Where are softs headed?

COTTON(NYBOT:CTH14)

General Comments:  Futures closed higher as traders start to get ready for the next supply and demand reports that are coming later this morning.  Futures price action has been positive. Prices overall have been supported by very good demand as export sales have been very strong, so there is a chance 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.  Prices are high enough now to cut off some demand and also to make some producers consider increasing planted area 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 mostly dry conditions, although Delta areas could see some precipitation on Tuesday and Southeast areas should see precipitation on Wednesday.  Temperatures will average near to below normal in the Southeast and much below normal in the Delta.  Texas will see dry conditions through Monday and snow and ice on Tuesday.  Temperatures will average below to much below normal.  The USDA spot price is 83.87 cents per lb. today.  ICE said that certified Cotton stocks are now 0.227 million bales, from 0.216 million yesterday. 

Chart Trends:  Trends in Cotton are mixed to up with objectives of 90.00 March.  Support is at 86.80, 86.30, and 85.80 March, with resistance of 88.20, 89.20, and 89.90 March.

FCOJ(NYBOT:OJH14)

General Comments:  Futures closed higher before the next round of USDA reports this morning.  Traders think USDA might lower production estimates again.  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.  Dry weather is forecast for the next week or so, but then longer range forecast suggest that the rains could return.

Overnight News:  Florida weather forecasts call for mostly dry conditions.  Temperatures will average above normal.                                                                                                                                                                                  

Chart Trends:  Trends in FCOJ are up with objectives of 163.00 and 174.00 March.  Support is at 142.00, 140.00, and 139.00 March, with resistance at 150.00, 152.00, and 155.00 March.

COFFEE (NYBOT:KCH14)

General Comments: Futures closed lower in London as that market adjusted to the New York weakness on Thursday.  Traders and producers returned to work in Vietnam and other countries as Lunar New Year holidays came to an end, and this fact might have contributed to the weakness in London.  There are still ideas of big selling to come as exports so far this year from Vietnam have been disappointing.  New York was little changed despite London weakness as Brazil remains dry.  The weather there has produced ideas of less production for this year and maybe next year as trees get stressed.  No rains are in the forecast until the end of the week, and these rains are not expected to be drought busters.  News of better offers from Central America in the market continues, but differentials are still holding fairly firm.  Differentials in the region are lower, but still not low enough to attract roaster interest. 

Overnight News:  Certified stocks are higher today and are about 2.639 million bags.  The ICO composite price is now 125.00 lb.  Brazil will get mostly dry conditions early in the week and showers later in the week.  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 mixed.  Support is at 132.00, 131.00, and 129.00 March, and resistance is at 144.00, 145.50 and 148.00 March.  Trends in London are mixed.  Support is at 1760, 1740, and 1720 March, and resistance is at 1820, 1880, and 1905 March.  Trends in Sao Paulo are mixed.  Support is at 156.00, 153.00, and 152.00 March, and resistance is at 165.00, 170.00, and 174.00 March.

SUGAR (NYBOT:SBH14)         

General Comments:  Futures were lower again in correction trading as futures could not move above 16.50 in May contracts.  It now appears that the market has established at least a short term trading range between 15.00 and 16.50 May New York futures.  Brazil continues to see stressful conditions that could hurt production potential for the coming crop.  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.  Most areas are forecast to see some rains start next weekend, and the situation could change quickly if the rains are good.  The market knows there is still a lot of Sugar available from other origins.  Thai Raw Sugar differentials are steady to weaker again as Thai exporters try to move a big crop as fast as possible.  They have been offering Raws but should start to offer Whites soon.  India had discussions on export subsidies for Sugar on Friday, but did not make any decisions.  Weather conditions in key production areas around the world are rated as mostly good except for the dry weather in Brazil. 

Overnight News:  Brazil could see dry weather and near to above normal temperatures.  Better chances for showers should appear this weekend. 

Chart Trends: Trends in New York are mixed.  Support is at 1580, 1560, and 1530 May, and resistance is at 1620, 1660, and 1670 May.  Trends in London are up with objectives of 458.00 May.  Support is at 425.00, 422.00, and 418.00 May, and resistance is at 436.00, 440.00, and 444.00 May.

COCOA (NYBOT:CCH14)        

General Comments:  Futures closed slightly higher in consolidation trading.  Reports indicate that commercial buying has found producer and speculator selling.  The market needs news and has not been getting any that is enough to propel prices to new highs.  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, but rains are about normal now.

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 3.553 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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