2005, and prompted the 58% decline from the March high of $2.197 per pound. Gains in output from Australia, India, and China offset the decline in U.S. production caused by the worst conditions since the "dust bowl" of the 1930’s. We think the selling may be overdone and would look to buy some call options on the chance that a correction after the heavy selling is in order. I don’t usually suggest trading corrections but the severity of the decline prompts me to look at the long side through the purchase of call options.
John L. Caiazzo