Cotton cashes in on corn, soybean weakness

COFFEE

General Comments: Futures were higher as New York and Sao Paulo rallied, but London closed a little lower. Trends have turned sideways for the short term in New York, and the market has firmed in Sao Paulo as the government has modified its producer loan program to greatly extend payment terms. The new Brazilian harvest is just a couple of months away, and traders expected big offers to develop on rallies. No one had been paying much attention to the reports of rust in Central America and parts of South America and prefer to concentrate on Brazil and also on improving production conditions in Vietnam. Rains have increased in Vietnam and crop conditions have improved. But the decreased exports from Central America have changed some ideas, and chart patterns also show the potential for a low to be developing. Reports of rust in Central America and the production cuts that it are still in the press, and major crop losses are being estimated by traders and producers. Current crop development is still good this year in Brazil, and there are showers around. Production ideas remain big there. Central America crops are mostly harvested. Colombia is reported to have good conditions.

Overnight News: Certified stocks are slightly lower today and are about 2.743 million bags. The ICO composite price is now 131.83 ct/lb. Brazil should get scattered showers. Temperatures will average near to above normal. Colombia should get a few showers, and Central America and Mexico should get mostly dry conditions. Temperatures should average near to above normal. LIFFE stocks are now 12,162 lots. Colombia produced 617,000 bags of Coffee in March, up 7% from last year. It exported 678,000 bags of Coffee in March, up 12% from last year. Brazil exported 2.513 million bags of Coffee in March, from 2.261 million last year. The ICO estimates 2012-13 world Coffee production at 144.6 million bags, up 6.4% from the previous year.

Chart Trends: Trends in New York are mixed. Support is at 136.00, 134.00, and 132.00 May, and resistance is at 141.00, 144.00, and 147.00 May. Trends in London are mixed to down with objectives of 1990 May. Support is at 1995, 1970, and 1950 May, and resistance is at 2045, 2060, and 2080 May. Trends in Sao Paulo are mixed to up with objectives of 179.00, 186.00, and 187.00 September. Support is at 172.00, 170.00, and 168.00 September, and resistance is at 176.00, 177.00, and 180.00 September.

SUGAR

General Comments: Futures closed mostly a little lower. ISO once again said that there would be a big production surplus this year to keep bearish ideas alive. Ideas of weak demand and big supplies keep traders negative to prices. Traders know that ther might be less production in India and Thailand, but expect Brazil to produce enough to cover any losses. The market could be in a new down trend. So far, no new demand is being reported, and chart patterns continue to look weak. Reports indicate that Brazil will start harvesting next month and that a big offer is expected. Exports from Brazil continue to be very strong overall despite the port problems.

Overnight News: Scattered showers are expected in Brazil. Temperatures should average near to above normal.

Chart Trends: Trends in New York are mixed to down with objectives of 1725 and 1610 July. Support is at 1760, 1740, and 1710 July, and resistance is at 1780, 1790, and 1800 July. Trends in London are down with objectives of 486.00 and 481.00 August. Support is at 487.00, 484.00, and 481.00 August, and resistance is at 496.00, 500.00, and 505.00 August.

COCOA

General Comments: Futures closed lower on what was called follow through speculative selling. Charts show that the market may have failed against some important resistance areas. The flow of Cocoa from western Africa is strong now. Weather continues good in Africa and as some crop size estimates for next year start to increase. 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. For now, though, the market seems to be in a longer term trading range. 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, and wire reports said that the harvest started this week in Nigeria. Malaysia and Indonesia crops appear to be in good condition and weather is called favorable.

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 higher today at 4.629 million bags. LIFFE stocks are now 6,422 standard lots, 137 large lots, and 7 bulk lots.

Chart Trends: Trends in New York are mixed. Support is at 2110, 2075, and 2035 May, with resistance at 2170, 2190, and 2220 May. Trends in London are mixed. Support is at 1430, 1410, and 1400 May, with resistance at 1460, 1480, and 1495 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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