Everywhere you look catastrophic events are taking place. Weather related events like floods and landslides in China and Pakistan or fires caused by record high temperatures in Russia; some of which are closing in on the Chernobyl area, producing extremely hazardous radioactive smoke. Or manmade calamities like the oil leak in the Gulf of Mexico. And the sad condition of the world’s economies due to decades of mismanagement. This is one angry planet right now! These uncommon weather patterns and manmade crises will no doubt affect many crops this growing season. The Reuters Jeffries Commodity Channel Index put in what looks to me like a substantial top last week and is sharply lower as I write. Let’s focus on the softs and their take on all of this.
Coffee 08/13/2010
Life Time Trading Range 41.50 Cents - $337.50 per Pound
Trades on The ICE 2:30 AM – 1 PM CDT
A European trade organization reports that Coffee stocks are higher for the first time this year. I consider this a shot across the bow. Until now, Coffee prices have been able to hold up quite well considering the downside pressure that has been present in commodities lately. The expected large Brazilian harvest is fast approaching and the perceived increase in supply is pressuring the market. Add this to last week’s key reversal from twelve year highs and we have a recipe for lower Coffee prices.
Due to heavy rains on the Island of Sumatra, Indonesian Coffee exporters have built up a stockpile of 120,000 tonnes. The developing Kenyan Coffee crop has been negatively affected by heavy rains as well. The weather has not been cooperative this growing season. There is talk that some Ethiopian exporters have defaulted on sales contracts after seeing Coffee make twelve year highs last week. Greed my friends will get them in the end! Though the crop from Brazil is expected to be huge, this short term tightness in supply has provided temporary support to Coffee prices.
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: Coffee’s journey to the upside was cut short last week by what appeared to be a classic blow off top. This week though, the market broke a bit below the 9 bar moving average; only to move back above it and rally sharply. This action could be telling us that the possibility of a run to $2.00 or more is still possible. The stochastic is about to issue a buy signal. The R.S.I. stands at 68.77, higher than last week’s reading of 64.68. The M.A.C.D. histogram stands at 2.8 and a bit lower than last week’s reading of 3.26. The bull looks to have returned. We shall soon find out.
Do not trade without the use of protective strategies such as stops and or options.
Cocoa 08/13/2010
Life Time Trading Range $444 – $5379 per Tonne
Trades on The ICE 3 AM – 1 PM
Cocoa has turned down and is looking for a reason not to head lower. Economic conditions are such that concern over consumer purchases of luxury goods versus necessities has again raised it’s head. Though there has also been concern regarding the October delivery cycle it seems to have lessened. One important fact to consider is that the July deliveries were taken by a speculator, not a commercial commodity entity. We have to ask ourselves if commercial interests will allow a speculator to take advantage of them at their own game. I highly doubt they will! Cocoa has broken below major support this week. A band of support between the 2800 and 2750 level appears to be the next stop.
The situation surrounding Cocoa is getting clearer by the moment. The economic, technical and fundamental developments surrounding this market are bearish. Continuing the decline that began late last week, traders are factoring in expectations of a large crop from West Africa and the strengthening U.S. dollars bearish influence. Cocoa traded at levels not seen since May of this year this week. Economic reports have been negative of late. Bank of England commentary and actions taken by the U.S. Federal Reserve confirm the weak state of the world’s economies. Cocoa futures broke below their 3200-2900 trading range and look to be headed lower.
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: Cocoa has moved lower this week and broken below the 3200-2900 value area. Lower prices look to be just around the corner. The 2750 area is critical support. Breaking below it could bring a strong move to the downside. Having been in a trading range for six months the market has the potential to move as low as 2200! Far below the 9 bar moving average and center band of the Bollinger study, the market has set it’s sights on the 100 bar moving average of 28.03 and the lower band of the Bollinger study at 29.61. The stochastic is firmly entrenched in sell mode. The R.S.I. stands at a bearish 45.32 and lower than last week’s indication of 49.50. The M.A.C.D. histogram stands at 1.32 and lower than last week’s indication of 15.40.
Do not trade without the use of protective strategies such as stops and or options.
