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Morning Softs Report 11/15/17


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COTTON
General Comments: Cotton was a little lower yesterday in consolidation trading. There did not appear to be any news or fundamental issues to push prices higher or lower. The futures market is watching the harvest roll along and is debating the demand for US and world Cotton. Bullish traders say that USDA is seriously underestimating demand for the fiber, while the bears look to the high USDA ending stocks estimates and good, but not great, export sales and see no reason for futures prices to go anywhere. Futures had a muted reaction to the USDA reports last week and held to the range seen for the last few weeks. Chart patterns imply that the market is content to hold at current levels. Farmers are reported to be quiet sellers right now so the cash market has some demand that needs to be satisfied. Good commercial buying was seen at the lows last week. Harvest conditions are good in just about all areas.
Overnight News: The Delta and the Southeast should get mostly dry weather this week and light showers this weekend. Temperatures should be near normal. Texas will see mostly dry conditions. Temperatures will be mostly above normal. The USDA average price is now 67.18 ct/lb. ICE said that certified stocks are now 48,128 bales, from 48,128 bales yesterday.
Chart Trends: Trends in Cotton are mixed. Support is at 6800, 6780, and 6690 December, with resistance of 6950, 6970, and 7000 December.

FCOJ
General Comments: FCOJ closed a little higher in consolidation trading. The market is holding Support areas and bouncing after a move higher used through some chart targets. Then the market failed, but buyers appeared today to Support the price action.. The price action so far this week implies that futures have found a short tem high. Traders still expect prices to hold firm overall. Production is now about two-thirds of what was expected at the start of the growing season. The demand side remains weak. However, for now it looks like the supply side has taken over as the force in the markets, although the supply side bullish fundamental might have lost its force yesterday.. Brazil weather has improved as groves are now getting rains, but suffered from drought at flowering time. It was also very hot and it is possible that production from Sao Paulo state will be less.
Overnight News: Florida should get mostly dry weather and near to above normal temperatures. Scattered showers are expected this weekend. Brazil should get mostly dry conditions and near to above normal temperatures. Some showers are possible this weekend. ICE said that 0 notices were posted for delivery today and that total deliveries for the month are now 0 contracts.
Chart Trends: Trends in FCOJ are mixed to up with objectives of 171.00 January. Support is at 157.00, 155.00, and 152.00 January, with resistance at 163.00, 165.00, and 166.00 January.

COFFEE
General Comments: New York closed lower after a big range day that saw futures make new highs for the move and then fail. The market moved down very quickly to the lows of the day, then found renewed buyng interest to close with much smaller losses on the day.. London closed a little higher in more tranquil trading. Many traders are expecting the market to move higher due to ideas of smaller crops from all over Latin America, and especially Brazil. Brazil exports are reduced on what is called reduced inventories held by exporters and producers. Producers are less interested in selling as well as the market tries to gauge production potential in Brazil after earlier drought and cold weather hurt trees at and before flowering time. There is plenty of rain now, but dry weather could return soon and stress the trees again There are also reports of short crops in parts of Central America and some areas in South America due to the lack of farmer investment from the low prices. New York futures could be forming a bottom at this time. Ideas are that the funds and industry need to buy in New York, but Arabica demand is tepid and differentials bids remain weak. Europe is paying better than the US, but differentials overall are not strong..
Overnight News: Certified stocks are slightly lower today and are about 1.910 million bags. The ICO composite price is now 118.01 ct/lb. Brazil will get drier weather through Saturday and showers and storms on Sunday and Monday. Temperatures should average near to above normal today and tomorrow, then near to below normal. Colombia should get scattered to isolated showers. Central America and southern Mexico should get scattered showers or dry conditions. Temperatures should average near to above normal.
Chart Trends: Trends in New York are mixed. Support is at 125.00, 122.00, and 121.00 December, and resistance is at 129.00, 130.00 and 133.00 December. Trends in London are mixed. Support is at 1800, 1770, and 1740 January, and resistance is at 1850, 1880, and 1900 January.

DJ Olam Awaiting a Short Squeeze in Robusta Coffee Futures
By Lucy Craymer
The market is increasingly short on Long Black, even as production of robusta coffee is expected to fall and supplies tighten.
It’s leaving big coffee trader Olam International Ltd. looking for a flare-up in prices.
Traders wanting to buy robusta for near-term delivery are having to pay an ever-increasing premium versus agreeing to wait. That should indicate the market ultimately expects short-term prices to fall as supplies get replenished.
However, early indications this go-around are there will be no large crop of robusta coffee flooding the market from Vietnam or anywhere else anytime soon.
“We expect two consecutive years of massive shortfalls in the robusta market,” said Olam co-founder and Chief Executive Sunny Verghese as the Singapore-listed company presented third-quarter results, which were helped by higher coffee earnings. “That should reflect in much-higher fair value for coffee.”
Olam is forecasting robusta-coffee demand will outstrip supply by 4 million bags for the year ending Sept. 20, following a similar shortfall for the recently concluded season.
Front-month robusta futures on the ICE Futures Europe trade more than $42 a metric ton higher than the next futures contract, currently January. It’s a spread not seen in a year; then, the market anticipated supplies improving through 2017 due to ample rainfall in Vietnam. November futures are currently at $1,878.
The market moved into backwardation–when front-month futures are higher than later-dated contracts–after the market was caught short by a significant buyer in July. The unknown participant surprised traders by opting to have a large amount of coffee delivered from ICE rather than choosing to roll over the contract.
At the same time, robusta availability tightened and the new crop from Vietnam, the world’s largest producer, will only start hitting the market this month. The harvest has been somewhat delayed due to dry conditions, according to Olam.
But investors remain short, with such positions topping those expecting prices to rise by the most since March 2016. A number of players continue to expect that ample stocks within importing countries–primarily the U.S., Japan and Europe–will offset any tightening supplies resulting from production shortfalls.
Mr. Verghese isn’t so sure. He said that due to the size of robusta shorts, there is potential that prices would “flare up” if people needed to cover those positions.

