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
This is an on year in Brazil’s on/off Coffee growing cycle. Forecast’s calling for record Brazilian Coffee production this growing season sent Coffee prices into a power dive that took prices down near 25 percent over the last five months. Brazilian Coffee growers have become the latest participant in the hold back the beans game. They also believe Coffee prices will be higher as the third quarter of 2012 rolls around. I certainly hope so for their sake.
Estimates are that Brazil’s piece of the global Coffee market will drop from 40 to 35 percent as Brazilian growers withhold Coffee supplies and ask for higher prices. At this point in time they are asking for a 15 percent premium to New York Coffee futures. Central American Coffee is selling at a discount to the board; very strange indeed.
According to Brazil’s Coffee Exporters Council (CECAFE) the country’s Coffee exports were 2.56 million 60 kilo bags (132 lbs) in December. Last year the figure was 3.13 million bags. I’m hearing that a similar decrease in exports took place in January. We will have to wait until the official tally is released to get the exact number.
Brazil’s government crop forecaster Conab describes the Brazilian Coffee market as firm and providing support for new highs over the short to medium term. Expectations are that Brazilian Coffee growers will produce 49 to 52.3 million 60 kilo bags this year. Eclipsing the prior record crop of 48.5 million bags harvested in 2002. Brazil now supplies near 40 percent of the worlds Coffee. Keep in mind that this number includes domestic consumption which continues to increase. Final production numbers will not be available until October.
The largest retail Coffee chain in India is Café Coffee Day (think Starbucks). At this time the company has 595 cafes spread over 100 cities in India, one in Vienna, Austria and two in Karachi, Pakistan. The company is planning a massive expansion. By March the company wants to increase it’s presence to 950 cafes; 50 of them to be located outside of India. To reach this goal means opening more than one café per day!? And now for the rest of the story. In a joint venture with India’s Tata, Starbucks has announced it will be opening 50 outlets in India. Tata is India’s premier conglomerate and owner of the Eight O Clock brand of Coffee in the U.S. It also owns Jaguar and Land Rover. This is bullish in the long run. Time to get out the boxing gloves!
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, March 3rd: At this time the week’s trading range was 219.65-210.95, the last print is 216.50. The stochastic has flashed a sell signal. At 38.43 the RSI is a bit lower than last week’s reading of 38.81. The M.A.C.D. histogram reads -0.21 and is lower than last week’s indication of -0.26. The market reached the bottom Bollinger band and rallied back to the weeks opening level. This is a reversal pattern and leads me to believe the market remains caught up in a trading range. A move up to the top of the range will likely follow. A weekly close at or above 221.25 in March coffee will turn the weekly trend up.
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
The hot, dry Harmattan winds and lack of new moisture have Ivory Coast Cocoa farmers on the ropes. The majority of Ivory Coast’s Cocoa growing areas experienced lack of rain and extremely hot weather last week. This seasons long lived Harmattan winds have definitely worn out their welcome.
These unfavorable weather conditions have put a damper on Ivory Coast Cocoa production. Cocoa output will certainly fall as the country enters the final stage of the main harvest. Not only will the main crop be affected, the mid crop will be adversely affected as well. The pro-longed drought has caused many Cocoa trees to lose their leaves.
In the major western growing area of Soubre, farmers are concerned that the lack of rain will reduce the size of the Cocoa beans. This will make it very difficult to find export quality beans. There are very few pods on the Cocoa trees; in fact some have none at all. Mid crop harvest will begin later than usual. The trees will have to regenerate their leaves first. The strength of the “La Nina” event in the equatorial Pacific Ocean is ebbing. Larger than normal West African Cocoa crops are generally the norm during “La Nina” events. Use last season’s record production as an example.
This should have everyone watching the commitments of trader’s reports closely. All of those new long positions added a few weeks ago had a story behind them. Those privileged characters either knew there were problems with Ivory Coast Cocoa production or were tipped off by someone that did. This should create support beneath the market. At this point view sharp setbacks as buying opportunities.
