Cotton traders step back as demand data becomes scarce

COFFEE (NYBOT:KCZ13)

General Comments: Futures were mixed, with New York and Sao Paulo trading higher, but London trading lower. It looked like there was some speculative long liquidation in London to finish the week. New York and Sao Paulo were able to rally as the real strengthened against the U.S. Dollar. The lack of Robusta supplies for the short term has supported the London market for the last week or two. Traders there are waiting for Vietnam to harvest and sell, but that is still a few weeks away. The harvest has been delayed due to rains throughout the country over the last couple of weeks. Traders expect more downward pressure on prices once the harvest starts to hit the market. Brazil is thought to have a lot of Coffee to sell yet, and producers there have now sold about half of the crop. Colombia and Peru are actively selling. Producers all over the world are worried about the low prices and are trying to hold back on offers, but differentials and futures prices remain very low. Brazil markets appear mostly quiet. Coffee is available in Central America, but the market there seems quiet.

Overnight News: Certified stocks are a little higher today and are about 2.758 million bags. The ICO composite price is now 110.87 ct/lb. Brazil should get mostly dry weather through Wednesday, then some showers. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get showers and rains. Northern Mexico should be mostly dry. Temperatures should average near to above normal.

Chart Trends: Trends in New York are mixed. Support is at 113.00, 111.00, and 108.00 December, and resistance is at 117.00, 118.00, and 119.00 December. Trends in London are mixed to up with no objectives. Support is at 1710, 1670, and 1640 November, and resistance is at 1755, 1770, and 1790 November. Trends in Sao Paulo are mixed. Support is at 135.00, 132.00, and 129.00 December, and resistance is at 140.00, 142.00, and 143.00 December.

SUGAR (NYBOT:SBH14)

General Comments: Futures were higher again as the Brazilian Real strengthened against the US Dollar. The currency moves overshadowed the harvest and production data from UNICA released Thursday that showed a 3% increase in production due to the better weather in Brazil. Drier weather is still reported in production areas, but the harvest has been further delayed by recent rains. Heavier rains seen in the last few weeks could have hurt Sugar yields, but yields could get a little better now with the return of drier weather. India should still have more than enough production to allow for exports. However, a cyclone is entering the country last weekend and could hurt crops. The Rupee has been working lower. There is talk of strong offers from Thailand, and Thai differentials are stable. Price action suggests that the rally is starting to stall, but nearby New York contracts could approach 1950 and strong resistance just above that level before finding much new selling interest from producers.

Overnight News: Brazil could see mostly dry conditions through Wednesday, then showers and near to above normal temperatures.

Chart Trends: Trends in New York are up with objectives of 1880, 1900, and 1940 March. Support is at 1845, 1835, and 1825 March, and resistance is at 1880, 1910, and 1935 March. Trends in London are up with objectives of 511.00, 513.00, and 534.00 December. Support is at 499.00, 493.00, and 487.00 December, and resistance is at 508.00, 515.00, and 517.00 December.

COCOA (NYBOT:CCZ13)

General Comments: Futures closed higher in response to very strong grind data from the EU. Traders expect strong data from the US as well. The strong demand combined with ideas of short production this year was more than enough to keep the rally going yesterday and should be enough to keep prices strong for at least the near term. Production in West Africa suffered this year due to drought in production areas. Rains are fine now, but are expected to be above average for the last half of the month. More than normal rains could impede harvest progress and hurt bean quality. The quality could be hurt as most farmers do not have good storage facilities. However, a strong rally now might encourage farmers to sell, and that would help with the quality as the beans would move to better facilities near the ports. Malaysia and Indonesia weather is favorable with scattered showers.

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 4.071 million bags.

Chart Trends: Trends in New York are up with objectives of 2720 and 2810 December. Support is at 2690, 2655, and 2645 December, with resistance at 2740, 2770, and 2800 December. Trends in London are up with objectives of 1770 and 1840 December. Support is at 1745, 1730, and 1715 December, with resistance at 1780, 1810, and 1840 December.

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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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