Trends on cotton, sugar, cocoa and more

May 11, 2017 09:56 AM

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Cotton            

General Comments:  Cotton was lower in reaction to the USDA reports. USDA showed s Sharp year on year increase in production.  This increase should have been expected as planted área estimates have been much higher.  Demand estimates showed stable trends, so ending stocks for the coming crop were high at 5.0 million bales. USDA did increase export demand for the current crop this month and cut ending stocks estimates, but this had been generally expected.  The charts give ideas that the trends have turned down for a good correction move.  Planting conditions remain mixed due to recent cold and wet weather.  Texas is still too cold for best crop development.  Forecasts now call for drier and warmer weather to return this weekend.  The US mills still have to fix July purchases and the need for them to fix will keep some Support under July futures.  The mills did not price sales from producers at cheaper levels and now are forced to pay higher prices.  Strong export demand has supported nearby futures until recently.  Demand has faded on the export side for the last couple of weeks and this is one reason for selling to develop in old crop months in recent days.  More selling is possible if the funds continue to liquidate positions and if export demand does not move higher again.  Certified stocks have moved sharply higher in the last month as an indication of increased farm selling and reduced overall demand.   

Overnight News: The Delta and Southeast should get more rain Friday and Saturday, with more heavy rain possible.  Dry starting Sunday.  Temperatures should average below normal today, then trend to near to above normal.  Texas will see mostly dry weather. Temperatures will be below normal today and tomorrow, then above normal this weekend.  The USDA average price is now 73.24 ct/lb.  ICE certified stocks are now 310,768 bales, from 310,933 bales yesterday.  ICE said that 0 contracts were tendered for delivery for May and those total deliveries for the month are now 735 contracts.  USDA said that net Upland Cotton export sales were 160,600 bales this year and 146,400 bales next year.  Net Pima sales were 3,300 bales this year and 13,500 bales next year.     

Chart Trends: Trends in Cotton are down with objectives of 7570 and 7370 July.  Support is at 7610, 7540, and 7450 July, with a resistance of 7710, 7790, and 7830 July.

FCOJ

General Comments: FCOJ closed lower in reaction first to higher production estimates from Brazil and later from USDA.  USDA increased Florida production by 1.0million boxes.  The crop is still small but does not appear to be getting smaller.  Weak domestic demand is also helping keep prices under pressure.  The latest Nielsen report once again highlighted the weak domestic demand that remains very low overall.  Reports of imports from Brazil that are being reflected in the Florida Movement and Pack report also have weighed on prices as supplies overall have been more than enough for the demand.  Domestic production remains very low due to the greening disease and drought.  Trees now are showing small fruit.  Irrigation is being heavily used to prevent loss as the state is in drought and there are no forecasts for rain for the next week.  The Valencia harvest is moving to processors and into the fresh market and will start to wind down at this time.  Brazil crops remain in mostly good condition. 

Overnight News: Florida should see mostly dry weather and near to above normal temperatures,  Brazil should get mostly dry conditions and near normal temperatures.  ICE said that 0 contracts were tendered for May delivery today and those total deliveries for the month are now 0 contracts.

Chart Trends: Trends in FCOJ are down with objectives of 135.00 July.  Support is at 142.00, 139.00, and 136.00 May, with resistance at 150.00, 153.00, and 155.00 May.

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About the Author

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.