Will increasing sugarcane exports boost cocoa prices?

August 22, 2017 09:45 AM

General Comments: Cotton was a little higher as the market tried to anticípate the crop condition reports.  The condition improved overall in the USDA reports last night and some selling is possible today.  However, futures have fallen a lot in the last couple of weeks, so selling pressure might be limited.  It might take some selling from producers to push futures significantly lower at this time, and for now, they are quiet.  Prices remain under general pressure due to good weather forecasts for the crop and the higher US dollar. The temperatures are more moderate in Texas and there have been some showers.  The growing weather in the US Delta and Southeast is generally good as rains have been seen in many growing areas.  Bolls are forming and starting to open in many áreas.  Some harvest has been reported in southern Texas and results have been very good.  Monsoon rains are reported as very uneven in India and Pakistan.  Some crops are lost due to the flooding, other áreas have been too dry.  Better rains are forecast for drier áreas this week.  The weekly charts show that futures might have completed a bear flag and could break some support áreas and move lower in the next few weeks.

Overnight News: The Delta and Southeast will see showers through Thursday, then mostly dry conditions.  Temperatures should average near to below normal.  Texas will see dry scattered showers on Thursday and Friday. Temperatures will average near normal.  The USDA average price is now 66.61 ct/lb.  ICE certified stocks are now 13,520 bales, from 13,983 bales yesterday. 

Chart Trends:  Trends in Cotton are mixed to down with no objectives.  Support is at 6710, 6670, and 6630 December, with the resistance of 6780, 6850, and 6900 December.

General Comments:  FCOJ closed lower yesterday as production and demand news was bearish for the market.  Steger estimated Florida production for the coming year at 75 million boxes, up significantly from the 68 million boxes harvested this year.  Neilsen said that demand continues to suffer.  Sales were down 8.9% from the previous year in the latest four weeks and are now down 7.5% for the marketing year.  The potential for storms increases dramatically for the next few weeks, and the systems are coming right in line with long term normals.  Florida weather is very good as it is now drier after some recent rains.  There are no systems in the Atlantic to cause concern about tropical storm development that could be detrimental to trees and fruit.  One System could develop and could move to Florida, but mostly just to drop heavy rains.  No wind damage is in the forecast. The demand side remains weak and there are plenty of supplies in the United States. Trees now are showing fruit of good sizes and overall conditions are called good.  Brazil crops remain in mostly good condition and production estimates are climbing after recent rains.   The weekly charts show that a low could be near completion,

Overnight News:  Florida should get scattered showers and near to above normal temperatures this week and good chances for showers and storms this weekend.  Brazil should get mostly dry conditions and near to below normal temperatures.

Chart Trends:  Trends in FCOJ are mixed.  Support is at 131.00, 129.00, and 128.00 September, with resistance at 138.00, 140.00, and 142.00 September.

General Comments:  New York and London closed lower again on follow through selling tied to ideas of improving growing conditions in Brazil.  There were not any other big news stories to affect prices.  There has been some rains and flowering has been reported to get the next production cycle started.  Ideas of smaller offers from Brazil and the rest of Latin America are still around, but ideas of weaker demand and the potential for increased production next year are bearish for prices.  Both buyers and sellers have been quiet  Producers are still worried about an extended outbreak of dry weather as flowering has started in Brazil, but most are not concerned as there is often dry weather at this time of year.  The harvest in Brazil is starting to wind down and harvest reports have been mixed.  Reports indicate that the quality of the beans harvested in Brazil often is not good and that many beans are small.  Even so, many people talk of production above 50 million bags.

Overnight News:  Certified stocks are higher today and are about 1.634 million bags.  The ICO composite price is now 124.82 ct/lb.  Brazil will get mostly dry weather.  Temperatures should average near to above normal.  Colombia should get scattered to isolated showers.  Central America and southern Mexico should get scattered showers.  Temperatures should average near to above normal.           

Chart Trends:  Trends in New York are down with objectives of 126.00 and 115.00 September.  Support is at 125.00, 123.00, and 120.00 September, and resistance is at 130.00, 135.00 and 137.00 September.  Trends in London are mixed to down with objectives of 1990 and 1880 September. Support is at 2090, 2070, and 2040 September, and resistance is at 2150, 2180, and 2200 September

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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.