Cotton prices stay strong, following a rise in demand

January 19, 2018 12:19 PM

General Comments: Futures were lower again yesterday and trends are down on the daily and weekly charts.  Futures are now at or near contract lows in New York and also in London. Ideas that Sugar supplies available to the market can increase in the short term have been key to the selling this week.  

Brazil is considering the end of import tariffs on US ethanol and this has triggered selling in Sugar as more cane can now be processed into sweetener.  Price action had been strong due to the strong demand for ethanol that has diverted some Brazil mill production away from Sugar.  However, prices fell apart on forecasts for excessive production from the ISO and from private analytical firms.  Mills in Brazil have decided to make more Ethanol as world Crude Oil and products prices have been very strong.  Ideas are that petroleum prices can continue strong as OPEC and Russia have agreed to keep production constrained compared to world demand.

Overnight News:  Brazil should feature light showers each day.  Temperatures should be near to above normal 

Chart Trends: Trends in New York are down with objectives of 1260 March. Support is at 1290, 1260, and 1230 March, and resistance is at 1370, 1390, and 1410 March. Trends in London are down with no objectives. Support is at 352.00, 349.00, and 346.00 March, and resistance is at 367.00, 371.00, and 379.00 March.


General Comments: Futures closed slightly higher in New York and a little lower in London.  New York broke through some major resistance on Wednesday and trends are up.  It was a consolidation day yesterday as the world waited for the North American grind data.  The data showed a lower grind and should be a negative surprise for the trade today.  London is now at the upper end of its trading range.  The West African main harvest has started to wind down and focus is shifting to the next round of grind data and the weather for the West African mid crop.  Ideas are that Cocoa demand from grinders can be strong this quarter due to the weaker prices, and the EUJ grind announced last week was very strong and well above grade expectations. 

The market is also on alert for the Harmattan winds that can suck moisture from the soil and trees and really hurt bean quality and production.  These winds have not developed as of yet, but could at any time.  It has become hot and dry in many parts of West Africa, so conditions are very good for the winds to form.  Some crop losses might be possible if the current conditions persist even without the winds.  Arrivals in West Africa remain behind year-ago levels when they were expected to be above year-ago levels. 

Overnight News:  Mostly dry conditions are expected in West Africa.  Temperatures will average above normal.  Malaysia and Indonesia should see frequent showers.  Temperatures should average above normal.  Brazil will get cry conditions and near to above normal temperatures.  ICE certified stocks are slightly lower today at 3.664 million bags.   

Chart Trends: Trends in New York are up with objectives of 2100 and 2250 March. Support is at 1950, 1900, and 1870 March, with resistance at 2010, 2030, and 2070 March. Trends in London are mixed. Support is at 1370, 1330, and 1320 March, with resistance at 1440, 1450, and 1460 March.

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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.