Cocoa consolidating as West Africa completes harvest

FCOJ

General Comments: Futures closed lower on speculative buying as Florida weather looks to turn colder later this week, but not cold enough to freeze crop. Futures are now trading near the upper end of the Winter trading range. Temperatures are warm in the state, and conditions are dry again, and talk about the potential for more fruit drop and poor development of the crop for next year returned. Forecasts now call for colder weather to hit the state later this week. It is possible that some areas will see freezing temperatures, and crop development is reported to be far enough along that some damage or loss is possible. Harvest in Florida of mid and early oranges is almost over, and the Valencia harvest is underway. Bloom has been reported in groves in all production areas of the state. Weather in Brazil is reported to be good. Brazil is seeing near to above normal temperatures and scattered showers. Harvest is continuing.

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

Chart Trends: Trends in FCOJ are mixed. Support is at 125.50, 123.50, and 122.00 March, with resistance at 131.00, 132.00, and 135.00 March.

COFFEE

General Comments: Futures were higher yesterday, and once again held some support areas. It still seems that New York is trying to form a low in this area. Some support came from news that Colombia Coffee farmers will not deliver as they seek higher prices for crops so they can cover costs and even make a small profit. Reports of rust in Central America and the production cuts that it is causing are getting more attention. 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 still good this year in Brazil, and production areas are getting drier weather for the developing crop. There is some talk the drier weather could stress trees. 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 2.677 million bags. The ICO composite price is now 132.31 ct/lb. Brazil should get scattered showers through Wednesday, then mostly dry weather. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get mostly dry conditions. Temperatures should average near to above normal. ICE said that 2 contracts were delivered today against March futures and that total deliveries for the month are 101 contracts.

Chart Trends: Trends in New York are mixed. Support is at 141.00, 137.00, and 134.00 May, and resistance is at 145.00, 147.00, and 149.00 May. Trends in London are mixed to up with objectives of 2110 and 2145 May. Support is at 2070, 2040, and 2010 May, and resistance is at 2110, 2130, and 2140 May. Trends in Sao Paulo are mixed. Support is at 180.00, 178.00, and 177.00 September, and resistance is at 185.00, 187.00, and 189.00 September.

SUGAR         

General Comments: Futures closed lower yesterday. Some are looking for a short covering rally in short term as a short squeeze is said to be possible in New York March contracts, and some think that rally is now starting. Supplies appear big around the world, but increasing off take could finally start to offer more stability to the prices. 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. However, some Brazil production areas have been too dry in the south, so the production could suffer. Recent rains were beneficial, and more rain is possible in the region this week. Exports from Brazil continue to be very strong. Chart patterns now show that a rally is possible, with London likely to be the leader in any rally attempt.

Overnight News: Mostly dry weather expected in Brazil. Temperatures should be near to below normal.

Chart Trends: Trends in New York are mixed. Support is at 1780, 1760, and 1730 May, and resistance is at 1825, 1850, and 1875 May. Trends in London are mixed to up with objectives of 515.00 and 528.00 May. Support is at 502.50, 499.00, and 494.00 May, and resistance is at 508.00, 512.00, and 517.00 May.

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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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