Cotton falls on worries China buying to slow

COTTON (NYBOT:CTZ13)

General Comments: Futures closed lower once again. Demand is not strong and the harvest is active. 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. 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 dry weather through Wednesday, then some showers. Temperatures will average near to above normal early in the week and near to below normal late in the week. Texas will see showers tomorrow, otherwise dry weather. Temperatures will average near to below normal early in the week, then near to above normal. The USDA spot price is 74.16 ct/lb. today. ICE said that certified Cotton stocks are now 0.156 million bales, from 0.149 million yesterday. Informa estimated US Cotton production at 13.851 million bales on yields of 854 pounds per acre.

Chart Trends: Trends in Cotton are down with objectives of 76.40 and 75.10 December. Support is at 76.00, 75.70, and 75.00 December, with resistance of 78.80, 79.10, and 79.75 December.

FCOJ (NYBOT:OJF14)

General Comments: Futures closed higher again Friday on follow through speculative short covering and some new speculative buying. There will be less production this year due to greening disease and some unfavorable weather earlier in the year. Demand remains weak and there have been no tropical systems to hit the state. Growing conditions in the state of Florida remain mostly good. Dry weather has returned and conditions are said to be very good in almost the entire state. Temperatures are warm. Fruit is reported to be sizing well and of consistent size and trees are reported in good condition. Some early harvest has started. Brazil is seeing near normal temperatures and showers.

Overnight News: Florida weather forecasts call for mostly dry conditions. Temperatures will average near to above normal.  

Chart Trends: Trends in FCOJ are mixed to up with objectives of 130.00 January. Support is at 122.00, 120.00, and 117.00 January, with resistance at 127.00, 129.50, and 131.00 January.

COFFEE (NYBOT:KCZ13)

General Comments: Futures were slightly higher in consolidation trading. Traders think that there is still a lot of Coffee to sell in Brazil and in northern South America and also know that a big crop is coming from Vietnam. The Vietnamese harvest will continue under good conditions as weather is mostly dry. Harvest until now has been done mostly in the main growing province, but almost all áreas should be harvesting something now. The production in Vietnam is expected to be very big and traders expect more downward pressure on prices as the harvest hits the market. So far, offers from Vietnam have been light as producers do not like the prices. Cyclones and tropical storms are forecast for Philippines and Vietnam this week and could damage production. Brazil has a lot of Coffee to sell yet, but the market there is quiet. Colombia is actively selling even with very cheap prices and the production there is much larger than in recent years. The rest of northern Latin America was quiet. Coffee is available in Central America, but the market was quiet. There were offers, but bids and offers were far apart.

Overnight News: Certified stocks are slightly higher today and are about 2.715 million bags. The ICO composite price is now 100.54 ct/lb. Brazil should get light showers. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get light showers. Temperatures should average near to above normal.

Chart Trends: Trends in New York are down with objectives of 98.00 December. Support is at 105.00, 102.00, and 99.00 December, and resistance is at 108.00, 110.00, and 113.50 December. Trends in London are down with no objectives. Support is at 1460, 1430, and 1400 January, and resistance is at 1520, 1575, and 1605 January. Trends in Sao Paulo are down with objectives of 123.50 December. Support is at 126.00, 123.00, and 120.00 December, and resistance is at 132.00, 135.00, and 136.50 December.

SUGAR (NYBOT:SBH14)

General Comments: Futures were a little lower on Friday. Prices could continue to work lower in the short term is still a lot of Sugar available to the world market despite the logistical problems in Brazil. The fire at the port warehouses of Coopersucar has hurt the overall export pace from Brazil, but other origins, mostly India and Thailand, have been happy to step in and fill the void. The overall fundamental of big supplies remains. Sugar prices had dropped until recently due to big world production and especially big production in Brazil. The production in Brazil and around the world is still there, but the ability of Brazil to export is much more difficult now. Meanwhile, countries like India and Thailand have a little less competition for sales. They have taken advantage of the reduced capacity in Brazil to increase their own export sales. Weather conditions in key production areas around the world are rated as mostly good.

Overnight News: Brazil could see light showers with near to above normal temperatures. Cyclones and tropical storms are passing through Philippines and Vietnam this week and could damage crops.

Chart Trends: Trends in New York are down with objectives of 1775 March. Support is at 1820, 1815, and 1770 March, and resistance is at 1850, 1880, and 1905 March. Trends in London are down with objectives of 480.00 and 457.00 March. Support is at 480.00, 478.00, and 476.50 December, and resistance is at 490.00, 493.00, and 495.00 December.

COCOA (NYBOT:CCZ13)

General Comments: Futures closed lower. Bulls refuse to give up easily, but price action has turned relatively weak. Ivory Coast is estimating its production at about unchanged from last year, and West African production as a whole seems to be good. 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 continuing under good conditions 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 3.737 million bags.

Chart Trends: Trends in New York are mixed to down with objectives of 2620, 2530, and 2410 December. Support is at 2635, 2610, and 2560 December, with resistance at 2695, 2750, and 2780 December. Trends in London are mixed to down with objectives of 1660 December. Support is at 1670, 1640, and 1610 December, with resistance at 1710, 1725, and 1740 December.

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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