Foods and Softs Outlook - An Excerpt from CRB'S Futures Market Service

COTTON—Dec cotton prices are holding just below last month’s 14-month high. Bullish factors include (1) harvest delays with only 28% of the US cotton crop harvested as of Nov 1, below the 5-yr avg of 50%, and (2) ICAC’s estimate that global cotton output will fall to 22.6 MMT in the year through Jul, down -4.7% y/y. Bearish factors include (1) the -6.8% m/m fall in Sep China cotton imports to 102,200 tons, the 16th straight monthly decline, and (2) the unexpected drops in US consumer confidence in Sep and Oct, raising concerns about clothing demand. As of Oct 27, large specs increased their1-1/2 yr high large long position to 40,166. 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 are trading just below their recent 14-month high. Bullish factors include (1) Oct Brazil coffee exports down -19% y/y, (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 the  11-months through Aug. Large specs as of Oct 27 held a large long position of 33,518. USDA coffeesummary: 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 corrected down to a 3-week low from their recent 29-1/2 yr high as Ivory Coast cocoa workers cancelled strike plans. Bullish factors include (1) 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, and (2) dollar weakness. 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 27 added to a 15-month high large long position of 30,887.

SUGAR—Mar sugar prices are moving sideways 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 27, large specs held a large long position of 175,135. 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 corrected down to a 3-week low from their recent 15-month high. Bullish factors include (1) increased demand as OJ sales in the 12 months thru Oct 3 were up +1.2% y/y, (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 27 held a large long position of 11,969. 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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