Foods and Softs Outlook - An Excerpt from CRB'S Futures Market Service
COTTON—Dec cotton prices are just below their recent 14-month high. Bullish factors include (1) harvest delays with only 15% of the US cotton crop harvested as of Oct 18, below the 5-yr avg of 35%, (2) USDA’s Oct 9 cuts in its US cotton production and US and global carry-over estimates, and (3) the weak dollar. Bearish factors include (1) the -41% m/m fall in Aug China cotton imports to 109,700 tons, the 15th straight decline and the lowest Aug import total in 5 yrs, and (2) the unexpected drop in Sep US consumer confidence, raising concerns about clothing demand. As of Oct 13, large specs added to a 1-1/2 yr high large long position of 31,765. Cotton summary: 2009-10 US production 12.998 mln bales (+1.4% y/y), 2009-10 US carry-over 5.4 mln bales (-12.9% y/y and 5-yr low), 2009-10 global carry-over 56.13 mln bales(-10.2% y/y).
COFFEE—Dec Nybot Arabica coffee prices soared to a 1-yr high. Bullish factors include (1) dollar weakness which benefits most commodities priced in dollars, (2) the Brazilian government’s planned purchase of 10 mln bags of coffee from local farmers, and (3) ICO’s cut in its global coffee output estimate for the year ending Sep 30 to 128.8 mln bags from a prior forecast of 133.4 mln bags. Bearish factors include (1) speculation that Brazil’s 2009-10 coffee harvest may reach 43.5 mln bags, the highest off-year output since 1987-88, and (2) ICO’s report that global coffee exports rose +2.8% to 90.51 mln bags during the11- months through Aug. Large specs as of Oct 13 added to a now large long position of 26,286. USDA coffee summary: 2009-10 world coffee production 127.4 mln bags (-5.5% vs 2008-09’s record 134.8 mln bags); 2009-10 world ending stocks at 35.3 mln bags (-12% vs 2008-09’s 40.1 mln bags).
COCOA—Dec cocoa prices surged to a 29-1/2 year high. Bullish factors include (1) dollar weakness, (2) ICO’s prediction that Ivory Coast cocoa output will fall -12% to 1.21 MMT in the year through Sep, and (3) ICO’s hike in its global cocoa deficit estimate for the year ending Sep 2009 to 73,000 MT, up from a prior estimate of 62,000 MT. Bearish factors include (1) the -1.4% y/y decline in Q3 European cocoa grindings, (2) ICO’s prediction that global cocoabean grindings may drop -6.7% in the yr ending Sep, the biggesT fall since records began in 1960-61, and (3) ICO’s hike in its forecast for a 150,000 MT global cocoa surplus for 2010. Large specs as of Oct 13 added to a 1-1/4 yr high large long position of 28,393.
SUGAR—Mar sugar prices are moderately below their recent 28-yr high. Bullish factors include (1) the weak dollar, (2) expectations that India, the world’s 2nd-largest sugar producer and largest consumer, may import up to 8 mln tons of sugar this year (its first sugar imports in 3 years), (3) fears that recent heavy rains in Brazil will curb sugar output, and (4) ISO’s hike in its estimate for a 2008-09 world sugar deficit by 20% to 9.35 MMT from its May estimate of 7.8 MMT. Bearish factors include the Indian government’s placement of sugar inventory limits on India’s sugar mills, reducing import demand. As of Oct 13, large specs had a large long position of 175,371. USDA Sugar crop summary: 2009-10 world production 159.9 MMT (+7.5% y/y vs 148.7 MMT in 2008-09), consumption 159 MMT (+1.0% y/y from 157.5 MMT in 08-09), ending stocks 31.2 MMT (-2.4% y/y from 31.9 MMT in 08-09).
ORANGE JUICE—Nov orange juice prices extended their 3-month rally to a 14-month high. Bullish factors include (1) the current cold snap that threatens to damage Florida’s citrus crops, (2) the USDA’s Oct 9 Florida orange production estimate for 2009-10 of 136 mln boxes, down -16% from this year, and (3) the drop in Florida orange acreage in 2009 to a 23-yr low as farmers cut down trees to stop the spread of greening disease. A bearish factor is the lack of any major hurricane threats to Florida’s citrus growing areas. Large specs as of Oct 13 increased their large long position to 14,943. USDA orange summary: Florida 2009-10 orange crop 136 mln boxes (-16% from 2008-09’s 162.4 mln 90-lb boxes); US 2009-10 all-orange production 8.25 MT (-10% y/y).
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