South American drought pushes softs; which market took the brunt?

COTTON(NYBOT:CTH14)

General Comments:  Futures closed higher as traders start to get ready for the next supply and demand reports that are coming on Monday.  Prices overall have been supported by very good demand as export sales have been very strong, so there is a chance the USDA will increase demand and might cut ending stocks estimates.  There is also talk that USDA could cut production estimates again, but this is unlikely. 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 82.00 and 87.00 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 to much below normal.  The USDA spot price is 81.89¢ per lb. today.  ICE said that certified cotton stocks are now 0.188 million bales, from 0.178 million yesterday. 

Chart Trends:  Trends in Cotton are mixed.  Support is at 84.80, 84.00, and 83.70 March, with resistance of 86.80, 87.00, and 88.20 March.

 

FCOJ(NYBOT:OJK14)

General Comments:  Futures closed a little higher as the weather remains mostly good in Florida but might be stressing trees in Brazil.  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 139.00, 137.00, and 135.00 March, with resistance at 146.00, 147.00, and 150.00 March.

 

COFFEE (NYBOT:KCH14)

General Comments: Futures closed slightly higher as Brazil remains dry and warm.  The weather there has produced ideas of less production for this year and maybe next year as trees get stressed.  Trends are up in Arabica markets and in London.  News of better offers from Central America in the market continue.  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 as soon as next week.  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 in all areas.

Overnight News:  Certified stocks are lower today and are about 2.644 million bags.  The ICO composite price is now $1.2419 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 mixed to up with objectives of 1910 March.  Support is at 1760, 1740, and 1740 March, and resistance is at 1850, 1860, and 1890 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 158.00, 161.00, and 162.50 March.

SUGAR (NYBOT:SBH14)         

General Comments:  Futures were sharply higher on follow through buying tied mostly to the warm and dry weather in Brazil. Temperatures in some key production areas have been running above normal and there has been little in the way of rain.  This is mostly true in the northeast production areas as southern production areas should have seen better weather.  Speculators appeared to be covering short positions and starting to get long once again.  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.  Thai Raw Sugar differentials are steady to 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 no objectives.  Support is at 1615, 1600, and 1580 May, and resistance is at 1660, 1670, and 1700 May.  Trends in London are up with no objectives.  Support is at 432.00, 428.00, and 422.00 May, and resistance is at 440.00, 445.00, and 450.00 May.

 

COCOA  (NYBOT:CCH14)      

General Comments:  Futures closed lower on what appeared to be some speculative long liquidation.  The market needs now and has not been getting any that is enough to propel prices to new highs.  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.  It is the dry season, and it will turn drier again this week and whatever stress is there will increase.  There is some talk of a delayed mid-crop harvest, but little talk of actual yield losses so far.  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 areas 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 lower today at 3.644 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.

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