Coffee drops on expectations of big Brazil crop

COFFEE (NYBOT:KCH14)

General Comments: Futures were lower as Ecom refuted the Volcafe production estimate released on Monday and said that Brazil will indeed have a very big production this year. Reuters said that offers of coffee from Vietnam had increased and this was viewed as another reason to sell futures in London and New York. There was little interest noted by producers or roasters in any trading in Latin America. Central American differentials are turning firmer now as northern South America offers are much harder to find, and higher differentials are getting paid at least in a small way. Weather is reported to be good in all areas.

Overnight News: Certified stocks are lower today and are about 2.701 million bags. The ICO composite price is now 110.03 ct/lb. Brazil will get dry conditions. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get mostly dry weather. Temperatures should average near to above normal.

Chart Trends: Trends in New York are up with objectives of 121.00, 122.00, and 125.00 March. Support is at 115.00, 113.00, and 112.00 March, and resistance is at 122.00, 124.00 and 125.00 March. Trends in London are mixed. Support is at 1670, 1660, and 1600 March, and resistance is at 1730, 1740, and 1760 March. Trends in Sao Paulo are mixed to up with objectives of 151.00 March. Support is at 142.00, 138.00, and 136.00 March, and resistance is at 149.00, 151.00, and 155.00 March.

COTTON (NYBOT:CTH14)

General Comments: Futures closed higher after Calcot said that Chinese production could drop by as much as 20% in the coming year. It said that the government there will most likely buy no Cotton for the reserve program and that imports for the next crop year could drop by 45% as the government there seeks to get out of the supply management of the market. Instead, the government will move to payments to producers to support production. Traders think USDA can show reduced production this year and perhaps reduced planted area potential for the coming year in the reports Friday. 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. The US economy is improving slowly and should support increases in demand over time as people start to buy clothes again. Brazil conditions are reported to be very good in Bahia.

Overnight News: The Delta and Southeast will see precipitation late in the week and a dry weekend. Temperatures will average much below normal today, then will trend to near to above normal by the end of the week. Texas will see dry conditions. Temperatures will average near to above normal. The USDA spot price is 81.16 ct/lb. today. ICE said that certified Cotton stocks are now 0.037 million bales, from 0.036 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 83.80, 82.70, and 82.50 March, with resistance of 85.30, 85.50, and 86.00 March.

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