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Softs Report 07/19/19


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COTTON
General Comments: Cotton was lower again on follow through speculative selling. Futures made new lows for the move. Trends remain down on the daily and weekly charts. Ideas are that the crops are in good shape. The trade will keep a close eye on the Texas Panhandle where some extreme heat is expected to return by the first of next week. Hot and dry conditions could damage dryland crops in the region. Cotton is already experiencing lost business potential with China and Turkey and could get hurt if Vietnam is targeted for tariffs later on. Also pressuring the market are forecasts for big production around the world. USDA sees no shortage of Cotton anywhere in the coming year. However, the Indian monsoon is off to a slow start and production potential could be hurt there and in Pakistan. Monsoon rains have started to move into central and northern parts of the country but these rains are arriving a couple of weeks late. It is reported to be too hot and dry in many growing areas in the Gujarat and into Pakistan and other parts of India.
Overnight News: The Delta and Southeast could see mostly dry conditions through the weekend, then some showers. Temperatures should be mostly near to above normal. Texas will have mostly dry weather, but a few showers are possible on Monday. Temperatures will be above normal. The USDA average price is now 55.28 ct/lb. ICE said that certified stocks are now 49,226 bales, from 49,935 bales yesterday.
Chart Trends: Trends in Cotton are down with objectives of 6170 and 5780 December. Support is at 6140, 6080, and 6020 December, with resistance of 6310, 6410, and 6470 December.

DJ On-Call Cotton – Jul 18
As of Jul 12. On-call positions represent spot cotton sold to or
purchased from a merchant, based on New York cotton futures contracts
of 500-pound bales. Prices are not yet fixed against these contracts.
Source: CFTC
*-denotes changes from the previous week are based on revised data from
last week.
Call Previous Change Call Previous Change
Sales Purchases
Jul 19 84 84 0 15 15 0
Oct 19 0 0 0 0 0 0
Dec 19 29,398 32,320 -2,922 38,875 38,945 -70
Mar 20 21,365 21,204 161 3,537 3,583 -46
May 20 8,488 8,304 184 387 431 -44
Jul 20 13,187 13,492 -305 1,828 1,947 -119
Dec 20 6,880 6,760 120 13,584 13,259 325
Mar 21 2,175 2,177 -2 574 574 0
May 21 633 634 -1 0 0 0
Jul 21 578 581 -3 0 0 0
Dec 21 0 0 0 331 331 0
Total 82,788 85,556 -2,768 59,131 59,085 46
Open Change
Int
Jul 19 2 13 -11
Oct 19 246 215 31
Dec 19 137,889 131,581 6,308
Mar 20 32,127 29,873 2,254
May 20 3,964 3,531 433
Jul 20 4,360 4,050 310
Dec 20 11,582 10,067 1,515
Mar 21 253 193 60
May 21 0 0 0
Jul 21 0 0 0
Dec 21 0 0 0
Total 190,423 179,523 10,900

FCOJ
General Comments: FCOJ was lower and prices remain stick in a narrow trading range. Overall crop conditions are called very good in the state and production estimates from USDA remain very high. There are no tropical systems likely to hit Florida in the next week. Speculators have been buying in anticipation of the hurricane season, but there are no storms on the horizon this early in the season. Producers have also been looking to sell as the orange crop in Florida looks to be big at well over 70 million boxes. The hurricane season started on June 1, but so far the state has seen only an increase in showers and storms that have been beneficial for crops. Trends are sideways to down on the daily charts and weekly charts as the market looks at a big orange crop and weak demand for FCOJ. Fruit for the next crop is developing and are as big as tennis balls. Crop conditions are called good.
Overnight News: Florida should get scattered and light showers through the weekend. Temperatures will average near to above normal. Brazil should get scattered showers today, then drier weather and near normal temperatures. ICE said that 0 notices were posted for delivery against July contracts and that total deliveries for the month are 0 contracts
Chart Trends: Trends in FCOJ are mixed. Support is at 99.00, 95.00, and 92.00 September, with resistance at 104.00, 106.00, and 107.00 September.

COFFEE
General Comments: Futures closed a little higher as the market waits for something new to trade on. The bears seem to have lost the force of the market, but the bulls have nothing to trigger a rally right now. The Brazil freeze news is getting stale and the damage from the freeze is not reported to be extensive. The production is less in Brazil this year, but as much from bad weather at flowering time and a tough start to the cherry development than any freeze. The trees will be in shock so there might be trouble once the rains start and the flowering tries to get going in some of the affected areas. Many farmers in Central America are having trouble getting financing for crops due to low prices and production ideas are dropping for the current and next crops. Brazil continues to keep a strong export pace and shipped about 2.8 million bags in June. 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, but showers are reported in the Central Highlands now and ideas are that conditions and production potential have improved.
Overnight News: ICE certified stocks are slightly lower today at 2.363 million bags. The ICO daily average price is now 104.51 ct/lb. Brazil will get mostly dry conditions with near to above temperatures. Vietnam will see scattered showers and storms. ICE New York said that 0 notices were posted against July contracts and that total deliveries for the month are 610 contracts.
Chart Trends: Trends in New York are mixed. Support is at 105.00, 102.00, and 101.00 September, and resistance is at 110.00, 115.00 and 118.00 September. Trends in London are mixed. Support is at 1400, 1380, and 1360 September, and resistance is at 1440, 1460, and 1480 September.