SUGAR
General Comments: Futures were mixed, with nearby months a little lower and deferred months a little higher. The day was a consolidation day and the market is still holding up trends. UNICA on Monday showed a reduced sugarcane crush and continued emphasis on ethanol production and reduced Sugar production in its biweekly report about the Brazil supply and demand situation.. Part of the reduced Sugar production comes from the reduced crush pace, but part comes from reports that mills are now producing more ethanol for domestic fuel use and less Sugar for export. India says it will produce more than enough for domestic consumption, but did not mention that it would be exporting this year after the very short crop last year. London was higher on ideas of reduced availability of White Sugar. Trends are turning up in London and in New York after the price action last week on ideas of reduced availability of Sugar to the market. There have been no big demand reports, but the price action and the intermarket spreads suggest that someone is short in refined Sugar at this time. Upside price potential is limited as there are still projections for a surplus in the world production,and these projections for the surplus seem to be bigger. Even so, the charts in both New York and London imply that higher prices are coming.
Overnight News: Brazil should feature drier weather through Saturday and showers and storms starting on Sunday. Temperatures should be near to above normal today and tomorrow, then near to below normal
Chart Trends: Trends in New York are mixed to up with objectives of 1530, 1560, and 1590 March. Support is at 1480, 1460, and 1430 March, and resistance is at 1520, 1530, and 1580 March. Trends in London are up with objectives of 394.00 and 406.00 March. Support is at 388.00, 383.00, and 380.00 March, and resistance is at 399.00, 405.00, and 412.00 March.

COCOA
General Comments: Futures closed lower in New York and also in London on what appeared to be speculative selling. The rally had stalled and some liquidation selling was needed. However, the overall market should remain strong.. Some talk of disease in crops in Ivory Coast has created much of the recent buying interest, but nothing news has been Heard so the fundamental supply side issue faded. Demand ideas are getting stronger. Callebrut said yesterday that its Cocoa grinding margins were near six-year highs, implying good demand for finished products like Chocolate. World production ideas remain high. Harvest reports show good to very good production will be seen this year in West Africa. However, Nigeria now says that a lack of timely rainfall has hurt yields and supplies are short. The growing conditions in other parts of the world are generally good. East Africa is getting better rains now along with cooler temperatures. Good conditions are still seen in Southeast Asia.
Overnight News: A few isolated showers are expected in West Africa. Temperatures will average near to above normal. Malaysia and Indonesia should see mostly dry conditions. Temperatures should average above normal. Brazil will get scattered showers and near to above normal temperatures. ICE certified stocks are lower today at 3.871 million bags.
Chart Trends: Trends in New York are mixed to down with objectives of 2130, 2070, and 2010 December. Support is at 2120, 2100, and 2070 December, with resistance at 2200, 2230, and 2260 December. Trends in London are mixed to up with objectives of 1680 and 1760 December. Support is at 1600, 1560, and 1530 December, with resistance at 1650, 1690, and 1730 December.

DJ CMAA Spot Cocoa Bean And Price Indications – Nov 14
Ex-dock or warehouse U.S. Eastern Seaboard North of Hatteras, in U.S. dollars
per metric ton. Settling price for November 10, 2017. All pricing is considered
nominal. Source: Cocoa Merchants Association of America.
N/A denotes not available.
Type Differential/ Price
Ratio
Main Crop Ghana, Grade 1 355 2,567.00
Main Crop Ivory Coast, Grade 1 250 2,462.00
Main Crop Nigerian, Grade 1 190 2,402.00
Ecuador 200 2,412.00
Sanchez f.a.q. 200 2,412.00
PPP Natural African Type Carton Cocoa Butter 2.92 6,459.04
Cocoa Press Cake – Natural 10/12% Butterfat 0.72 1,600.00
Ex-dock or warehouse U.S. Eastern Seaboard North of Hatteras, in U.S. dollars
per metric ton. Settling price for November 3, 2017. All pricing is considered
nominal. Source: Cocoa Merchants Association of America.
N/A denotes not available.
Type Differential/ Price
Ratio
Main Crop Ghana, Grade 1 355 2,411.00
Main Crop Ivory Coast, Grade 1 250 2,306.00
Main Crop Nigerian, Grade 1 190 2,246.00
Ecuador 200 2,256.00
Sanchez f.a.q. 200 2,256.00
PPP Natural African Type Carton Cocoa Butter 2.92 6,003.52
Cocoa Press Cake – Natural 10/12% Butterfat 0.78 1,600.00
Questions? Ask Jack Scoville today at 312-264-4322

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About the author


Jack Scoville is a futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar.

He offers brokerage services to an international clientele of agricultural producers, processors, exporters, and other professional traders.

Jack writes daily comments of the many products he specializes in, in three languages, English, Spanish, and Portuguese.

He has been quoted by most major wire services including Dow Jones, AP, and Reuters. His comments have also appeared in newspapers around the world and on various radio and television shows.

Jack offers a dedicated and high quality service for his clients. His industry contacts in South America, Europe, Asia, and North America provide him with a unique view of the markets. He also uses his own charting program for technical traders.

Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles. He has been a broker off the floor since then and has been with The PRICE Futures Group since it was established in 1988.

Contact Jack Scoville: (800) 769-7021 or at jscoville@pricegroup.com

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