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Softs Report 06/11/19


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COTTON
General Comments: Cotton was a little higher as strong storms moved through the Delta and Southeast over the weekend. USDA released its crop progress and condition reports after the close, and USDA noted slower planting progress last week. Crop condition was also less. The market is experiencing lost business potential with China and Turkey and could get hurt if Vietnam is targeted for tariffs later on. There are some concerns that the cold May weather from Texas to the Delta might cause lower yields this Fall. It has been hot and dry for the last few weeks in the Southeast, and crops of all kinds in the region need water and cooler weather. Precipitation moved into the region over the weekend and brought some very big rains. Also pressuring the market are forecasts for big production around the world. USDA sees no shortage of Cotton anywhere in the coming year. However, it could be that the Indian monsoon gets off to a slow start and production potential gets hurt there and in Pakistan. It has been dry so far and is turning hotter, but this is considered pre monsoonal weather. Below normal rains are now in the forecast for both countries in June.
Overnight News: The Delta and Southeast should get drier weather until showers and storms start to develop again this weekend. Temperatures should be mostly above normal. Texas will have scattered showers on Wednesday and Thursday, otherwise dry weather. Temperatures will average near to above normal. The USDA average price is now 60.92 ct/lb. ICE said that certified stocks are now 86,065 bales, from 85,903 bales yesterday.
Chart Trends: Trends in Cotton are down with objectives of 6540 and 6240 July. Support is at 6520, 6490, and 6450 July, with resistance of 6650, 6690, and 6850 July.

Crop Progress
Date 2-Jun 2-Jun 2018 Avg
Cotton Planted 75 71 88 87
Cotton Squaring 11 8 14 11
Crop Condition
Very Poor Fair Good Excellent
Cotton This Week 7 8 41 37 7
Cotton Last Week 3 10 41 38 8
Cotton Last Year 3 18 37 38 4

FCOJ
General Comments: FCOJ was lower and prices are ow back at support areas near 100 July. Speculators have been buying in anticipation of the hurricane season, but the weather has been good and speculators have pulled back from buying more. The season started on June 1. Trends are sideways to down on the daily charts and sideways weekly charts as the market looks at a big orange crop and weak demand for FCOJ. USDA production estimates are above 70 million boxes and represent a remarkable recovery from the greening disease and the small crops of just a couple of years ago. Inventories in Florida are still 17% above a year ago. That means that there should be no shortage of oranges available to the market to make FCOJ. The increase is coming from less demand along with the increased domestic production. Fruit for the next crop is developing and are as big as golf balls. Crop conditions are called good. Irrigation is being used a few times a week to help protect crop condition. Mostly good conditions are reported in Brazil as the harvest there is active.
Overnight News: Florida should get mostly dry weather. Temperatures will average near to above normal. Brazil should get scattered showers late this week and below normal temperatures.
Chart Trends: Trends in FCOJ are mixed to down with objectives of 88.00, 85.00, and 81.00 July. Support is at 100.00, 97.00, and 95.00 July, with resistance at 105.00, 108.00, and 113.00 July.

COFFEE
General Comments: Futures were lower again yesterday on what appeared to be speculative and producer selling. The producers are trying to sell and fix some Coffee with prices back above 100 in the futures. Speculators noted the weakening Real and strong exports for May from Brazil. The Brazil harvest is moving along at a slow pace. Reports indicate that the yields are not real strong and that the quality of the crop is poor due to extreme weather seen early in the growing season. Vietnam is also reporting lower yields for the current crop as the weather was not good for flowering earlier in the year. There have been some hot and dry spells that have hurt yield and quality for these crops as well. Buyers are now more actively pursuing other origins, especially for certified or higher end coffees. The charts show that both markets could trade in a sideways pattern for now as the market looks at weather and production potential of the next crop.
Overnight News: ICE certified stocks are lower today at 2.383 million bags. The ICO daily average price is now 98.65 ct/lb. Brazil will get mostly dry conditions, with near to above normal temperatures. Vietnam will see scattered showers and storms.
Chart Trends: Trends in New York are mixed. Support is at 98.00, 97.00, and 95.00 July, and resistance is at 103.00, 106.00 and 108.00 July. Trends in London are mixed. Support is at 1400, 1380, and 1360 July, and resistance is at 1460, 1490, and 1520 July.

DJ Brazil Coffee Exports Rise to 3.5 Million Bags in May –Cecafe
By Jeffrey T. Lewis
SAO PAULO–Brazilian coffee exports rose in May from a year earlier, boosted by record production in the 2018 growing season.
The South American country exported 3.5 million 132-pound bags of coffee last month, more than double the 1.7 million bags sold abroad in the same month a year earlier, exporters group Cecafe said Monday.
Sales abroad of the arabica variety of coffee rose 96% to 2.8 million bags, while exports of robusta beans increased to 376,257 bags in May from 46,621 bags a year earlier.
Brazil is the world’s biggest producer and exporter of coffee and has been gaining market share recently. Brazilian coffee farmers grew a record crop of 61.7 million bags in 2018.
Coffee production in Brazil has a two-year cycle in which even-numbered years produce bigger crops of the arabica variety and then smaller crops in odd-numbered years, when the plants recover.
Production in 2018 was also helped by the recovery of the robusta crop following a drought in the state of Espírito Santo, which grows most of Brazil’s robusta coffee.
Exports of roasted, ground and instant coffee rose 35% in May to 326,885 bags, Cecafe said.

