Cold temps wreaking havoc on warm weather commodities

COTTON

General Comments:  Futures closed lower on follow through speculative long liquidation.  Prices overall have been supported by very good demand as export sales have been very strong, but traders look at China and its economic problems and high stocks levels and wonder if the buying trend can continue.  The price action last week left futures in a range as the market could not test support or resistance.  Prices are high enough now to cut off some demand and also to make some producers consider increasing planted acreage next year.  The market needs to keep seeing demand to keep prices well supported.  It is possible that futures continue in a trading range between 82¢ and 87¢ per lb. basis nearby futures for a while. Brazil conditions are reported to be very good in Bahia with light precipitation and warm temperatures.

Overnight News:  The Delta and Southeast will see more precipitation move from west to east today and Wednesday.  Temperatures will moderate this week before turning cold again late this week.  Texas will see dry conditions except for light precipitation today.  Temperatures will average below normal.  The USDA spot price is 81.54¢ today.  ICE said that certified Cotton stocks are now 0.178 million bales, from 0.168 million yesterday. 

Chart Trends:  Trends in Cotton are mixed.  Support is at 84.00, 83.70, and 82.40 March, with resistance of 85.70, 86.80, and 87.00 March.

FCOJ

General Comments:  Futures closed a little lower.  Spreads were stronger again despite poor sales data as reported by Nielsen. There does not appear to be any cold weather threats on the horizon for the crops in Florida, but it has been dry.  Florida is harvesting a very small crop of oranges due to disease problems with the greening disease.  Growing and harvest conditions in the state of Florida remain mostly good, with mostly dry conditions and moderate temperatures.  More rain would be beneficial.  Irrigation water is available and is being used.  Harvest remains active for early and mid-oranges, but fruit sizes are reported to be small.  The Valencia harvest is expanding.  Brazil is seeing near to above normal temperatures and mostly dry conditions, and there is now talk of reduced production this year. 

Overnight News:  Florida weather forecasts call for mostly dry conditions, but some showers are possible late this week.  Temperatures will average above normal.                                                                                                                

Chart Trends:  Trends in FCOJ are mixed.  Support is at 140.00, 137.00, and 135.00 March, with resistance at 147.00, 150.00, and 152.00 March.

DJ U.S. Orange-Juice Sales Volume Down 4.7% from a year ago

  NEW YORK--U.S. orange-juice retail sales fell 4.7% from a year ago, indicating consumer demand for the onetime breakfast-table staple continues to wane.

 U.S. consumers bought 48.59 million gallons of orange juice during the four weeks that ended Jan. 18, Nielsen data published Monday showed. The period is usually the peak of orange-juice sales, as consumers buy the beverage to take in more Vitamin C during cold and flu season. Some consumers believe the Vitamin C in orange juice can stave off or speed recovery from the common cold.

  Still, sales were up 8.8% from the four weeks ended Dec. 21, the sixth consecutive gain in monthly orange-juice retail sales, according to the data.

  The next report from Nielsen, due in March, will show the effects that the polar vortex and freezing temperatures across the U.S. had on orange-juice sales.

  "We always have a bump up in demand in January; however, it's not based on the calendar, it's based on the weather," said James Cordier, president of Liberty Trading Group, a Tampa, Fla.-based brokerage. "So if we have January weather in the month of February, it's very rational to think that demand's going to last a little longer this year."

Cost is also a concern. The average price for orange juice was $6.24 a gallon in the four weeks ended Jan. 18, down 1-cent from last year but up 41% from a decade ago.

 

COFFEE 

General Comments: Futures closed sharply higher as Brazil remains dry and warm.  The weather there has produced ideas of less production for this year and maybe next year.  Buyers know that there are only minimal sales for the next few days from Vietnam due to the Tet holiday and are also hearing that dry weather in coffee regions of Brazil are stressing crops.  Vietnamese traders will return to work on Friday and action should start again next week.  Trends are up in Arabica markets and in London.  News of small offers from Central America in the market continue, but buying interest is thin as buyers say they can buy cheaper from places like Colombia.  Differentials in the region are lower, but still not low enough to attract roaster interest.  Export estimates from Vietnam remain below last year, but the trade continues to expect a big offer, perhaps after the Tet holidays end on Thursday.  Brazil is also mostly quiet right now.  Production ideas for Brazil remain about 54 to 55 million bags, but the current dry weather could cut production estimates again soon.  Differentials are steady for Vietnam.  Central American differentials are weaker, but still elevated.  Weather is reported to be good.

Overnight News:  Certified stocks are higher today and are about 2.662 million bags.  The ICO composite price is now $1.24.75 per lb.  Brazil will get mostly dry conditions.  Temperatures will average near to above normal.  Colombia should get scattered showers, and Central America and Mexico should get mostly dry weather, but there will be some showers midweek in Eastern Mexico.  Temperatures should average near to above normal. 

Chart Trends:  Trends in New York are up with no objectives.  Support is at 131.50, 130.00, and 128.00 March, and resistance is at 138.00, 142.00 and 144.00 March.  Trends in London are up with objectives of 1880 and 1910 March.  Support is at 1800, 1760, and 1740 March, and resistance is at 1890, 1900, and 1930 March.  Trends in Sao Paulo are up with no objectives.  Support is at 155.00, 151.00, and 149.00 March, and resistance is at 161.00, 162.50, and 165.00 March.

 

SUGAR          

General Comments:  Futures were higher on follow through buying tied mostly to the warm and dry weather in Brazil.  Speculators appeared to be covering short positions and starting to get long.  More people are talking about dry weather in Brazil right now and that it could impact production of the next crop, but the market knows there is still a lot of Sugar.  In addition, the dryness is concentrated in northeast production areas, but the main region in the center-south of the country is getting better rains.  Thai Raw Sugar differentials are weaker again as Thai exporters try to move a big crop as fast as possible.  Weather conditions in key production areas around the world are rated as mostly good except for the possible dry weather in Brazil. 

Overnight News:  Brazil could see dry weather and near to above normal temperatures. 

Chart Trends: Trends in New York are up with objectives of 16.00¢ per lb. May.  Support is at 15.30, 15.20, and 14.90 May, and resistance is at 16.00, 16.15, and 16.35 May.  Trends in London are up with objectives of 438.00 May.  Support is at 422.00, 420.00, and 417.00 May, and resistance is at 431.00, 436.00, and 440.00 May.

 

COCOA         

General Comments:  Futures closed a little higher in consolidation trading.  The market has been consolidating since making a move sharply higher about a week ago.  Traders are still looking for tight supplies and higher prices down the road, but for now the world should have enough Cocoa available to it.  Arrivals from Ivory Coast and purchases from Ghana have been above expectations so far this year and at least as strong as last year.  A good midcrop production is expected in the spring from Africa as weather now is good for the mid-crop development.  It is the dry season, and it will turn drier again this week and whatever stress is there will increase.  There is also talk of some losses in Indonesia and other countries in Southeast Asia from recent heavy rains.

Overnight News:  Mostly dry expected in West Africa, but a few showers are expected in southern regions starting mid-week.  Temperatures will average near to above normal.  Malaysia and Indonesia should see scattered showers.  Temperatures should average near to above normal.  Brazil will get dry conditions or light showers and near to above normal temperatures.  ICE certified stocks are higher today at 3.654 million bags.  

Chart Trends:  Trends in New York are mixed.  Support is at 2865, 2835, and 2800 March, with resistance at 2930, 2950, and 2980 March.  Trends in London are up with no objectives.  Support is at 1830, 1810, and 1775 March, with resistance at 1870, 1900, and 1930 March.

 

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.

Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome