by Robin Rosenberg, PFGBEST
(800) 611-6974
RRosenberg@PFGBEST.com
COFFEE
Forty Year Trading Range: $41.50 to $337.50 per lb.
Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST
Philippine Coffee farmers have been unable to produce enough Coffee to satisfy domestic demand. The Philippine Coffee Board is attempting to get the country’s Coffee farmers to produce more. The country imports near 45,000 tonnes of Coffee annually. The goal is to plant 8 million seedlings as soon as possible. This would do much to improve the Coffee supply over the next few years. The Board plans to go from region to region promoting Coffee farming.
According to a recent report from the International Coffee Organization, India’s Coffee production is expected to rise near 7 percent to 5.4 million sixty kilo bags in the 2011-2012 marketing season. Planning Commission Deputy Chairman Montek Singh Ahluwalia has said that India’s economy is forecast to expand by 8 percent over the next few years. The rising income of the Indian people will give 500 million citizens enough disposable income in 20 years to buy things like Coffee. Twenty years!?
Kenya’s state run Coffee Board expects Coffee output to rise 6 percent to 54,000 tonnes this marketing year. The Kenyan marketing year runs from October through September. This week’s Kenyan Coffee auction saw prices for benchmark AA grade Coffee rise to $526 per 50 kilo bag from $442 last week. Trade volume was higher as well. Kenya is a small producer when compared with other growers. Kenyan Coffee beans are famous for their high quality and always in high demand. Many Coffee roasters blend Kenyan beans with those of other countries. This is more or less like adding octane booster to your cars gas tank.
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 on Friday, January 27th: At this time the week’s trading range was 225.00-216.80, the last print is 218.50. The stochastic remains in buy mode, but has flattened out. This indicates a loss of momentum to the upside. At 39.37 the RSI is lower than last week’s reading of 42.55. The M.A.C.D. histogram reads -0.19 and is a bit higher than last week’s indication of -0.26. The market remained below the 9 bar moving average all week. A weekly close at or below 223.85 in March coffee will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
COCOA
Forty Year Trading Range: $4.44 to $53.79 per tonne
Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST
We witnessed one heck of a short covering rally in Cocoa early this week. Futures rallied five percent on Tuesday alone. Two weeks ago I wrote there had been a huge jump in long positions as indicated by the C.F.T.C. commitments of trader’s data. It now appears the counter parties to those longs (the shorts) have begun covering their positions. If traders holding sizable short positions decide to cover there is no telling how high this market could go. Who is going to sell to them? Conversely, keep in mind that this market had been trading in a tight range for seven weeks. Many times range bound markets break out, falls back and trades down to the bottom of the range. A lot of traders call this a “fake out breakout”.
Central Cameroon is reporting an infestation of capsid bugs. Capsid bugs (think leaf-hoppers) are sap sucking insects that feed on the tips of newly emerged plant shoots. Immature Cocoa trees are one of their favorite foods. The insect does very well in dry weather conditions like those present in Cameroon now. This must be checked before spreading any further. A worsening of the capsid infestation will cut Cocoa output considerably and increase the possibility of spreading to other West African growing areas. The majority of the world’s Cocoa supply is at risk and farmers cannot wait for the government to act. Cameroon’s National Organization of Cocoa and Coffee Producers is holding meetings with Cocoa unions to devise a collective means of eradicating the problem. The quality and quantity of Cameroon’s mid crop Cocoa harvest is at risk.
Enjoyed in a multitude of ways, an excess of three million tonnes of Cocoa are consumed annually. Preferences vary and each country prefers unique flavors for both candies and desserts. Examples are French chocolate truffles, German chocolate cake and Swiss Cocoa. Name brand chocolates are also made from distinctive blends. A Hershey bar made for U.S. consumption tastes unlike one made for distribution in France.
