Cocoa rises as bulls see production waning

COCOA (NYBOT:CCZ13)

General Comments: Futures closed higher in recovery trading. Bulls refuse to give up easily as they still see short production. Ivory Coast is estimating its production at about 1.4 million tons this year, about unchanged from last year. There have been no reports yet on quality or yields from Ghana, but Nigeria says it has good crops. The weather is good now, and arrivals at ports are increasing throughout the region. The harvest is underway and it could be that prices work lower for the near term. However, the overall fundamental picture should support higher prices as the supply situation should be tight. That implies that the market should be able to digest the harvest relatively easily and resume the longer term rally soon. However, demand has slacked off since the big surge of the last several weeks. Reports indicate that chocolate manufactures are now covered through the big demand holiday period coming up and do not need to buy. That implies that Cocoa prices can work lower through the harvest.

Overnight News: Scattered showers or dry conditions are expected in West Africa. Temperatures will average near normal. Malaysia and Indonesia should see scattered showers. Temperatures should average above normal. Brazil will get dry conditions and near normal temperatures. ICE certified stocks are lower today at 3.754 million bags. LIFFE stocks are now 4,731 standard delivery units, 129 large delivery units, and 0 bulk delivery units. Cameroon exports ere 19,659 tons in August and September, from 30,248 tons last year.

COTTON (NYBOT:CTZ13)

General Comments: Futures closed lower once again despite great export sales as announced by USDA. Demand is poor at a time of expanding harvest, and traders felt that the delayed export sales announcements were already built into the prices. Traders worry that China will not be a big buyer this year as the government there has been buying a lot and might have enough. However that has been true in past years but the private mills bought here, anyway. China was a big buyer in the delayed reports. The private buyers will not have to buy just from the US as there appear to be increasing supplies available from other origins like India and Pakistan. Good weather in US productions areas should be replaced by scattered showers over the middle of the week, but the crop should remain in good condition as the rains are not expected to be big. Traders should get more reports on demand this week. Brazil conditions are reported to be very good in Bahia. US crop conditions right now are generally good in Texas. The Delta and Southeast are reporting generally favorable conditions as well. Trends are down on the charts.

Overnight News: The Delta and Southeast will see rain develop today and tomorrow, then dry weather again over the weekend. Temperatures will average near to above normal. Texas will see dry weather. Temperatures will average near to above normal. The USDA spot price is 74.66 ct/lb. today. ICE said that certified Cotton stocks are now 0.149 million bales, from 0.146 million yesterday.

Chart Trends: Trends in Cotton are down with objectives of 76.40 and 75.10 December. Support is at 76.80, 76.00, and 75.70 December, with resistance of 78.80, 79.10, and 79.75 December.

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