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Softs Report 01/17/2020


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COTTON
General Comments: Cotton was a little lower on follow through selling around the trade deal signed by the US and the Chinese. The Chinese side said that any buying would depend on comparative price and internal demand and this was taken as negative by the market. It means that China will not have to chase prices higher just to fulfill their commitments and brings into focus some promises made by the Trump administration before the deal was signed. In the end, the trade deal is a lot of noise but very little in substance. China has been buying Cotton from the US and Brazil as it needs higher quality Cotton to blend with its domestic production but has not bought from the US in several weeks now due to the negotiations. It could resume buying with the new trade deal signed. USDA showed the production problems in its annual update and held demand strong. The report was considered bullish for futures. World data also showed reduced ending stocks and the world report was also considered bullish.
Overnight News: The Delta and Southeast should see frequent periods of precipitation through this weekend. Temperatures should be mostly above normal. Texas will have mostly dry conditions except for some rain on Thursday. Temperatures will average above normal. The USDA average price is now 65.76 ct/lb. ICE said that certified stocks are now 6,752 bales, from 6,792 bales yesterday.
Chart Trends: Trends in Cotton are mixed. Support is at 6900, 6880, and 6850 March, with resistance of 7090, 7120, and 7170 March.

DJ On-Call Cotton – Jan 16
As of Jan 10. 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
Dec 19 0 0 0 0 0 0
Mar 20 31,882 34,087 -2,205 22,272 23,819 -1,547
May 20 19,228 18,606 622 2,636 2,291 345
Jul 20 22,830 22,609 221 3,505 3,476 29
Oct 20 0 0 0 0 0 0
Dec 20 15,608 15,152 456 17,126 17,825 -699
Mar 21 6,215 5,673 542 1,033 967 66
May 21 2,720 2,413 307 191 147 44
Jul 21 4,528 4,442 86 242 220 22
Dec 21 1,093 1,093 0 1,533 1,423 110
Mar 22 440 440 0 0 0 0
Dec 22 0 0 0 7 7 0
Dec 23 0 0 0 7 7 0
Total 104,544 104,515 29 48,552 50,182 -1,630
Open Change
Int
Dec 19 0 0 0
Mar 20 127,048 124,444 2,604
May 20 52,702 51,226 1,476
Jul 20 31,996 22,979 9,017
Oct 20 15 14 1
Dec 20 30,256 28,789 1,467
Mar 21 1,873 1,451 422
May 21 258 243 15
Jul 21 636 495 141
Dec 21 251 230 21
Mar 22 2 2 0
Dec 22 0 0 0
Dec 23 0 0 0

FCOJ
General Comments: FCOJ was a little lower after trading a relatively wide range for the day. Futures have now made objectives to the downside and are beginning to show some stability. Good growing conditions and increased oranges production estimates by USDA this season have been bearish. The weather has been great for the trees. Many areas have been dry lately and harvest is expanding. Crop yields and quality should be high for Florida this year. Inventories of FCOJ in the state are high and are more than 36% above last year. Demand remains a problem with American consumers and others looking elsewhere for Vitamin C.
Overnight News: Florida should get mostly dry conditions. Temperatures will average near to above normal. Brazil should get dry conditions through the weekend and near to above normal temperatures. ICE said that 0 notices were posted for delivery against January contracts and that total deliveries for the month are now 4 contracts.
Chart Trends: Trends in FCOJ are mixed to down with objectives of 95.00 March. Support is at 95.00, 92.00, and 89.00 March, with resistance at 98.00, 99.00, and 100.00 March.

