Cotton traders worried about bearish surprise in USDA report

COFFEE

General Comments: Futures were lower on speculative and origin selling tied to reports of good weathedr in Brazil and increased production in Colombia. London was higher as trends turned up on Friday and as Vietnam producers are not selling due to the Tet holiday. Prices for Arabica remain in the recent trading range, but price action is weak. Bulls keep talking about the losses from rust in Central America and the bears keep noting that there is more than enough coffee being produced in other countries to cover the losses seen in Central America. For now, it looks like Central America could lose at least 5% of the total crop this year and more next year. Current crop development is good this year in Brazil, and production areas are getting beneficial showers for the developing crop. Production ideas remain big there, and also remain big in Vietnam even though producers there talk about the potential for 25% crop losses. Central America crops are mostly harvested. Colombia is reported to have good conditions.

Overnight News: Certified stocks are lower today and are about 2.642 million bags. The ICO composite price is now 132.37 ct/lb. Brazil should get scattered showers and storms. Temperatures will average near to above normal. Colombia should get mostly dry conditions, and Central America and Mexico should get mostly dry conditions. Temperatures should average near to above normal. Colombia produced 877,000 bags of Coffee in January, up 64% from January, 2012. Production for the 12 month period ending in January was 8.08 million bags, up 9% from the previous 12 month period. January exports were 725,000 bags, up 34% from January in 2012.

Chart Trends: Trends in New York are mixed to down with objectives of 140.00 March. Support is at 141.00, 138.00, and 135.00 March, and resistance is at 147.00, 150.00, and 151.00 March. Trends in London are up with objectives of 2100 and 2290 March. Support is at 2040, 2020, and 2000 March, and resistance is at 2085, 2110, and 2130 March. Trends in Sao Paulo are down with objectives of 176.00 March. Support is at 173.00, 170.00, and 167.00 March, and resistance is at 179.00, 181.00, and 183.00 March.

SUGAR

General Comments: Futures closed lower after trading higher early in the session. Most traders still note that big supplies appear to be available to the market, but Brazil said it will increase the ethanol in its gasoline blends in May. There are ideas that this could help work off a lot of the surplus production in Brazil and could tighten world balance sheets. Production has been strong in Brazil so far this year, and reports say that the new crop production looks to be strong as well, so the diversion into more domestic ethanol use will help. Exports from Brazil continue to be very strong after the delayed start to the program. The Thai crushing season is underway with good production expected, but the crushing and export pace remain slow. It is possible that the crop size there has been overestimated. 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.

Overnight News: Scattered are expected in Brazil through this weekend. Temperatures should be near to above normal.

Chart Trends: Trends in New York are mixed to down with objectives of 1775 May. Support is at 1820, 1790, and 1760 May, and resistance is at 1850, 1875, and 1900 May. Trends in London are mixed. Support is at 496.00, 493.00, and 490.00 May, and resistance is at 507.00, 512.00, and 517.00 May.

COCOA

General Comments: Futures closed lower. Hot and dry winds now could hurt the mid crop production and also hurt some development of the crops for next year. Speculators seemed to be the best buyers as trends started to turn up on the charts. 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 and for the mid crop and next crop, although hot weather now could increase stress to trees. Demand is still 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. Traders are starting to look ahead and past the midcrop harvest and note that the market could move to a production déficit next year.

Overnight News: Mostly dry conditions are expected in West Africa, but some showers are expected in coastal areas. Temperatures will average above normal. Malaysia and Indonesia should see episodes of scattered showers, but Malaysia will be drier this weekend. Temperatures should average near normal. Brazil will get scattered showers and warm temperatures. ICE certified stocks are higher today at 3.814 million bags.

Chart Trends: Trends in New York are mixed to up with objectives of 2270, 2330, and 2360 March. Support is at 2210, 2180, and 2155 March, with resistance at 2250, 2280, and 2300 March. Trends in London are mixed to up with objectives of 1475, 1510, and 1535 March. Support is at 1440, 1420, and 1410 March, with resistance at 1465, 1480, and 1500 March.

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About the Author
Jack Scoville

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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