Foods and Softs Outlook - An Excerpt from CRB'S Futures Market Service
COFFEE—Sep Nybot Arabica coffee prices are trading near the bottom of a 5-month range. Coffee prices
have sold off from a Jun 30th 4-1/2 month high on bearish factors that include (1) dollar strength and general commodity selling, (2) ICO’s forecast for a 8.5% hike in global coffee production in 2008/09 to 128 mln bags from 118 mln bags in 2007/08, and (3) the USDA’s forecast of a 36% y/y rise in Brazil’s harvest starting July to 51.1 mln bags (vs last year’s 37.6 mln bags). Bullish factors include (1) speculation brazil may subsidize its coffee farmers to ensure a minimum price, and (2) the 6-8 mln bag 2007-08 world coffee deficit. As of July 22, large specs continue to liquidate their moderate long position to 23,439. USDA coffee summary: 2007-08 world coffee production 117.8 mln bags (-4.7% vs 2006-07’s 122.9 mln); 2007-08 world ending stocks at a record low 18.3 mln bags.
COCOA—Sep cocoa prices bounced to a 1-week high from the recent 2-month low on concern shipments 
from the Ivory Coast may be disrupted by a scheduled Aug 1 strike. Bearish factors include (1) the +8% y/y rise in Ivory Coast exports between Oct-Jun 15, (2) ICO’s forecasted 20% decrease in the global cocoa deficit to 41,000 MT in the season ended in Sep, and (3) ICO’s forecast of a +10% increase in the 2007-08 global cocoa crop to 3.74 mln tons. Bullish factors include (1) concern about poor quality cocoa beans from the Ivory Coast due to reduced use of high-priced fertilizers and pesticides, and (2) cocoa inventories at a 6-month low. Large specs as of July 22 reduced their moderate long position to 24,022.
SUGAR—Oct sugar prices corrected up to a 2-week high from the recent 1-1/2 month low. Bearish factors
include (1) long liquidation pressure and general commodity weakness, and (2) the plunge in crude oil prices which is undercutting sugar and ethanol prices. Underlying bullish factors include (1) ISO’s prediction that India’s sugar output next year may fall 4 MMT as farmers switch to more profitable crops, (2) ISO’s cut in its forecast for the 2007-08 sugar surplus to 7.8 MMT from 9.3 MMT, (3) the USDA’s forecast for a 2.3% drop in 2008-09 (Oct-Sep) global sugar production. As of July 22, large specs continued to liquidate their large long position to 118,309. USDA Sugar crop summary: 2007-08 world production 165.5 MMT (+0.9% y/y vs 164.1 MMT in 2006-07), consumption 149.4 MMT (+4.6% y/y from 142.8 MMT in 05-06), ending stocks 14.7 MMT (-53% y/y from 31.5 MMT in 05-06).
ORANGE JUICE—Sep orange juice has collapsed in the past 3 weeks to a contract low from the Jul 7th 
4-3/4 month high. Bearish factors include (1) dollar strength, (2) the lack of any hurricanes, and (3) the USDA forecast of a +31.8% increase in 2007-08 production as demand slumps and inventories rise (FCOJ sales -2.6% y/y in week ended Jul 5 and inventories +67% y/y in Jun). Bullish factors include (1) the hurricane season, and (2) the USDA’s forecast for a 13% drop in Brazil’s orange crop because of dry weather. As of Ju1y 22, large specs had a moderate long position of 8,696. USDA orange summary: Florida 2006-07 orange crop 17-yr low of 129 mln boxes (-12.8% from 2005-06’s 147.9 mln 90-lb boxes); US 2005-06 all-orange production 8.87 mln tons (-4% y/y).
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