SUGAR
General Comments: Futures closed a lower on follow through selling. New York made new lows for the move and is now closing in on final objectives for the down move on the daily charts. London held recent lows and has already made its objectives for the recent down move. London had been the leader on the way down on ideas of better growing conditions in India and reports of good crop potential in parts of Europe. The reports of good crops in Europe come despite the hot weather in Western Europe. Some rains have benefited crops in Ukraine and Russia. Trends in both markets remain down on the daily charts. Reports from India indicate that the country still has a large surplus of White Sugar. It is expecting lower production this year, but the Sugar in storage from past years will still mean that the country has more than it can consume. There are concerns that the Indian monsoon will not be strong this year and that Sugarcane production could be hurt. The monsoon has started to develop but rains have been mixed in Sugar areas. Processing of Sugarcane in Brazil is faster now after a very slow start as the is now harvest in full swing. Mills are refining mostly for ethanol right now. The fundamentals still suggest big supplies, and the weather in Brazil and India has improved to support some of the big production ideas. Demand seems to be average and routine. Very good conditions are reported in Thailand.
Overnight News: Brazil will get mostly dry weather or light showers. Temperatures should be below normal today and near to above normal starting tomorrow.
Chart Trends: Trends in New York are down with objectives of 1150 October. Support is at 1150, 1120, and 1190 October, and resistance is at 1180, 1210, and 1230 October. Trends in London are down with no objectives. Support is at 311.00, 308.00, and 305.00 October, and resistance is at 318.00, 323.00, and 325.00 October.

COCOA
General Comments: Futures closed a little higher. The overall price action remains generally weak and the trends remain down on the daily charts. The selling came in part on ideas of less demand from grinders, and the European grind data for the second quarter showed that this has happened at least in that part of the world. The grind was down 3.2% for the quarter and was the lowest grind in two years. The North American data should be released on Thursday. The uneven weather in West Africa is still a feature. The weather in Ivory Coast and the other countries in West Africa has been dryer than normal for the last couple of weeks and there is some talk that production of the next main crop could be hurt. Some showers are returning to West Africa now to help relieve stress on trees. Asian weather is called good for crops and East Africa is also having some generally good weather. It is a little too dry for good development of the next crop in Brazil, but the harvest there should be very active amid good conditions.
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 lower today at 4.337 million bags.
Chart Trends: Trends in New York are mixed to down with objectives of 2370 September. Support is at 2420, 2390, and 2380 September, with resistance at 2480, 2520, and 2550 September. Trends in London are mixed to down with objectives of 1790 September. Support is at 1810, 1790, and 1760 September, with resistance at 1860, 1890, and 1900 September.

DJ Asian Cocoa Grinding Up 16.3% on Year in the Second Quarter
By Lucy Craymer
Asian cocoa grinding rose 16.3% in the second quarter from the same period last year to 215,574 metric tons, according to figures issued by the Cocoa Association of Asia on Friday.
Grinding were up 3.4% over the first quarter, the industry association said.
Grinding refer to the volume of cocoa beans processed into the butters and powders used to make chocolate and are often used as a proxy for chocolate demand.
The data reflect the compilation of grinding from Malaysia as well as from Cocoa Association of Asia members in Singapore and Indonesia.
07-19-19 0418ETCopyright (c) 2019 Dow Jones & Company, Inc.

DJ European Cocoa Grinding Fell to Two-Year Low in Second Quarter
By Joe Wallace
European processing volumes of raw cocoa beans fell to a two-year low in the second quarter, according to data released Tuesday by the European Cocoa Association, in a sign of weakening demand.
Cocoa grinding–the amount of raw cocoa processed into butter and powder for making confectionery and chocolate–fell 3.2% compared with the second quarter of 2018, their first annual decline since late 2016.
European cocoa bean usage fell to 344,890 tons, a two-year low. That’s down from 370,359 tons–an eight-year high–in the first quarter of 2019 and from 356,109 tons in the second quarter of 2018.
Grinding are seen by market participants as a proxy for demand. The ECA bases its estimates on data from 23 companies, including Barry Callebaut AG, Cargill Cocoa & Chocolate Inc., Ferrero SpA, Nestle SA and Mondelez International Inc.
Cocoa demand appears to be simmering down after growing at its fastest pace since the 2010-11 season last year, and carrying that speed into the first quarter of 2019.
Weather conditions in western Africa have been broadly conducive to crop growth, though there have been some concerns about a lack of rainfall in the Ivory Coast and the swollen-shoot virus in Ghana.
Grinding numbers for North America are expected to be released by the National Confectioners Association on Thursday.



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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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