by Robin Rosenberg, PFGBEST
(800) 611-6974
RRosenberg@PFGBEST.com
COFFEE
Forty Year Trading Range: $41.50 to $337.50 per lb.
Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST
The International Coffee Organization estimates world coffee output for 2011-12 will reach 134.2 million 60-kilogram bags. India, the world’s fourth largest coffee exporter may become a net importer within the next five years. Domestic coffee drinking has been increasing by leaps and bounds as it grows in popularity.
According to the Vietnam Coffee and Cocoa Association, Vietnamese coffee output is estimated to be 17.5 million 60 kilo bags this season. Vietnamese coffee farmers may sell only one third of their coffee crop prior to the start of the Tet Lunar New Year holiday. They are attempting to raise prices until work resumes following the celebrations. Usually they sell 50 percent of their inventory by the start of the holiday.
The Indonesia Coffee Exporters and Industries Association (AEKI)) predicts that Indonesian coffee exports will rise 14.3 percent to 400,000 tonnes this year. Weather over the next two months or so has a huge impact on the country’s harvest and exports. can make or break the coffee crop. The country is Southeast Asia’s largest economy. Presently the country’s coffee prediction falls behind Brazil and Vietnam. Indonesia has it’s sights set becoming the world’s number two coffee producer within five years.
Coming as a complete surprise, coffee production in Colombia fell to a 35 year low after Mother Nature provided too much rain, disease and little sunshine throughout the growing season. When compared to the 2010-2011 coffee production of 8.92 million 60 kilo bags the 2011-2012 harvest tumbled 12 percent to 7.81 million bags. This was the smallest Colombian crop since 1976. Colombia’s 2011-2012 coffee exports fell 1.2 percent to 7.73 million bags from 7.82 million exported in 2010-2011.
An official at one of Colombia’s leading brokerages exclaimed “We’re actually below 8 million? And 8 million is disastrous.” Back in November the head of the Growers Federation said farmers would have a “very hard” time increasing production this year if adverse weather persists. He certainly hit it on the head. I hope Juan Valdez isn’t out of a job!
Technical analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly technical indications on Friday, January 20th: At this time the week’s trading range was 229.25-221.15, the last print is 226.40. The stochastic remains in buy mode. At 43.28 the RSI is higher than last week’s reading of 42.46. The M.A.C.D. histogram reads -0.18 and higher than last week’s indication of -0.91. This weeks trading pierced the 9 bar moving average above, but has yet to close above it. This market is struggling to put on a bullish face. A weekly close at or below 220.35 in March coffee will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
COCOA
Forty Year Trading Range: $4.44 to $53.79 per tonne
Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST
When compared to the same time last year arrivals of cocoa at Ivory Coast ports for export were down 4 percent through January 15th. Exporters estimate this year’s arrivals at 763,000 tonnes. Last year the figure was 793,772 tonnes. The reasons for this are twofold. Farmers failed to properly treat plantations that developed disease and unusually dry weather. I had written arrivals would be down when the last of the prior season’s crop had been delivered. Don’t expect any improvement in this situation. The decline in arrivals will continue as there are no more pods on cocoa trees left to pick!
Cocoa farmers have had to deal with extremely dry weather that has so far lasted for two months. This is highly unusual during a La Nina event. La Nina events generally provide better than normal rainfall in West Africa’s cocoa growing areas. As a rule cocoa production increases as well. According to farmers and exporters, the 2011-2012 main crop will fall short of the record production forecast earlier this season.
According to Cameroon’s National Cocoa and Coffee Board (NCCB) the country exported 131,989 tonnes of cocoa during the the August through December time frame. That’s down near 11 percent from the 148,973 tonnes exported a year earlier. Cameroon produced a record crop of 240,000 tonnes in 2010-2011. The NCCB does not understand why exports have been falling off. It could be that farmers are holding back supply while awaiting higher prices. Poor weather has brought a drop in production as well.
Cameroons Cocoa Development Authority (SODECAO) contends that the country’s cocoa production will reach 250,000 tonnes in the 2011-2012 growing season primarily due to the cultivation of disease resistant cocoa varieties. Why do producing countries always over do it when it comes to forecasting output?
Technical analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly technical indications for Friday, January 20th: At this time the week’s trading range was 23.50-22.00 the last print is 23.22. The stochastic is in buy mode. RSI at 41.95 is higher than last week’s reading of 39.74. The M.A.C.D. histogram at -1.51 is much improved over last week’s indication of -24.50. For the second week running this market has rallied above the 9 bar moving average and held. This market is telling us that things have taken a positive turn. Keep close watch on this market; it wants to rally. A weekly close at or below 21.72 in March cocoa futures will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
COTTON
Forty Year Trading Range: $26.84 to $227.00 per lb.
