Cocoa pushes lower as increased stocks hurt bulls’ case

COCOA (NYBOT:CCH14)

General Comments: Futures closed lower in New York and in London and both markets held to the recent trading range. New York tried to start a new leg up on the charts in early trading, but could not hold the gains. Continued increases in certified stocks in New York have hurt the bull case and helped stall futures at current price levels. Arrivals in Ivory Coast and Ghana purchases remain strong. 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 sharply higher today at 3.754 million bags. LIFFE stocks are now 6,886 standard units, 163 large units, and 2 bulk units.

Chart Trends: Trends in New York are mixed. Support is at 2630, 2580, and 2570 March, with resistance at 2730, 2740, and 2765 March. Trends in London are mixed. Support is at 1700, 1680, and 1660 March, with resistance at 1730, 1750, and 1765 March.

COTTON (NYBOT:CTH14)

General Comments: Futures closed lower on worries about Chinese demand and as many prepared for the USDA reports that will be released at 11:00 AM Chicago time. 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 above normal. Texas will see dry conditions except for rain tomorrow. Temperatures will average above too much above normal. The USDA spot price is 79.40 ct/lb. today. ICE said that certified Cotton stocks are now 0.042 million bales, from 0.037 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 82.70, 81.50, and 80.80 March, with resistance of 83.80, 84.20, and 85.00 March.

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