COFFEE
General Comments: Futures were a little lower in New York and in London yesterday as demand ideas are weak and the supply ideas are starting to increase again. Prices could start to turn sideways after the extended down move. The Brazilian crop is developing well. It is dry in other parts of Latin America. The Asian harvest is underway but producers do not seem to be selling on ideas that prices are too low. Vietnam exports remain behind a year ago, but the market anticipates bigger offers with the Tet holiday drawing nearby. Vietnamese crops are expected to be big despite uneven growing conditions earlier in the year.
Overnight News: ICE certified stocks are higher today at 2.102 million bags. GCA stocks are now 6.834 million bags, from 6.923 million last month. The ICO daily average price is now 107.38 ct/lb. Brazil will get drier weather this weekend with near to above normal temperatures. Vietnam will see mostly dry conditions.
Chart Trends: Trends in New York are down with objectives of 105.00 and 100.00 March. Support is at 110.00, 106.00, and 104.00 March, and resistance is at 116.00, 120.00 and 123.00 March. Trends in London are mixed to down with objectives of 1280, 1260, and 1240 March. Support is at 1310, 1290, and 1270 March, and resistance is at 1370, 1390, and 1410 March.

DJ Uganda December Coffee Exports Rose 5% on Year
By Nicholas Bariyo
KAMPALA Uganda-Coffee exports from Uganda increased 5% in December, the third rise in a row as maturing plantations and favorable weather boosted yields in Africa’s top exporter of the beans, the state-run Uganda Coffee Development Authority said Friday.
A total of 330,248 60-kilogram bags were shipped in December, up from 314,439 bags exported in the same month last season.
The coffee body attributed the rise in exports to well-distributed rains and more young trees planted a few years ago entering the production phase. Ugandan farmers also released more stocks to the market to fulfill contractual obligations with international buyers amid improving global prices.
December coffee exports brought cumulative shipments since the start of the coffee season in October to 1.12 million bags, a 7% rise on year.
Uganda, which mainly grows the bitter-tasting robusta coffee variety used in blends and instant drinks, exports nearly all of its bean-form coffee output to U.S. and European Union markets.
Uganda expects a bumper crop of around 5.2 million bags for the 2019-20 season.

DJ Brazil 2020 Total Coffee Crop Could Reach Record 62.02M Bags
By Jeffrey T. Lewis
SAO PAULO–Brazilian farmers could produce a record coffee harvest in 2020 as productivity rises and the area planted with the crop increases, according to national crop agency Conab.
Brazil will produce from 43.2 million 132-pound bags to 45.98 million bags of arabica coffee, the most popular variety, and will grow from 13.95 million to 16.04 million bags of the stronger, and less sought-after, robusta variety, Conab said Thursday.
That would bring total output to 57.2 million to 62.02 million bags, surpassing the 61.66 million-bag record set in 2018 if the harvest comes in at the upper end of the agency’s forecasts. In 2019 Brazil produced 49.31 million bags, according to Conab.
Brazil is the world’s biggest producer and exporter of arabica coffee and the second-biggest producer of robusta, after Vietnam. The South American country’s arabica production has a two-year cycle in which even-numbered years produce a bigger crop, then a smaller crop the following year as the plants “rest.”
Brazil already dominates global coffee production, growing about 37% of total world output in 2018. That figure could rise this year and in the next few years as low prices in world market force less efficient producers in other countries to either switch to more profitable crops or abandon farms altogether, according to Brazilian coffee exporters’ group Cecafe.
Brazil has the world’s most efficient coffee production, and so its growers are better able to handle the ups and downs of coffee prices, the president of Cecafe, Nelson Carvalhaes, has said.
The area planted with both arabica and robusta will grow 1.4% this year, according to Conab.
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

DJ Brazil Coffee Exports Fell 25.1% in December to 3M Bags, 2019 Exports Hit Record of 40.6M Bags
By Jeffrey T. Lewis
SAO PAULO–Brazilian coffee exports fell in December as sales abroad of arabica beans dropped, but the country still set a record for exports in 2019, according to exporters group Cecafe.
The South American country exported three million 132-pound bags of coffee last month, a decline of 25.1% from the same month a year earlier, Cecafe said Wednesday.
Sales abroad of the arabica variety of coffee fell 32.1% to 2.35 million bags, while exports of robusta beans more than doubled to 340,731 bags, from 168,196 bags in December 2018.
Brazil exported 40.6 million bags of coffee in 2019, beating the record set in 2015, when sales abroad reached 37.02 million bags.
Almost all of the biggest importers of Brazilian coffee increased their purchases of Brazilian beans in 2019, with sales to the U.S., the biggest single buyer, jumping 24.75% to 7.9 million bags last year compared with 2018. Sales to Germany, the second biggest buyer, rose 19.4%.to 6.8 million bags in the same period.
Brazil also is the world’s biggest producer and exporter of instant coffee, and in December its exports of roasted, ground and instant coffee fell 17.4% to 309,144 bags, Cecafe said.
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

