Cocoa trends down as speculators liquidate longs

COCOA (NYBOT:CCH14)

General Comments: Futures closed lower in New York and in London on follow through speculative selling tied to increasing certified stocks in New York and increased certified stocks in New York. Charts show that trends are down for the short term. Speculators are liquidating longs at this time. Industry is waiting to price but will probably be more active over the next couple of days now that the new year has started. Much of West Africa is now reporting that arrivals and purchases have been strong and above last year. Traders will continue to monitor the arrivals and purchases data to get a better handle on total production in West Africa. The overall fundamental picture should support generally strong prices as the supply situation should be tight on strong demand for the longer term. Ideas are that demand can remain above production for at least the next couple of years. Much of the increased demand should come from Asia. A good midcrop production is expected in the spring from Africa as weather now is good for the mid-crop development. Asian growing conditions are reported to be good.

Overnight News: Mostly dry conditions are expected in West Africa. Temperatures will average mostly above normal. Malaysia and Indonesia should see scattered showers. Temperatures should average near to above normal. Brazil will get dry conditions and near normal temperatures. ICE certified stocks are lower today at 3.570 million bags.

Chart Trends: Trends in New York are down with objectives of 2600 and 2450 March. Support is at 2690, 2650, and 2630 March, with resistance at 2750, 2765, and 27856 March. Trends in London are mixed to down with objectives of 1700 and 1650 March. Support is at 1710, 1680, and 1660 March, with resistance at 1750, 1765, and 1800 March.

COTTON (NYBOT:CTH14)

General Comments: Futures closed mixed, with nearby months a little lower on speculative selling and deferred months a little higher. Traders are worried about export demand after the recent rally in prices and the weaker Chinese economic data reported this week. The demand has held together better than expected by many analysts given the recent price rally. The US economy is improving slowly and should support increases in demand over time as people start to buy clothes again. Traders think USDA can show reduced production this year and perhaps reduced planted area potential for the coming year in the reports this month. That is what some traders bought deferred contracts yesterday. Reduced production from the crop last year is very possible given that USDA showed good yields in the production reports this fall despite some very stressful weather seen over the Summer in Texas and over to the Southeast. Brazil conditions are reported to be very good in Bahia.

Overnight News: The Delta and Southeast will see dry conditions except for precipitation on Sunday. Temperatures will average above normal through the weekend, then much below normal. Texas will see dry conditions. Temperatures will average near to above normal. The USDA spot price is 80.42 ct/lb. today. ICE said that certified Cotton stocks are now 0.034 million bales, from 0.034 million yesterday. USDA said that net Upland Cotton export sales were 85,900 bales this year and 29,300 bales next year. Net Pima sales were 2,500 bales this year and 0 bales next year.

Chart Trends: Trends in Cotton are mixed to up with objectives of 85.80, 86.90, and 88.20 March. Support is at 83.80, 83.00, and 82.50 March, with resistance of 85.30, 85.50, and 86.00 March.

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