Foods and Softs Outlook - An Excerpt from CRB'S Futures Market Service
COTTON—Dec cotton prices retreated from their recent 14-month high. Bearish factors include (1) the -6.8% m/m fall in Sep China cotton imports to 102,200 tons, the 16th straight monthly decline, (2) a rebound in the dollar, and (3) the unexpected drops in US consumer confidence in Sep and Oct, raising concerns about clothing demand. Bullish factors include (1) harvest delays with only 19% of the US cotton crop harvested as of Oct 25, below the 5-yr avg of 43%, and (2) USDA’s Oct 9 cuts in its US cotton production and US and global carry-over estimates. As of Oct 20, large specs increased their1-1/2 yr high large long position to 38,412. 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 corrected down to a 2-week low from their recent 13-month high as the dollar recovered. Bullish factors include (1) the Brazilian government’s planned purchase of 10 mln bags of coffee from local farmers, and (2) 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 the 11-months through Aug. Large specs as of Oct 20 added to a large long position of 33,384. 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 are just below their recent 29-1/2 year high. Bullish factors include (1) a possible strike by Ivory Coast cocoa farmers who account for 40% of the world’s cocoa crop, (2) recent dollar weakness, 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 cocoa-bean 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 20 cut their large long position to 28,005.
SUGAR—Mar sugar prices are consolidating moderately below September’s 28-year high. Bullish factors include (1) 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), (2) fears that recent heavy rains in Brazil will curb sugar output, and (3) 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 20, large specs held a large long position of 180,964. 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—Jan orange juice prices fell back from their recent 15-month high. Bullish factors include (1) abnormally early cold weather 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 20 reduced their large long position to 11,921. 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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