Cocoa turns lower after rally stalls out during harvest

COCOA (NYBOT:CCZ13)

General Comments: Futures closed lower in liquidation trading. Bulls got out of some positions after the rally attempt from earlier in the week stalled out. It is harvest time in West Africa. 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. 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 3.653 million bags.

Chart Trends: Trends in New York are mixed. Support is at 2630, 2610, and 2560 December, with resistance at 2720, 2750, and 2770 December. Trends in London are mixed. Support is at 1670, 1660, and 1640 December, with resistance at 1730, 1750, and 1760 December.

COTTON (NYBOT:CTZ13)

General Comments: Futures closed a little lower before the USDA reports today. There is a lot of talk that demand is not strong and the harvest is active. But, speculators have been selling and selling in this market and appear to be very short. It is possible that prices could rally today even with a bearish report. 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.

Overnight News: The Delta and Southeast will see dry weather. Temperatures will average near to below normal late in the week, then near to above normal by the beginning of next week. Texas will see dry weather. Temperatures will average near to above normal. The USDA spot price is 74.33 ct/lb. today. ICE said that certified Cotton stocks are now 0.172 million bales, from 0.175 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 76.25, 75.30, and 75.00 December, with resistance of 78.80, 79.00, and 80.00 December.

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