Cotton rallies as Texas may cut planting areas by 25%

COFFEE

General Comments: Futures were higher for much of the day yesterday, but sold off once bullish traders were unable to take out resistance areas on the charts near 145.00 May. 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 and some support came from even more reports of severe rust damage in Central America. 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. Guatemala is now saying it could lose half of the crop next year. 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. Vietnam producers there talk about the potential for 25% crop losses due to prolonged drought in the Central Highlands. India might lose 5% of its Robusta crop due to unseasonal rains at harvest time. Central America crops are mostly harvested. Colombia is reported to have good conditions.

Overnight News: Certified stocks are lower today and are about 2.682 million bags. The ICO composite price is now 132.55 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 183.00, 185.00, and 187.00 September.

SUGAR         

General Comments: Futures closed mostly lower in New York, but higher in London. It seems that demand for White Sugar is good right now and that has supported London for now. Chart trends in London are now up, but trends in New York are down. But, big supplies of Sugarcane and Raw Sugar keep new York from participating in the rally, at least so far, and the market remains in a sideways trend even though trends are trying to turn up. 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 1775, 1760, and 1730 May, and resistance is at 1800, 1825, and 1850 May. Trends in London are mixed to up with objectives of 515.00 and 528.00 May. Support is at 512.00, 506.00, and 502.50 May, and resistance is at 517.00, 520.00, and 522.00 May.

COCOA        

General Comments: Futures closed a Little higher yesterday. Market trends are still down overall, but ideas are that the market can turn higher now that the main harvest in West Africa is about over. Short term trends have turned sideways as futures settle into a consolidation pattern. The weather was warm and dry in West Africa this week, but temperaturas are not extreme. Hot and dry winds now could hurt the mid crop production and also hurt some development of the crops for next year. For now, traders expect good mid crop production from West Africa. Malaysia and Indonesia crops appear to be in good condition and weather is called favorable. 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 15 contracts were delivered today against March contracts and that total deliveries for the month are now 826 contracts. ICE certified stocks are sharply higher today at 4.429 million bags.

Chart Trends: Trends in New York are mixed. Support is at 2100, 2085, and 2050 May, with resistance at 2155, 2190, and 2210 May. Trends in London are mixed. Support is at 1415, 1405, and 1390 May, with resistance at 1435, 1450, and 1475 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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