SUGAR
General Comments: Futures closed a little lower as the Real turned weaker. The Real weakness has the chance to make Brazilian Sugar cheaper but mill in Brazil seem more interested in producing Ethanol. Processing of Sugarcane in Brazil has been off to a slow start and there are some ideas that Sugarcane production was not all that strong this year due to uneven weather. The fundamentals still suggest big supplies, and the weather in Brazil has improved to support some of the big production ideas. Demand seems to be average and routine. There are concerns that the Indian monsoon will not be strong this year and that Sugarcane production could be hurt. It is hot and dry there so far, but there are signs that the monsoon is ready to develop. Even so, there are now a lot of private forecasts that June rains in both India and Pakistan will be below average. The government weather services there is looking for a normal monsoon, but many private forecasters expect less rain and warmer temperatures than normal. Very good conditions are reported in Thailand. Demand for Sugar has been average, and demand for ethanol is reported to be increasing.
Overnight News: Brazil will get mostly dry weather or light showers. Temperatures should be near to above normal. ICE said that there were 1,964 contracts delivered against July Sugar 16 futures.
Chart Trends: Trends in New York are up with objectives of 1290 and 1370 July. Support is at 1210, 1200, and 1180 July, and resistance is at 1250, 1300, and 1330 July. Trends in London are up with objectives of 346.00 and 362.00 August. Support is at 332.00, 329.00, and 325.00 August, and resistance is at 339.00, 344.00, and 345.00 August.

DJ Brazilian Mills Increased Sugar Production in Late May: S&P Survey — Market Talk
0825 GMT – Mills in Brazil’s key Center-South region increased sugar production in the second half of May, according to a survey of analysts by S&P Global Platts. UNICA, the industry association, is expected to release its widely followed report for the period this week. It will show that the proportion of cane turned into sugar, as opposed to ethanol, rose to 36.4% from 36.2% in the first half of May, the analysts forecast. “If the estimates prove correct, it would be the highest sugar production for a 15-day period since the first half of September 2018,” S&P says. However, cumulative sugar production since April would still be 12.7% lower than at the same stage last year. (joe.wallace@wsj.com)

DJ Sugar Market Set to Slip Into Deficit in 2019-20: ISO
By Joe Wallace
Lower sugar output in Brazil and some other key producers will pull down the surplus in global supplies in the 2018-19 season and lead to a deficit in 2019-20, the International Sugar Organization said Monday.
World output of sugar will fall by 2.5% to 178.7 million tons in 2018-19 while consumption will grow by 1.6% to 176.9 million tons, the ISO said in a quarterly outlook. That would lead to a surplus of 1.8 million tons, an 80% decline from the surplus of 9.1 million tons seen in 2017-18.
The ISO tentatively forecasts an end to sugar surpluses in 2019-20, predicting that demand will outweigh production by around 3 million tons, and that continued growth in consumption will widen that gap to roughly 6 million tons the following year.
The forecasts add to evidence that sugar markets are tightening after years of oversupply that have pushed raw prices down to levels rarely seen since the financial crisis, hurting farmers, mills and trading houses. Sugar output has outstripped demand for six of the past eight years.
Still, the ISO cautioned that the pain for these groups may not be over even if the market slips into a deficit next year, since large inventories accumulated during surplus years will continue to hang over prices.
“High accumulated stocks still need to be absorbed before prices can return to more remunerative levels for producers,” the ISO said. “The immediate fundamentals are clearly bearish, and against this background, it is hard to be optimistic regarding the future of sugar prices in the remaining part of the October/September cycle.”
The ISO noted that its projected surplus for 2018-19, while considerably smaller than last year’s, is still higher than the 0.6 million ton surplus it forecast back in February.
The main decline in output this year will come in second-largest producer Brazil, the ISO said, forecasting an 8% fall to 29.1 million tons from 31.8 million tons in 2017-18.
Rising output in India, the world’s largest sugar producer, will partially offset that. The ISO predicts that Indian sugar production will increase by 1.9% to 33 million tons, from 32.4 million tons in 2018-19.
Thailand is also seeing “spectacular results,” the ISO said, forecasting near-record output of 14.6 million tons.

COCOA
General Comments: Futures closed higher and made new highs for the move on disease concerns for the West African crop. Ghana Cocoa authorities noted disease problems in its crop and said that mid crop production could be hurt. The disease could hurt the mid crop and probably will affect the next main crop that will be harvested at the end of the year. The mid crop harvest is winding down in West Africa and reports are generally positive, although some Nigerian producers have complained that the weather is not giving them the best conditions for top yields. Ivory Coast arrivals are strong as are exports. Demand appears strong. Growing conditions are generally good in West Africa. Periods of showers and cooler temperatures were beneficial, and most in West Africa expect a very good mid crop harvest. Cameroon and Nigeria are reporting less production and prices there are reported strong. Conditions appear good in East Africa and Asia, but East Africa has been a little dry as has Malaysia.
Overnight News: Scattered showers and storms are expected in West Africa. Temperatures will average near normal. Malaysia and Indonesia should see showers. Temperatures should average above normal. Brazil will get mostly dry conditions and near to above normal temperatures. ICE certified stocks are higher today at 4.623 million bags.
Chart Trends: Trends in New York are up with objectives of 2570 July. Support is at 2470, 2450, and 2400 July, with resistance at 2550, 2580, and 2600 July. Trends in London are up with objectives of 1830 and 1850 July. Support is at 1800, 1780, and 1760 July, with resistance at 1860, 1870, and 1900 July.



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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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