Cotton searching for base after drop on production estimates

COTTON (NYBOT:CTV13)

General Comments: Futures closed mixed in consolidation trading. The market had been moving sharply lower in response to U.S. and Indian production estimates, but might try to find a base now as it has hit some support areas on the charts. Buyers have pulled away from the market and will wait for some kind of bottom to form before buying in a big way. Very hot weather conditions in China continue, and the weather in Corron areas is not really improving right now in that country. US crops remain behind the normal pace. The poor planting conditions early in the year have made the crop progress behind normal. Texas is dry, but will turn cooler later in the week. Weather for Cotton still appears good in India. Trends are down, but some short term recovery is possible given the magnitude of the down move seen last week.

Overnight News: The Delta will be dry and Southeast will see scattered showers and storms. Temperatures will average above normal in the Delta and near to above normal in the Southeast. Texas will see dry weather. Temperatures will average near to above normal. The USDA spot price is now 80.31 ct/lb. ICE said that certified Cotton stocks are now 0.028 million bales, from 0.034 million yesterday.

Chart Trends: Trends in Cotton are down with objectives of 8300 October. Support is at 83.80, 83.55, and 82.90 October, with resistance of 85.20, 86.00, and 86.50 October.

FCOJ(NYBOT:OJU13)

General Comments: Futures closed lower on long liquidation before the weekend. Short term trends are up and it is the high point of the hurricane season. There are still no real threats showing in the tropical Atlantic for Florida or Orange production. The weather in the tropics has started to show a little more life, but no real threats. The bulk of the tropical Atlantic is still seeing some very dry conditions and wind shear to prevent tropical storm development, but at least some systems that could become tropical are starting to appear. Growing conditions in the state of Florida remain mostly good. Showers are reported and conditions are said to be very good in almost the entire state. Temperatures are warm. Brazil is seeing near to above normal temperatures and mostly dry weather.

Overnight News: Florida weather forecasts call for some showers. Temperatures will average near normal.

Chart Trends: Trends in FCOJ are mixed. Support is at 133.00, 130.00, and 128.00 September, with resistance at 140.00, 142.00, and 145.00 September.

Next page: COffee, Sugar and Cocoa

COFFEE (NYBOT:KCZ13)

General Comments: Futures were lower again in quiet trading. Ideas of increased offers from Brazil were helped by the Real weakness, although there were no real reports of big selling. Most Coffee producers apparently plan to move Coffee into the support programs and hope for higher prices. Brazil producers are selling in other markets and should be selling a lot of Coffee, too, if not for the government programs. The Real is moving to new lows and this has decreased the effectiveness of the Brazil government program for world markets as the support is made in Rais. Differentials held firm on a lack of offer from producers for both the old crop and the new crop. Coffee appears to be available in Central America as farmers and mills clear inventories before the next harvest, but none of the new crop is being offered yet. Current crop development is still good this year in most production areas of Latin America and also appears to be mostly good in Asia. Central America crop areas remain too dry, but conditions are said to be good overall. Colombia is still reported to have good conditions. Harvest conditions are good in Brazil.

Overnight News: Certified stocks are higher today and are about 2.799 million bags. The ICO composite price is now 112.85 ct/lb. Brazil should get dry conditions except for a few showers on Wednesday. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get showers, and rains. Temperatures should average near to above normal.

Chart Trends: Trends in New York are down with objectives of 116.50 and 111.00 December. Support is at 114.00, 111.00, and 108.00 December, and resistance is at 118.00, 120.00, and 122.00 December. Trends in London are down with objectives of 1750 November. Support is at 1760, 1735, and 1730 November, and resistance is at 1800, 1825, and 1840 November. Trends in Sao Paulo are mixed to down with objectives of 134.50 and 123.50 December. Support is at 140.00, 137.00, and 134.00 December, and resistance is at 145.50, 148.50, and 150.50 December.

SUGAR (NYBOT:SBV13)

General Comments: Futures closed higher after holding a support area on the charts. There did not seem to be any news to support Sugar. The Real keeps sinking and made new lows for the move against the US Dollar last week, but Sugar held. Brazil production could improve as the weather gets better. Forecasts call for warm and dry conditions into the weekend. Mills remain more interested in producing ethanol rather than Sugar due to price. Countries like Thailand and India also expect more production this year. Demand for ethanol has been good, but there is still a lot of Sugar and the supply side fundamentals seem to overwhelm any demand side strength over time.

Overnight News: Brazil could see dry weather and moderate temperatures

Chart Trends: Trends in New York are mixed to down with objectives of 1630, 1590, and 1580 October. Support is at 1625, 1610, and 1595 October, and resistance is at 1650, 1685, and 1700 October. Trends in London are down with objectives of 478.00 and 469.00 October. Support is at 478.00, 474.00, and 470.00 October, and resistance is at 488.00, 492.00, and 495.00 October.

COCOA (NYBOT:CCZ13)

General Comments: Futures closed higher. The market broke down on Thursday and made a potential top on the charts. Further down side Price pressure is possible this week. Talk of improved rains in West Africa caused the increased selling interest. Ghana and Ivory Coast are still too dry, but precipitation is improving. Temperatures are moderate. There is talk the drier weather could delay the harvest and the arrival of beans to ports. The harvest will be getting underway soon, and has already begun in Nigeria, with mixed results so far there. 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 near normal. Malaysia and Indonesia should see scattered showers, but southern areas could be dry. Temperatures should average above normal. Brazil will get mostly dry conditions and warm temperatures. ICE certified stocks are lower today at 4.663 million bags. ICE said that 13 delivery notices were posted today and that total deliveries for the month are 330 contracts.

Chart Trends: Trends in New York are mixed to down with objectives of 2395 and 2285 December. Support is at 2405, 2390, and 2360 December, with resistance at 2455, 2475, and 2505 December. Trends in London are mixed to down with objectives of 1525 and 1470 December. Support is at 1615, 1600, and 1580 December, with resistance at 1650, 1670, and 1705 December.

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.