SUGAR
General Comments: The markets closed mixed, with New York lower after making new highs for the move and London higher and also making new highs for the move. Reports indicate that little is on offer from India even though current prices are favorable for Indian exporters. Thailand might also have less this year due to reduced planted area and erratic rains during the monsoon season. Reports from India indicate that the country is seeing relatively good growing conditions and still holds large inventories from last year. However, these supplies are apparently not moving. Reports of improving weather in Brazil imply good crops there, but most of the cane is being used to produce ethanol. More rallies in Sugar prices are needed for the mills to switch back to producing Sugar for export, but the price action suggests that New York is close to levels to make that happen.
Overnight News: Brazil will get drier weather this weekend. Temperatures should be near to above normal. The ISO said that the Thai crush is now 34.4 million tons, from 41.4 million tons last year. Sugar production is now 3.495 million tons, from 4.093 million tons last year. Ukraine production is now 1.98 million tons, from 19% less than last year on reduced area.
Chart Trends: Trends in New York are up with objectives of 1450 March. Support is at 1420, 1410, and 1370 March, and resistance is at 1460, 1470, and 1480 March. Trends in London are up with no objectives. Support is at 394.00, 387.00, and 383.00 March, and resistance is at 403.00, 406.00, and 409.00 March.

DJ Brazil Center-South Sugar, Ethanol Output Drop as Harvest, Production Season Approaches End
By Jeffrey T. Lewis
SAO PAULO–Brazilian sugar mills in the country’s center-south region crushed less cane in the second half of December compared with a year earlier, according to industry group Unica.
Center-south mills crushed 734,000 metric tons of cane in the period, a decline of 71.2% from the same period a year earlier. They produced 13,000 tons of sugar, down 82.4%, and made 137 million liters of ethanol, a decrease of 35.7%.
Brazil is the world’s biggest sugar producer and exporter, and the center-south grows about 90% of the country’s cane. The harvest and production season is coming to an end, with only 31 mills still operating and producing ethanol, compared with 253 mills that had already closed down, according to Unica.
The production mix for the second half of December month was 14.4% sugar to 85.6% ethanol. A year earlier, the mix was 21.4% sugar and 78.6% ethanol.
In the season from April 1 through Jan. 1, mills in the region crushed 578.6 million tons of cane, up 2.9% from the same period a year earlier. Sugar production rose 0.5% to 26.5 million tons, and ethanol output rose 6.5% to 32.1 billion liters.
The production mix for the season through Jan. 1 was 34.5% sugar to 65.5% ethanol. A year earlier, the mix was 35.5% sugar and 64.5% ethanol.

COCOA
General Comments: Futures closed higher in New York and mixed in London and made new highs for the move. It was an outside day down in London so maybe that market is about done with the current rally. Funds and other speculators were the best buyers in New York but were more two-sided in trading in London. Producers were sellers in both markets. Harvest is now active in West Africa and the results so far are very good. Ideas are that demand is currently very strong due to the current price action. The reports from West Africa imply that a big harvest is possible in the region. Ivory Coast arrivals are strong and are above year ago levels. The weather in Ivory Coast is good. The weather is too dry in Nigeria and there are fears that the mid crop is not developing well at this time.
Overnight News: Scattered showers are expected in southern sections of West Africa. Temperatures will be on both sides of 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 2.944 million bags.
Chart Trends: Trends in New York are up with objectives of 2780 March. Support is at 2650, 2600, and 2550 March, with resistance at 2750, 2780, and 2810 March. Trends in London are mixed to up with no objectives. Support is at 1950, 1910, and 1860 March, with resistance at 2000, 2030, and 2060 March.



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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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