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
Coffee drinking is becoming increasingly popular in China. In a play on words spoken by Winston Churchill – We have not yet begun to drink! The average Chinese Coffee drinker consumes three cups of Coffee annually. Coffee drinkers worldwide consume 240!
They better discover a fresh vein of Coffee in the Coffee mine. With a population of 1.6 billion people, Chinese Coffee drinking is at the beginning of what could be a long, sustained period of growth. This puts the Chinese province of Yunnan in a very good position. Yunnan produces more than 95 percent of China’s Coffee.
Guess who’s already gotten into the act? Right – Starbucks. The company inked an agreement with China’s Ai Ni Group this week to establish a joint venture to enlarge it’s Coffee sourcing in Yunnan. Serving to increase both domestic and global supply needs, the joint venture will focus on buying and exporting high quality arabica Coffee beans grown in Yunnan. The joint venture will also build and operate dry mills throughout the province. Starbucks has 800 stores in China today and expects to have 1500 by 2015. Amazing!
The International Coffee Organization has reduced it’s global Coffee production forecast for this growing season. Strengthening market sentiment, a major shortfall in the Ethiopian Coffee crop and a decrease in Brazilian green Coffee exports for January year over year is all supportive to the market.
Over the last few years Coffee yields have been decreasing. Colombia has been the world’s second largest producer of arabica Coffee for many years. Recent production has declined to levels not seen for 35 years.
Many Latin American growing areas have experienced rising temperatures and unpredictable rains of high intensity. Many scientists have linked this to global warming. Keep in mind that global warming is a shift in weather patterns, not just warmer temperatures. Coffee plants require the correct mix of temperature, rainfall and dryness to ripen beans properly and retain their taste. Conversely, Coffee pests thrive in warmer, wetter weather. The Coffee industry overall is quite concerned that the world’s Coffee production may not be able to recover. Has world Coffee production reached it’s peak? If so, be prepared for much higher Coffee prices in the future.
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 10th: At this time the week’s trading range was 222.45-213.05, the last print is 215.65. The stochastic is in sell mode. At 38.04 the RSI is again a bit lower than last week’s reading of 38.19. The M.A.C.D. histogram reads -0.16 and is again a bit lower than last week’s indication of -0.25. A rally to just above the 9 bar moving average failed to hold. The market is continuing to trade in a range. There is nothing to get excited about here. A weekly close at or above 219.50 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
According to port data, Cocoa bean exports from Ivory Coast’s port of Abidjan increased 53 percent in December. Shipments rose to 125,816 tonnes versus 82,082 tonnes in November. Exports of Cocoa products rose to 20,237 tonnes from 15.221 tonnes. Cocoa products include butter, powder, liquor and cake.
The improving macroeconomic environment is having little effect on Cocoa’s price. Once the debt problems of Greece are settled we can expect some strength to show it’s face and lift Cocoa prices higher. The expected 10 percent decline in Cocoa production this season will see the global Cocoa supply move from surplus to deficit. In late January Cocoa purchases by Ghana from the country’s farmers were at least 5 percent higher than last a year ago. I will wait until further down the road to state my opinion. The main harvest will continue through March and the hot dry weather that was experienced by the Ivory Coast will no doubt negatively affect output.
In an interesting development Ghana and the Ivory Coast have formed a joint committee to streamline Cocoa production and marketing. The committee’s first objective is to regulate price differentials and put a stop to cross border Cocoa smuggling. There is a very long history of smugglers playing the spread. Can you imagine? Spreaders with guns! If the committee can accomplish their task Cocoa farmers in both countries will benefit. Ghana and the Ivory Coast produce 60 percent of the worlds Cocoa.
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 10th: At this time the week’s trading range was 23.32-21.86 the last print is 21.90. The stochastic is in buy mode. RSI at 39.08 is lower than last week’s reading of 42.27. The M.A.C.D. histogram at 38.67 is unchanged from last week. This week’s trade again took place both above and below the 9 bar moving average. The market is again finishing out the week below the average. There is nothing to get excited about here. A weekly close at or above 24.60 in March cocoa will turn the weekly trend up.
