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

COTTON—May cotton prices are trading just under their recent 2-yr high. Bullish factors include (1) the USDA’s Mar 10 cut in its US carry-over estimate to 3.2 mln bales, a 14-yr low, (2) the 15%drop in 2009 China cotton output to 29.4 mln bales and the rise in its Jan cotton imports to a 2-yr high, (3) the USDA’s Feb 9 hike in its US cotton export forecast to 12 mln bales, and (4) the USDA’s Jan 12 cut in its US cotton production estimate to 12.40 mln bales, a 19-yr low. A bearish factor is the ICAC’s report that 2009 global cotton demand fell -12% in the year ended Jul 31. As of Mar 9, large specs added to a large long position of 38,503. Cotton summary: 2009-10 US production 12.40 mln bales (-3.3% y/y and a 19-yr low), 2009-10  US carry-over 3.2 mln bales (-49.5% y/y and 14-yr low), 2009-10 global carry-over 51.41 mln bales(-17.6% y/y).

COFFEE—May Nybot Arabica prices are moving sideways, modestly above their recent 5-1/2 month low. Bearish factors include (1) the prediction from Brazil’s Agriculture Ministry that Brazil’s 2009-10 coffee output may rise +27% y/y to 50 mln bags as trees enter the higher-yielding part of their 2-year cycle, and (2) commodity fund liquidation. Bullish factors include (1) ICO’s prediction that world coffee supply will fall short of demand in the 2009-10 season by 6-7 mln bags, (2) the USDA’s cut in its 2009-10 global coffee production and ending stocks estimates, and (3) the 14% drop in Brazil’s 2008-09 coffee harvest to 39.47 mln bags. Large specs as of Mar 9 held a moderate long position of 10,566. USDA coffee summary: 2009-10 world coffee production 125.2 mln bags (-3.7% vs 2008-09’s 130 mln bags); 2009-10 world  ending stocks at 34.69 mln bags (-15% vs 2008-09’s 40.96 mln bags).

COCOA—May cocoa prices rebounded from a recent 7-month low, which was a correction down from a 31-yr nearest futures high in Dec. Bearish factors include (1) ICO’s estimate for a 80,000 MT global cocoa surplus for 2010-11, and (2) weak demand after ICO’s report that global cocoa bean processing in the year ended Sep fell -6.6%, the first drop since 2001-02. Bullish factors include (1) ICO’s forecast for a  -1.9% y/y drop in the Ivory Coast cocoa crop for the year through Sep, and its report that 2008-09 Ivory Coast cocoa output was 1.22 million tons, a 14-yr low, and (2) the +0.6% y/y rise in Q4 European cocoa grindings, the first increase in a year. Large specs as of Mar 9 held a large long position of 21,432.

SUGAR—May sugar prices plunged to a 7-3/4 month low, further correcting downward from last month’s 29-yr high. Bearish factors include (1) the hike in this year’s sugar crop estimate by India’s SMA to 16.8 MMT, up 5% from a Feb estimate, and (2) commodity fund liquidation. Bullish factors include (1) ISO’s hike in its 2009-10 global sugar deficit to 9.4 MMT, up 28%from a Dec estimate, and (2) the action by India, the world’s 2nd-largest sugar producer and largest consumer, to import sugar for a second year. As of Mar 9, large specs reduced their large long position to 163,449. USDA Sugar crop summary: 2009-10 world  production 153.5 MMT (+6.7% y/y vs 143.8 MMT in 2008-09), consumption 153.7 MMT (-0.4% y/y from 154.4 MMT in 08-09), ending stocks 26 MMT (-5.7% y/y from 27.6 MMT in 08-09).

ORANGE JUICE—May orange juice prices are trading moderately below their recent 2-1/3-yr high. Bullish factors include (1) damage to the 2009-10 Florida orange crop due to freezing weather in Jan and Feb, and (2) 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. Bearish factors include (1) the USDA’s Mar 10 hike in its 2009-10 Florida orange production estimate to 131 mln boxes, up +1.6% from last month’s estimate of 129 mln boxes, and (2) the -3.3% y/y drop in US retail orange juice sales in the 4-weeks ended Feb 20. As of Mar 9, large specs added to their large long position of 14,908. USDA orange summary: Florida 2009-10 orange crop 131 mln boxes (-19.3% from 2008-09’s 162.4 mln 90-lb boxes); US 2009-10 all-orange production 8.10 MT (-12% y/y).

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