Cotton 08/13/2010
Life Time Trading Range $26.84 – $117.20 per Pound
Trades on The ICE 8 PM – 1:30 PM CDT (Next Day)
Hot weather has a grip on the Texas Cotton growing areas and is not about to let go. The 100 Degree plus weather will be heading eastward towards the Mississippi Delta and mid south growing areas in short order. There is the possibility that a tropical storm developing in the Gulf of Mexico could make landfall and bring much needed moisture. But again this is only a possibility. Recent economic reports have indicated a slowing in the U.S. recovery. Though this may affect Cotton prices somewhat, exports drive the U.S. Cotton market. News regarding future exports is good. Joe Nicosia of Allenberg Cotton recently stated that the company has booked more Cotton sales in the last ten weeks than almost any time in history. Huge shipments will be taking place as soon as the U.S. crop is ready to go.
Net sales for the week ending August 8th 2010 totaled 341,800 running bales. The 2010-11 marketing year began August 1st. The 2010-11 U.S. cotton forecast shows higher production and exports compared to last month; resulting in lower ending stocks. Production has been raised by 234,000 bales, as the first survey based forecast indicates lower abandonment; this more than offset a reduction in yield.
Expect China to remain active on the import side of the equation. Word is their domestic crop is in decent shape, but reserves have fallen to somewhat low levels. This has created a tight margin for error moving into the harvest period. If China’s stocks require replenishment they will likely buy from the U.S., Australia, or West Africa. In the past, China has purchased Cotton from the former Commonwealth of Independent States (Russia), but until the extent of fire damage to that Cotton crop is known, that’s pretty much up in the air. Recently China auctioned 600,000 tonnes of Cotton from their reserves to assist in stabilizing the market.
Pakistan is the world’s fourth largest Cotton producer. Floods there are spreading across the central and eastern river valleys where the majority of their Cotton is grown. Extensive damage to the Pakistani crop will cause Cotton prices to move higher as well as extensive damage to your trading account if you are short and have no money management plan in place.
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: Cotton has made higher highs for five weeks in a row now. This week’s high is above the top band of the Bollinger band study. The market appears a bit overbought. Resistance sits just above at 8710, which is the high of the past six months. Based on the six month long trading range this market has resided, a breakout to the upside has the potential to carry Cotton prices as high as 105.00 plus! The stochastic is firmly entrenched in buy mode. The R.S.I. stands at a bullish 63.41 and higher than last week’s indication of 60.21. The M.A.C.D. histogram is improved at 0.2 and higher than last week’s reading of --0.19. Trading a breakout to the upside seems reasonable here, but by all means use tight money management stops
Do not trade without the use of protective strategies such as stops and or options.
Sugar 08/13/2010
Life Time Trading Range 2.30 Cents – 66.00 Cents per Pound
Trades on The ICE 2:30 AM – 1 PM CDT
Sugar prices have firmed due to the Russian drought. Until the extent of damage to the Russian Sugar beet crop is known, I expect Sugar prices to hold and perhaps move somewhat higher. Private estimates call for a Russian Sugar beet harvest of 2.8 million tonnes. This is 3.2 million tonnes below last year’s harvest and 1.2 million tons below estimates for a 400 million tonne harvest this year. The outcome of the Russian situation could see current expectations for a surplus of Sugar supply disappear. For the fourth time this year China plans to auction 150,000 tonnes of Sugar from it’s reserves. The government has sold 714,354 tonnes of sugar since the start of 2010. This of course will assist in satisfying demand over the short term.
This year, monsoon rainfall has improved significantly and India's 2010-11 Sugar output is expected to rise to 25 million tonnes from the 18.8 million tonnes produced in 2009-10. India had imported large quantities of sugar last year and in early 2010 as local output had fallen sharply after last year's drought. Much of this Sugar remains at port due to a shortage of railcars. India will be allowing up to 200,000 tonnes of this Sugar to be exported. I’m hearing there is 590,000 tons of imported Sugar just sitting at Indian ports. What a waste!
A large number of vessels remain at Brazilian ports waiting to be loaded with Sugar. As of Wednesday there were 124. All of the major trading companies, such as Cargill Inc., Bunge Ltd (BG), Sucden and Louis Dreyfus are scheduled to ship Sugar to a wide variety of destinations to rebuild stocks and fulfill short-term demand.
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: Sugar retreated to the 9 bar moving average and the center band of the Bollinger study this week only to move up and appear to be awaiting a reason to move higher. The stochastic remains in sell mode. R.S.I. has moved up to 53.48, higher than last week’s reading of 50.61. Not much change in the M.A.C.D. histogram. It stands at +.82 versus +.83 last week. I am watching the technicals closely. Sugar has the potential to move big in either direction. Keep a close eye on this market.
Do not trade without the use of protective strategies such as stops and or options.