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, March 3rd: At this time the week’s trading range was 23.59-22.70 the last print is 22.19. The stochastic is in buy mode. RSI at 40.05 is lower than last week’s reading of 45.60. The M.A.C.D. histogram at 32.99 is higher than last week’s indication of 25.70. This week’s trade took place both above and below the 9 bar moving average. The market is finishing out the week below the average. A weekly close at or below 23.52 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)
Oh well - Groundhog Punxsutawney Phil saw his shadow Thursday. According to folklore this calls for six more weeks of winter. That won’t stop the National Cotton Council from releasing U.S. Cotton planting intentions for 2012 next Friday. More than a few traders are expecting a decrease in Cotton acreage in comparison to last year. Crops offering higher profitability like corn and soybeans are expected to be planted in cotton’s place. World ending stocks are again expected to rise during the 2012-2013 marketing year as production out paces demand. They could rise to a lofty 12.9 million tonnes.
According to the International Cotton Advisory Committee world Cotton prices have steadied near $1.00 per pound after moving lower for nearly ten months. The Chinese government has purchased large amounts of Cotton from both foreign and domestic sources and demand for Cotton has improved slightly. Projections are for world economic growth to slow near 12 percent in 2012. World Cotton mill use is expected to drop 3 percent to 23.7 million tonnes in 2011-2012. I believe the global economy is improving and expect Cotton mill use to improve as well.
During the first quarter of the year the U.S. competes with Cotton crops of the Southern Hemisphere. As is generally the case their Cotton output is priced lower than the U.S. old crop supply. It’s not unusual to see U.S. Cotton futures come under pressure during late winter through early spring. When this harvest pressure subsides Cotton prices are driven by the U.S.
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, March 3rd: At this time the week’s trading range was 96.30-92.69, the last print is 95.47. The stochastic is in buy mode. RSI at 47.35 is a smidgen lower than last week’s reading of 47.52. The M.A.C.D. histogram at 1.33 is just a bit higher than last week’s indication of 1.24. The market appears to be finishing off the week nearly unchanged. This week’s bar hints a reversal to the upside is near. There is a good chance that an assault on the double top is in the cards. A weekly close at or above 98.19 in March Cotton will turn the weekly trend up.
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
Mother Nature is at it again. Australia is experiencing heavy summer rains across it’s east coast. Week long saturating rains have rivers in the area near flood stage. Heavy rains and flooding are expected to continue over the next few weeks. Australia’s Bureau of Meteorology has issued flood warnings for large areas of Queensland and New South Wales. ABARES, the government’s commodities forecaster reports that the rains have affected sugarcane and could adversely affect yields down the road. According to Thailand’s Office of Cane and Sugar Board, production declined 1.9 percent to 4.57 million tonnes during the first 78 days of the 2011-2012 crushing season. Of interest is the fact that the country’s crushing season began two weeks earlier than last year.
U.S. Sugar beet farmers reap profits year after year. Is this a miracle? No, it’s because they have one of best government price support programs in existence. And they full well know it. These federal price supports go back decades and serve no other purpose than to stuff the pockets of Sugar beet farmers with cash. These farmers as a group are known as American Crystal Sugar. Close to one half million acres of Sugar beets are planted across North Dakota and Minnesota each year, producing near 15 percent of the U.S. Sugar supply.
American Crystal Sugar is one of the country’s most powerful lobbying groups. They dole out cash to politicians like it’s going out of style. This serves to guarantee tariffs on imports and price supports that allow U.S. Sugar beet farmers to profit, even if their activities drive domestic Sugar prices higher than the global market. The National Confectioners Association has fought tooth and nail against the Sugar program with no success. This program benefits no one other than Sugar beet farmers and greedy D.C. politicians. It’s time for the program to disappear. Americans pay at least $1 billion more for Sugar yearly than they would in an open market!
Expected large crops from Brazil and India have the Sugar market under pressure this week. A break back to the lower boundary of the prior trading range is in the cards.
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, March 3rd: At this time the week’s trading range is 24.38-23.41, the last print is 23.64. The stochastic remains in buy mode. RSI at 45.15 is lower than last week’s reading of 47.65. The M.A.C.D. histogram at 0.06 is higher than last week’s reading of 0.05. This week’s trade took place both above and below the 9 bar moving average. The market is finishing out the week below the average. A weekly close at or above 25.17 in March Sugar will turn the weekly trend up.
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.
