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

COTTON—Dec cotton prices jumped to a 16-month high. Bullish factors include (1) the USDA’s Nov 23 prediction that China’s 2009-10 cotton output may fall -15% y/y to 6.8 million tons, (2) persistent dollar  weakness, (3) the USDA’s Nov 10 cut in its US cotton production estimate to 12.496 mln bales, the smallest  harvest since 1989-1990, along with cuts in its US and global carry-over estimates, and (4) the  +16% m/m increase in Oct China cotton imports, the first increase in the last 17 months. A bearish factors  is overall slack Chinese cotton demand as China’s cotton imports from Jan-Oct are down -35.9% y/y. As of Nov 17, large specs cut their large long position to 39,293. Cotton summary: 2009-10 US production  12.496 mln bales (-2.5% y/y), 2009-10 US carry-over 4.9 mln bales (-22.7% y/y and 5-yr low), 2009-10 global carry-over 53.72 mln bales(-13.4% y/y).

COFFEE—Dec Nybot Arabica coffee prices are consolidating below last month’s 15-month high. Bullish factors include (1) ICO’s estimate that global coffee supplies may drop -3.2% y/y in the year beginning Oct 1, (2) Oct Brazil coffee exports down -19% y/y, and (3) the Columbia Coffee Growers Federation prediction that its coffee harvest this year will fall to 8.3 mln bags, -28% y/y. 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 +1.6% to 97.58 mln bags during the 12-months through Sep. Large specs as of Nov 17 sharply cut their large long position to 23,911. 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 moving sideways, modestly below last month’s 29-1/2 yr high. Bullish factors include (1) speculation that cocoa demand will improve along with the global economy, and (2) 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 Nov 17 reduced their large long position to 32,059.

SUGAR—Mar sugar prices continue to consolidate below September’s 28-year high. Bullish factors include (1) fears that recent heavy rains in Brazil will curb sugar output, (2) the action by India, the world’s 2nd-largest sugar producer and largest consumer, to import up to 8 mln tons of sugar this year (its first sugar imports in 3 years), 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. A bearish factor is ISO’s cut in its world sugar deficit estimate for the year through Sep 2010 to 7.2 MMT from its Sep estimate of 8.4 MMT. As of Nov 17, large  specs held a large long position to 147,892. 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 are modestly below their recent 15-month high. Bullish factors include (1) speculation that the H1N1 virus may boost OJ demand (OJ sales in the 4-weeks thru Oct 31 up +6.4% y/y), (2) the USDA’s Oct 9 Florida orange output estimate for 2009-10 of 136 mln boxes, -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 Nov 17 held a large long position of 12,534. 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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