Cocoa finds demand better than expected

COCOA  

General Comments: Futures closed slightly lower in consolidation trading. Chart patterns suggest further rallies could be coming down the road and demand has been better than trade expectations. The flow of Cocoa from western Africa is down for seasonal considerations, and traders wonder about the quality and size of the mid crop after some hot and dry weather during the growing season. Ideas are that production in West Africa could be less next crop year as well despite the improved weather as farmers have not liked offered prices. The mid crop harvest is underway, and less than expected production along with smaller beans is reported. Malaysia and Indonesia crops appear to be in good condition and weather is called favorable, although some say that too much rain is hurting the harvest in Indonesia.

Overnight News: Scattered showers are expected in West Africa. Temperatures will average near to 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 4.653 million bags. ICE said 0 delivery notices were posted against May contracts today and that total deliveries are now 743 contracts. LIFFE stocks are now 6,888 standard units, 137 large units, and 7 bulk units.

Chart Trends: Trends in New York are mixed to up with objectives of 2530 July. Support is at 2370, 2320, and 2295 July, with resistance at 2435, 2460, and 2490 July. Trends in London are mixed. Support is at 1560, 1545, and 1515 July, with resistance at 1590, 1610, and 1620 July.

COTTON

General Comments: Futures were higher in very strong export sales data provided by USDA. China was the major buyer. Planting conditions for the next crop remain a problem in the US. Rains are moving through the Delta and Southeast through this weekend to slow planting progress, and Texas is cold again. Weather will be watched as more wet weather in the Delta and Southeast could create less interest in Corn and more in Cotton to avoid having Corn pollinate in the hottest time of the year. So far, planting of all crops is slow. Short term trends are trying to turn down, but bulls got a lot of help yesterday from the strong demand news.

Overnight News: The Delta and Southeast will see rains through the weekend. Temperatures will average near to above normal today, and then near to below normal. Texas will get mostly dry weather, but a few showers are expected today. Temperatures will average below normal. The USDA spot price is now 80.70 ct/lb. ICE said that certified Cotton stocks are now 0.495 million bales, from 0.519 million yesterday. ICE said that delivery notices were 0 contracts today and now total 545 contracts for the month.

Chart Trends: Trends in Cotton are mixed. Support is at 83.60, 82.85, and 82.20 July, with resistance of 87.60, 88.05, and 88.50 July.


FCOJ

General Comments: Futures closed higher. Traders are wrestling with more reports of losses from greening disease on the one side and beneficial rains that have hit the state and are expected to hit the state later this week on the other hand. The growing conditions in Florida are expected to improve with the rains. Greening disease and what it might mean to production prospects continues to be a primary support item. Irrigation is widespread, even with recent rains. Temperatures are warm in the state. The Valencia harvest is continuing. Brazil is seeing near to above normal temperatures and dry weather.

Overnight News: Florida weather forecasts call for scattered showers. Temperatures will average near to below normal. ICE said that 4 delivery notices were posted today and that total deliveries for the month are 104 contracts.

Chart Trends: Trends in FCOJ are mixed to down with objectives of 130.00 and 117.00 July. Support is at 139.00, 136.00, and 135.00 July, with resistance at 140.00, 142.00, and 145.00 July.

COFFEE

General Comments: Futures were higher on news that the Brazil government had scheduled a press conference to announce a new price support program for its producers. The program could have the effect of temporarily causing some tightness in supplies ion the spot market as selling from Brazil could be deferred. Longer term, the Coffee will still be there so rally potential would be limited. The press conference was cancelled as the Monetary Authority there had not signed off on the plan, and a new date was not announced. It could be next week before the announcement is made. Prices in general have been weak as traders anticipate another big crop out of Brazil starting the summer, and bears note that better rains should help increase Vietnamese production potential this year. Ideas are that supplies available to the market are good. Current crop development is still good this year in Brazil, but it has been dry for the past week and dry conditions are forecast to continue. Central America crops are mostly harvested and is too dry for good new crop flowering. Colombia is reported to have good conditions.

Overnight News: Certified stocks are higher today and are about 2.736 million bags. ICE delivery notices are 0 contracts today and now total 158 contracts for the month. The ICO composite price is now 129.44 ct/lb. Brazil should get mostly dry conditions. 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. Costa Rica exported 206,224 bags of Coffee in April, up 23% from last year. Year to date exports are now 840,605 bags, from 859,385 bags last year. LIFFE stocks are now 12,610 lots.

Chart Trends: Trends in New York are mixed to down with objectives of 126.00 and 116.00 July. Support is at 133.00, 131.00, and 128.00 July, and resistance is at 138.00, 140.00, and 142.00 July. Trends in London are mixed to down with objectives of 1950 July. Support is at 1970, 1955, and 1925 July, and resistance is at 2025, 2035, and 2050 July. Trends in Sao Paulo are mixed to down with objectives of 161 September. Support is at 163.00, 162.00, and 161.00 September, and resistance is at 166.00, 167.50, and 170.00 September.

SUGAR  

General Comments: Futures closed higher on what appeared to be some speculative short covering. Traders remain bearish on supplies, especially from Brazil, and this has hurt New York prices. However, the market seems unable to sustain the down trend and might have factored in all the bearish news for now. Traders are keeping an eye on developments in Brazil and expect big production as the harvest moves forward. Brazil mills could concentrate on Ethanol production first and Sugar production second, and that could create some short term shortages for the market. Sugar producers in Russia said that the planting pace has turned slow there as producers wrestle with high costs of production against falling domestic and world prices. Chart patterns are mixed for the short term.

Overnight News: Mostly dry conditions are expected in Brazil. Temperatures should average near to above normal.

Chart Trends: Trends in New York are mixed. Support is at 1720, 1710, and 1680 July, and resistance is at 1780, 1800, and 1835 July. Trends in London are mixed. Support is at 497.00, 496.00, and 494.00 August, and resistance is at 504.00, 510.00, and 513.00 August.

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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