Trades on the ICE from 8:00 p.m. to 1:30 p.m. CST (Next Day)
Cotton futures have rallied near 18 percent from their December lows. This has the bull camp concerned that short term demand will drop off as the Lunar New Year begins and China takes a vacation. The Chinese year 4710 will begin on Monday Jan. 23rd 2012 and lasts fifteen days.
Improving economic news from the U.S. and China and less negative economic news from Europe were the drivers behind cottons recent rally. With U.S. and Chinese cotton planting intensions 10 percent lower than last year the real concern is the tremendous old crop supply. The short term demand picture will become quite important during the Lunar New Year.
I’ve written in the past that I don’t understand how crop estimates are calculated. There are just so many unknowns involved. Perhaps it’s done purposely to motivate farmers, but it certainly confuses the issue.
India’s Cotton Advisory Board (CAB) is meeting next week. Talk is that it will cut it’s prior cotton output estimate by one million bales. CAB is comprised of the Union textile commissioner and it’s membership includes trade and industry representatives. India’s cotton growing area amounts to 12.1 million hectares this growing season. A senior official of CAB has stated that overall yield should be less than last year’s level of 475 kilos per hectare due to adverse weather conditions that negatively affected some northern and central cotton growing areas.
Lower than normal arrivals of cotton from the growing areas has been a concern. Only 60 percent of the cotton crop has made it to market. January’s arrivals have been running near 200,000 bales daily. This is a low number for early January and indicates that late crop cotton was affected by climatic events. Only 35 percent of India’s cotton is under irrigation.
Demand from China continues to support cotton prices. The country’s December cotton imports rose 71 percent year on year to 790,000 tonnes. Expectations are that China will soon issue an import quota for an additional1.1 million tonnes.
Technical analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly technical indications for Friday, January 20th: At this time the week’s trading range was 99.47-95.67, the last print is 98.12. The stochastic is in buy mode. RSI at 50.59 is higher than last week’s reading of 47.23. The M.A.C.D. histogram at 1.01 is higher than last week’s indication of 0.43. This is the first week that the market has closed above the center Bollinger band. I reiterate, expect surprises to be on the upside. A weekly close at or below 95.41 in March Cotton will turn the weekly trend down.
Do not trade without the use of protective strategies such as stops and or options.
SUGAR
Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.
Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST
Higher crushing volume in major sugar growing areas increased India’s sugar output 19 percent from the October 1st start of the marketing year when compared to the same period last season. India’s sugar mills have requested that the government increase allowable exports and loosen it’s controls over supplies. Food Minister, K.V. Thomas has said that India’s Food Ministry will soon discuss the easing of controls over the countries sugar supply. Sugar is one of the most tightly regulated food sectors in India.
According to sugar industry executives and an official at the Office of Cane and Sugar board, sugar mills in Thailand have ramped up processing to avoid possible rain delays in the coming months. State owned Thai Cane & Sugar Corporation sold 31,333 tonnes of sugar to international trading firms in a tender on Tuesday.
With ever increasing Brazilian demand for U.S. ethanol there is a good chance that Brazil’s sugar crop will play a much greater role in the countries energy policy and a lesser one in the world’s sugar market. This should place firm support under the market and bring a large amount of investor based funds into the sugar market. There nothing an investor likes more that a defined floor in a market. Futures are risky, but some situations can take the sting out of positioning oneself.
After falling 27 percent in 2011 sugar traders believe that the biggest glut since 2001 will abate in the next harvest and ending the largest decline in a decade. Expectations for a surplus in supply are turning to concern regarding supply. Here is an interesting tidbit. Trend following traders have been long anywhere from 50,000 to 140,000 contracts over the last three years. Per January 10th’s Commitments of Traders report they are now net short 4,821 contracts. The small amount leads me to believe they are wrong.
Technical analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly technical indications for Friday, January 20th: At this time the week’s trading range is 24.98-23.52, the last print is 24.94. The stochastic has flashed a buy signal. RSI at 51.11 is 45.59. The M.A.C.D. histogram at -0.009 is higher than last week’s reading of -0.18. This market is looking good. Keep close watch on the techs, they tell the story.A weekly close at or above 24.36 in March Sugar will turn the weekly trend up.
Do not trade without the use of protective strategies such as stops and or options.
There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