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 for Friday, January 27th: At this time the week’s trading range was 24.80-22.44 the last print is 23.96. The stochastic is in buy mode. RSI at 45.26 is higher than last week’s reading of 39.45. The M.A.C.D. histogram at 24.71 is much improved over last week’s indication of -2.82. The majority of this week’s trade took place above the 9 bar moving average. A weekly close at or below 22.56 in March cocoa futures will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
COTTON
Forty Year Trading Range: $26.84 to $227.00 per lb.
Trades on the ICE from 8:00 p.m. to 1:30 p.m. CST (Next Day)
Cotton continues to correct following 15 month lows made in December. As has been usual of late Chinese demand produced much of the strength. In 2011, China’s Cotton imports were up near 3.36 million tonnes or 19 percent when compared to a year ago. For the third month running USDA has cut it’s 2011 U.S. production estimate. The January figure was 15.67 million bales. The agency also cut world Cotton production to 122.84 million bales from 123.42 in December.
So, do we chalk this latest rally up to China and cuts in production? Are we witnessing our favorite economic indicator in action? Or is this just a bounce to alleviate the markets extremely oversold condition. Equity prices have certainly improved and Europe seems to have gotten it’s act together. I’m going to give credit to the macro picture.
So far this week the upside action in Cotton has stalled. As I write, the week’s high is exactly the same as last week. Yes, technically a perfect double top. My experience indicates that back to back double tops are not as reliable as those with a handful of bars between them. Some traders refer to them as tweezer tops. If there were a few weeks of trade between the tops I’d pay very more attention to them. Keep your eyes open and listen to the market. |
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 for Friday, January 27th: At this time the week’s trading range was 99.47-94.59, the last print is 95.59. The stochastic is in buy mode. RSI at 47.5 is lower than last week’s reading of 51.16. The M.A.C.D. histogram at 1.24 is higher than last week’s indication of 1.05. After posting a weekly double top the week’s action was decidedly down. A weekly close at or below 97.86 in March Cotton will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
SUGAR
Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.
Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST
According to a Reuters poll of 17 analysts the global Sugar surplus is forecast to fall 50 percent by years end. They expect the global surplus to be 7.97 million tonnes in 2011-2012 and will drop to 3.2 million tonnes in 2012-2013. The previous poll taken last July indicated the surplus in 2011-2012 would be 7.3 million tonnes. The consensus has become more bearish. Good weather and firm prices for Sugar have boosted plantings and large harvests are expected from Thailand and India as well.
The key questions for 2012 are: Will Brazilian sugar output recover from it’s recent setback? How much of the Brazilian Sugar crop will be diverted to ethanol production? Will India’s exports pick up or is the world’s surplus supply of Sugar just overbearing? In my opinion the surplus must be resolved before any meaningful upside price action comes in to play.
Brazil’s improving economy has put many more vehicles on the road. The country imported a record amount of ethanol from the U.S. in 2011. Why? Brazil must use Sugar to produce ethanol and Sugar output has not been up to par. The U.S. uses corn or biomass. Of which we have plenty.
Brazilian output fell last year due to weather and elderly sugarcane stock far beyond prime production years. Meaningful improvement in output will not take place until new sugarcane is planted. It will take at least two years for new plants to produce a Sugar crop. If “La Nina” brings extreme dryness to the country’s centre-south region the crop will be negatively affected. On the flip side, if “La Nina” were to reverse and become “El Nino“ torrential rains will lessen the sugar content of the cane. Not good!
The Indian government is about to remove controls from it’s Sugar market. That’s no guarantee that India’s Sugar exports will improve. We need to see demand improve initially. India’s Sugar exporters will not allow low prices to stand in their way. They will make the market and force prices lower to stimulate buying.
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 for Friday, January 27th: At this time the week’s trading range is 25.21-24.16, the last print is 24.25. The stochastic remains in buy mode. RSI at 47.83 is lower than last week’s reading of 50.89. The M.A.C.D. histogram at 0.06 is higher than last week’s reading of -0.01. After trading above the center Bollinger band the market turned decidedly lower and is now just above the 9 bar moving average. A weekly close at or below 24.81 in March Sugar will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction
