Cotton higher after buyers reject Chinese cotton

COTTON

General Comments:  Futures were a little higher on news that the Chinese government auction of its Cotton stocks went poorly.  Buyers there were not interested due to poor quality and relatively high prices.  The news implied that demand for world Cotton can stay strong as mills in China will still import despite big import fees and taxes.  The current low prices are bringing into question what farmers in Texas and the Delta and Southeast will plant this year.  Some are wondering if planted area might be lower this year here in the U.S. because of weak prices against competing crops.  The area lost would go mostly to Corn and Soybeans.  Current weather features some precipitation in Delta and Southeast areas, but western Texas was mostly dry.  Delta areas will turn dry today.  Trends are not well defined on the charts, but ideas are that the market can continue to work higher overall.

Overnight News:  The Delta will be dry all week and Southeast will get showers or rains through Thursday, then will see dry conditions move from west to east the balance of the week.  Temperatures will average near to above normal.  Texas will get dry weather.  Temperatures will average near to above normal.  The USDA spot price is now 71.65 ct/lb.  ICE said that certified Cotton stocks are now 0.102 million bales, from 0.101 million yesterday. 

Chart Trends:  Trends in Cotton are mixed to up with objectives of 77.30 and 78.40 March.  Support is at 75.30, 74.40, and 73.70 March, with resistance of 76.40, 76.95, and 77.05 March.

FCOJ

General Comments:  Futures closed lower again as warm and dry weather continued in Florida.  It has been cold in California where some of the citrus could be affected, but so far there have been no reports of losses.  California will see moderating temperatures through the weekend.  Weather remains good in Florida, although more rain would be beneficial.  Temperatures remain mild in the state, and conditions are mostly dry.  Forecasts call for mostly dry conditions to continue.  Fruit is holding for now, and irrigation is being used by producers to hold crop condition.  Harvest in Florida of mid and early oranges is continuing.  Demand for domestically produced Juice remains down from last year.  Weather in Brazil is reported to be good.  Brazil is seeing warm temperatures and light showers or dry conditions.

Overnight News:  Florida weather forecasts call for mostly dry conditions.  Temperatures will average above normal.

Chart Trends:  Trends in FCOJ are mixed.  Support is at 109.00, 108.00, and 107.00 March, with resistance at 115.00, 118.00, and 122.00 March.

Next page: Coffee, Sugar and Cocoa

COFFEE 

General Comments:  Futures were mostly a little lower after trading both sides of unchanged.  Charts still show that all three markets are in short term up trends.  Current crop development is good this year in Brazil, and production areas are getting beneficial rain for the developing crop.  Central America crops are getting harvested, and conditions are called good there.  There are widespread reports of rust on the trees and leaves, and Roya has become a big issue as well.  It is possible that many Central America and Mexico producers will harvest much less Coffee next year if they are affected by this disease, and many seem to be affected.  Costa Rica says the country could lose up to 30% of the crop, and Mexico expects to see a significant impact.  Crops in Guatemala, Honduras, and El Salvador have also been affected, but so far crops in Nicaragua seem to show less damage.  Colombia is reported to have good conditions. 

Overnight News:  Certified stocks are higher today and are about 2.601 million bags.  The ICO composite price is now 137.58 ct/lb.  Brazil should get scattered showers and storms through the weekend.  Temperatures will average near to above normal.  Colombia should get mostly dry conditions, and Central America and Mexico should get mostly dry conditions, but a few showers are possible in central and eastern Mexico.  Temperatures should average near to above normal.   GCA stocks were 4.735 million bags at the end of December, from 4.902 million at the end of November.

Chart Trends:  Trends in New York are mixed to up with objectives of 158.00, 160.00, and 170.00 March.  Support is at 149.00, 146.00, and 143.00 March, and resistance is at 157.00, 160.00, and 162.00 March.  Trends in London are up with objectives of 2100 and 2290 March.  Support is at 1945, 1930, and 1910 March, and resistance is at 1980, 1990, and 2000 March.  Trends in Sao Paulo are up with objectives of 199.00 March.  Support is at 187.00, 184.50, and 183.50 March, and resistance is at 193.50, 195.00, and 196.00 March.

SUGAR

General Comments:  Futures closed lower on follow through selling tied to reports of beneficial rains in Brazil and on no real demand news.  The market found support despite news from Brazil of increased production.  Production has been strong in Brazil so far this year, but the areas with the best weather have been in the Center-South region.  The rains are also now in the north where conditions had been too dry.  Futures are in a trading range, but trends are turning down.  News of any kind remains hard for the traders to find.  There was no demand news to support values.  Big Brazil production remains negative to prices, and traders know that Indian and Thai production is in the market, too.  The Thai crushing season is underway with good production expected, but the crushing pace remains slow.  Traders wonder if and when India will cut offers to the market due to the lower prices and perhaps less than expected production due to some dry weather at the beginning of the growing season.  Brazil production continues strong.

Overnight News: Scattered and light showers are expected in Brazil through the weekend.  Temperatures should be near to above normal

Chart Trends:  Trends in New York are mixed.  Support is at 1850, 1830, and 1800 March, and resistance is at 1900, 1925, and 1945 March.  Trends in London are mixed.  Support is at 500.00, 495.00, and 490.00 March, and resistance is at 510.00, 515.00, and 520.00 March.

COCOA

General Comments:  Futures closed a little higher again in consolidation trading.  The EU grind data was negative, but a bad number had been expected so the down reaction was not as big as it might have been.  The US data will be released later this week.  Good arrivals in Africa are negative and are continuing.  Ivory Coast arrivals are strong, and the trend for strong arrivals from there should continue.  Malaysia and Indonesia crops appear to be in good condition and weather is called favorable.  Overall weather patterns in West Africa production areas are good for harvest progress.  Demand is reported weaker from the US and Europe, in part due to current economics and in part due to changes forced by the World Bank that encouraged forward marketing of the crops.  The market needs some demand news or some other news to shake it out of the sideways to lower trade, but the EU and Ivory Coast data implies that a lower trade can continue.

Overnight News:  Mostly dry conditions are expected in West Africa.  Temperatures will average near to above normal.  Malaysia and Indonesia should see episodes of scattered showers.  Temperatures should average near normal.  Brazil will get dry conditions and warm temperatures.  ICE certified stocks are lower today at 3.853 million bags. 

Chart Trends:  Trends in New York are mixed.  Support is at 2230, 2205, and 2195 March, with resistance at 2295, 2325, and 2355 March.  Trends in London are mixed to up with objectives of 1490 and 1535 March.  Support is at 1430, 1410, and 1405 March, with resistance at 1465, 1490, and 1510 March.

About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar.