Coffee falls on speculation of big offseason crop in Brazil

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. An increase in offers from Central America due to sharply higher differentials and from Vietnam due to better weather helped push prices lower. 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. 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. 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.

Overnight News: Certified stocks are lower today and are about 2.743 million bags. The ICO composite price is now 128.52 ct/lb. Brazil should get scattered showers. 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 0 contracts were 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 131.00, 128.00, and 125.00 May, and resistance is at 138.00, 140.00, and 141.00 May. Trends in London are mixed. Support is at 2140, 2130, and 2115 May, and resistance is at 2200, 2220, and 2250 May. Trends in Sao Paulo are down with objectives of 161.00 May. Support is at 165.00, 162.00, and 159.00 September, and resistance is at 173.00, 177.00, and 180.00 September.

COTTON

General Comments: Futures were mostly a little higher yesterday after trading both sides of unchanged. The market has already rallied a lot and now seems to be forming a congestion area. A sideways to lower trade could develop until the end of the month. Demand ideas remain strong overall based on the strong export paces seen in the USDA reports in recent weeks and on reports of tight domestic and world cash markets. Demand is still said to be strong, and sales for export have held up well given the price strength in recent weeks. The rally is coming at a time when certified stocks are building as well, although the overall certified stocks remain low. The current rally in new crop prices are bringing into question what farmers will plant this year. Some producers in the Delta are noting the recent price rally and might decide to plant more Cotton this year. The plantings intentions report will be released at the end of the month. Indian corporate executives told wire services yesterday that the country might need to import much more Cotton than normal as the government keeps buying from producers but then holds on to the stocks.

Overnight News: The Delta and Southeast will see dry conditions until precipitation develops Friday and this weekend. Temperatures will average near to below normal, then turn warmer this weekend. Texas will get dry weather. Temperatures will average near to above normal this week and near to below normal this weekend. The USDA spot price is now 85.84 ct/lb. ICE said that certified Cotton stocks are now 0.421 million bales, from 0.420 million yesterday.

Chart Trends: Trends in Cotton are mixed to up with objectives of 93.90 May. Support is at 89.80, 88.80, and 87.60 May, with resistance of 91.60, 92.60, and 93.90 May.

Next page: Oragne Juice, Sugar and Cocoa

About the Author

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.

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