Orange juice moves higher as disease, drought threaten crop

COFFEE

General Comments: Futures were lower again yesterday in all three markets, with ideas that big selling will need to come from Brazil sooner or later keeping all buying interest away. Traders were also worried about European demand and US Dollar strength in the wake of the problems in Cyprus. Talk of a big offseason crop coming this year in Brazil kept ideas that there will be a lot of Coffee for buyers around. Brazil has Coffee to sell, but production in other countries is more problematical. Brazil offers are not very strong right now, but it is the threat of increased sales that helps keep prices under pressure. Reports of rust in Central America and the production cuts that it are still in the press. Central American losses next year could be 30% or more of the crop. The ICO said recently that the region has already lost 2.5 million bags from the production this year. Current crop development is still good this year in Brazil, and production areas are getting drier weather for the developing crop, although there are a few showers around. There is some talk the drier weather could stress trees. Production ideas remain big there. Central America crops are mostly harvested. Colombia is reported to have good conditions, but some now talk of less than expected production.

Overnight News: Certified stocks are higher today and are about 2.746 million bags. The ICO composite price is now 129.00 ct/lb. Brazil should get scattered showers. Temperatures will average near 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 1 contract was delivered today against March futures and that total deliveries for the month are 119 contracts.

Chart Trends: Trends in New York are down with objectives of 125.00 and 108.00 May. Support is at 134.00, 131.00, and 128.00 May, and resistance is at 138.00, 140.00, and 141.00 May. Trends in London are mixed. Support is at 2160, 2140, and 2130 May, and resistance is at 2200, 2220, and 2250 May. Trends in Sao Paulo are down with objectives of 169.00 and 161.00 May. Support is at 168.00, 165.00, and 162.00 September, and resistance is at 177.00, 180.00, and 183.00 September.

SUGAR

General Comments: Futures closed lower on the economic problems in Cyprus that caused a sharp rally in the US Dollar. Ideas that demand is still waiting underneath 1800 May helped provide some support. But, it was a sell the commodities day, and Sugar got hit as hard as any market as the Brazil harvest is about to start. Futures seem to uncover new consumptive demand every time the market moves below 1800 in New York and plenty of offers when a rally is made. Reports indicate that Brazil will start harvesting next month and that a big offer is expected. Brazil will start to offer a little less as mills there prepare for greater domestic Ethanol demand as blends for cars have been changed by the government. Reports from Brazil say that the new crop production looks to be strong, so the diversion into more domestic ethanol use will help offset increased sugarcane production. Exports from Brazil continue to be very strong. Exports from other countries are said to be less than expected.

Overnight News: Scattered showers are expected in Brazil. Temperatures should be near normal. In Brazil, Datagro estimated 2013-14 Sugarcane production at 643.5 million tons. It expects 2013-14 Sugar production at 40.7 million tons and Ethanol production at 26.4 billion liters.

Chart Trends: Trends in New York are mixed to down with objectives of 1810, 1750, and 1700 May. Support is at 1815, 1790, and 1780 May, and resistance is at 1850, 1865, and 1875 May. Trends in London are mixed to down with objectives of 522.00 and 507.00 May. Support is at 523.00, 518.00, and 513.00 May, and resistance is at 529.00, 531.00, and 536.00 May.

COCOA

General Comments: Futures closed lower on follow through selling and the European crisis. The crisis in Europe brought forward demand fears once again as Europeans eat more chocolate tan anyone else. Ideas are that current low prices should créate new demand and that the main crop harvest is over in Western Africa and much of Asia so that supplies on offer could also be less. The weather is forecast to be warm and somewhat wet in West Africa this week. 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: Scattered showers are expected in West Africa. Temperatures will average mostly above normal. Malaysia and Indonesia should see episodes of isolated showers. Temperatures should average near normal. Brazil will get mostly dry conditions and warm temperatures. ICE certified stocks are little changed today at 4.448 million bags.

Chart Trends: Trends in New York are mixed. Support is at 2055, 2035, and 2020 May, with resistance at 2105, 2155, and 2175 May. Trends in London are mixed to down with objectives of 1400 May. Support is at 1405, 1385, and 1370 May, with resistance at 1435, 1455, and 1475 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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