Cotton rebounds as Chinese buyers return to the market

COFFEE

General Comments: Futures were lower on speculative selling tied to reports of good weather in Brazil and on ideas that any crop losses in Central America can be made up by ample production in other countries. London was lower on primarily speculative selling as Vietnam producers are now back selling after the Tet holiday. Prices for Arabica continue to work lower on ideas of big production in Brazil and other South American countries. 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 20% of the total crop this year and more next year. Losses next year could be 30% or more of the crop. 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 slightly lower today and are about 2.672 million bags. The ICO composite price is now 127.92 ct/lb. Brazil should get mostly dry weather. 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. ICE said that 14 contracts were delivered today against March futures and that total deliveries for the month are 14 contracts.

Chart Trends: Trends in New York are down with objectives of 125.00 and 108.00 May. Support is at 137.00, 134.00, and 131.00 May, and resistance is at 143.00, 145.00, and 147.00 May. Trends in London are mixed to down with objectives of 2020 and 1990 May. Support is at 2010, 2000, and 1970 May, and resistance is at 2080, 2100, and 2130 May. Trends in Sao Paulo are down with no objectives. Support is at 177.00, 174.00, and 171.00 September, and resistance is at 181.00, 183.00, and 186.00 September.

SUGAR

General Comments: Futures closed higher on demand ideas. Iraq has been in the market. Wire reports indicate that it bought 200,000 tons of White Sugar last week and the country announced a tender for 50,000 tons yesterday. The lack of demand news had hurt the bull case and made it hard to sustain rallies given big production ideas. However, some are looking for a short covering rally in the short term as a short squeeze is said to be possible in New York March contracts. Brazil said it will increase the ethanol in its gasoline blends in May, and 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 continuing, 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: Mostly dry weather expected in Brazil through this weekend. Temperatures should be near to above normal. USDA said it does not expect to raise import quotas for Sugar into the US this year.

Chart Trends: Trends in New York are mixed to down with objectives of 1750 and 1700 May. Support is at 1760, 1730, and 1700 May, and resistance is at 1820, 1850, and 1875 May. Trends in London are mixed. Support is at 494.00, 489.00, and 486.00 May, and resistance is at 499.00, 502.00, and 508.00 May.

COCOA

General Comments: Futures closed lower again yesterday on ideas of increasing harvest selling pressure from Ivory Coast against forecasts for stressful weather for developing crops in West Africa. There were also reports of Ghana selling. The weather was warm and dry in West Africa over the weekendand is expected to stay that way this week. 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. Traders are starting to look ahead and past the midcrop harvest and note that the market could move to a production déficit next year. More buying is being noted in deferred months at this time due to smaller production ideas for the coming crops.

Overnight News: Mostly dry conditions are expected in West Africa. 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 said that 0 contracts were delivered today against March contracts and that total deliveries for the month are now 811 contracts. ICE certified stocks are sharply higher today at 4.016 million bags.

Chart Trends: Trends in New York are down with objectives of 2110 and 2030 May. Support is at 2120, 2085, and 2050 May, with resistance at 2150, 2190, and 2210 May. Trends in London are down with objectives of 1390 and 1365 May. Support is at 1405, 1390, and 1370 May, with resistance at 1420, 1440, and 1450 May.

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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