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)
See no weevil! Eradication of the boll weevil is succeeding. This little bug with a huge appetite is in it’s death throes. U.S. cotton producers could not be more pleased. The boll weevil migrated to the U.S. from Mexico in the 1890’s. It lays it’s eggs in the reproductive part of the Cotton plant called the square. Soon after the square falls off. No square, no Cotton! The coordinated boll weevil eradication program is overseen by the USDA and executed by state and local weevil fighters. Many Texas Cotton growers have not even seen a boll weevil for several seasons. Last year was the first that there was no weevil damage. The pest has been wiped out in most of the U.S. As of now, southern Texas is the only area dealing with boll weevils. This is a major accomplishment for the U.S. Cotton industry.
In years past supply and demand determined Cotton prices. Nowadays macroeconomic events have taken over that job. Cotton prices have been pressed to levels on both the high and low side that are out of line with fundamental reality. I again stress that we must view Cotton as a leading economic indicator. Cotton began to move higher in mid December. The S&P 500 did as well. At that time the world’s economic situation was thought to be in shambles. Well guess what? Cotton continues to be holding very well and appears to be backing and filling prior to beginning another leg to the upside.
Australia’s flooding problems have taken a toll on the country’s Cotton crop. The world’s third largest shipper predicts the deluge has the potential to damage as much as 10 percent of the crop. Key will be how high the water gets in the next week or so. Last year’s torrential rains did 9 billion $AD damage to the country.
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 10th: At this time the week’s trading range was 97.26-90.23, the last print is 90.51. The stochastic has issued a sell signal. RSI at 41.88 is lower than last week’s reading of 48.48. After failing to hold a rally above the 9 bar moving average and center Bollinger band it broke to a level centered between the center and lower Bollinger bands. The M.A.C.D. histogram at 1.03 is lower than last week’s indication of 1.39. The market continues to respect the double top at 99.47. Harvest pressure from Southern Hemisphere output is pressuring this market. A weekly close at or above 97.67 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
The Kingsman Sugar Conference is the place to be if you depend on Sugar for your livelihood. This year’s conference was held in Dubai this week. One of the featured speakers was Cargill Incorporated vice chairman Paul Conway. He stressed that the era of low food prices has come to an end. He also made it clear that speculators are an essential part of the market place and do not change supply and demand fundamentals. It’s nice to hear that for a change. I can’t count how many times I’ve heard the opposite.
The overabundant supply of Sugar that pressured prices last year is expected to shrink 43 percent next season as consumption growth is set to exceed the 10 year average. According to Switzerland based researcher Kingsman S.A. the surplus will drop to 5.5 million tonnes in the 2012-2013 marketing from 9.7 million tonnes this season. Global Sugar usage is expected to rise to 2.7 percent, a record 170.6 tonnes. According to the London-based International Sugar Organization the annual average over the last ten years had been 2.2 million tonnes.
Continued flooding in Australia has inundated portions of the country’s northeast. Not only have crops been damaged, thousands of people have abandoned their homes and headed for higher ground. Where is the higher ground in Australia? All I’ve ever seen is that large red domed rock formation named Uluru. It’s not large enough to hold that many people. But then again I’ve yet to visit Australia. Last year’s flooding cost the country’s economy in excess of 9 billion dollars.
As expected, India’s food ministry has again approved an additional 1 million tonnes of Sugar for unrestricted export. Sugar exporters had been clamoring for permission to do so since last year. India is the world’s largest consumer of Sugar. To allow 1 million tonnes of the sweetener at a crack one can only imagine the amount of Sugar the country’s suppliers have on hand. No, they won’t give us an accurate figure. That would depress prices now wouldn’t it?
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 10th: Breaks to support should be viewed as buying opportunities. At this time the week’s trading range is 24.89-23.94, the last print is 24.69. The stochastic continues in buy mode. RSI at 47.88 is higher than last week’s reading of 46.39. The M.A.C.D. histogram at 0.12 is a bit higher than last week’s reading of 0.08. This week’s trade saw the market rally above the 9 bar moving average and center Bollinger band. It was unable to hold and is now trading just above the 9 bar moving average. In my opinion this market is itching for a reason to move higher. A weekly close at or above 24.86 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.
