Cocoa moves higher on speculation of shortages

COCOA

General Comments: Futures closed higher. Ideas that production in the coming year will be short helped the bulls as did a weaker U.S. dollar. The market is trying to mount a seasonal rally now that the main harvest is over in Western Africa. Ideas are that current low prices should create 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 deficit 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 lower today at 4.432 million bags. LIFFE stocks are 6,941 standard lots, 216 large lots and 7 bulk lots.

Chart Trends: Trends in New York are mixed to up with objectives of 2240 and 2370 May. Support is at 2150, 2110, and 2075 May, with resistance at 2190, 2220, and 2250 May. Trends in London are mixed. Support is at 1440, 1420, and 1405 May, with resistance at 1475, 1495, and 1510 May.

COTTON

General Comments: Futures were lower yesterday on less than expected export sales. News that India and China would sell into local markets from government supplies in an effort to keep prices down on Tuesday had its effect as well. The market has already rallied a lot and now seems to be correcting lower. A sideways to lower trade could develop until the end of the month and the USDA planting intentions reports. 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. 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.

Overnight News: The Delta and Southeast will see precipitation develop today and this weekend. Temperatures will average near to below normal today and below normal by Sunday. Texas will get dry weather except for a few showers tomorrow. Temperatures will average below to much below normal. The USDA spot price is now 83.18 ct/lb. ICE said that certified Cotton stocks are now 0.424 million bales, from 0.421 million yesterday.

Chart Trends: Trends in Cotton are mixed to down with objectives of 86.25, 82.00, and 78.85 May. Support is at 87.60, 87.20, and 86.20 May, with resistance of 89.10, 89.80, and 90.45 May.

Next page: Orange Juice, Sugar and Coffee

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.

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.