Futures Commentary and Analysis

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Morning Softs. 02/17/17
Jack Scoville - IF - Fri Feb 17, 10:45AM CST

COTTON
General Comments: Cotton futures were lower on what appeared to be follow through speculative selling. There is a chance that the market is forming a top in this price area. More selling today might be enough to turn short term trends down. The export sales report showed improved sales, but the trade was hoping for very strong sales and fears that the US will start losing demand. The trade is increasingly concerned about exports to Mexico, the top destination for US Cotton. The USDA statistics imply that there is plenty of Cotton in the US and in the world. However, the US position and the biggest world exporter is secure for this year as export demand remains very strong. Big buying has been seen from the Middle East, South Asia, Southeast Asia, and China. India remains a quiet seller as the country works through internal currency changes, but the market is anticipating increased offers from Australia this year. Ideas are that the strong demand can continue as long as the world trade atmosphere remains good as the US has big supplies of good quality Cotton and can sell and deliver.
Overnight News: The Delta should get mostly dry weather. Temperatures should will average above normal. The Southeast should get mostly dry weather with mostly above normal temperatures. Texas will see mostly dry weather, but some light precipitation is expected on Sunday. Temperatures will be variable, but much above normal after today. The USDA average price is now 72.94 ct/lb. ICE certified stocks are now 306,705 bales, from 300,235 bales yesterday.
Chart Trends: Trends in Cotton are mixed to down with objectives of 7490, 7390,m and 7170 March. Support is at 7490, 7410, and 7370 March, with resistance of 7590, 7690, and 7740 March.

FCOJ
General Comments: FCOJ closed mixed, with front months a little higher and deferred months a little lower. The market seems to have found a level where buyers and sellers can deal. The Florida harvest continues amid mostly dry weather. Irrigation is being used to support blooms for the next crop. Some areas are in full bloom while other areas are just getting the bloom started. Early and Mid oranges are being harvested for processing. The Valencia harvest is moving quickly. Demand for Orange Juice inside the US is still a big problem. It is currently at its lowest level since records started being kept in 2002, and there are no real prospects for improvement right now as consumers have plenty of alternatives. Sao Paulo state is getting good weather and crop conditions are called good.
Overnight News: Florida should see dry weather and mostly above normal temperatures. Brazil should get episodes of scattered showers and near to below normal temperatures.
Chart Trends: Trends in FCOJ are mixed to up with objectives of 180.00, 183.00, and 190.00 March. Support is at 170.00, 167.00, and 165.00 March, with resistance at 177.00, 179.00, and 183.00 March.

COFFEE
General Comments: Futures were firm as both New York and London held Support on the charts. Buyers noted that the US Dollar appeared to be breaking down again as a reason to buy. The cash market in the US appeared more animated yesterday as some roasters looked for coverage. Brazil remains a tale of two regions. Arabica areas have seen better precipitation and good production is expected, but Espírito Santo has been so dry that the government is moving to allow Robusta imports to cover domestic demand needs. The coming rains will benefit the next crop, but the drought stress will be a problem for producers for a couple of years. Most other parts of the Coffee production world are suffering from mixed production conditions as is Brazil. This includes Asia and the rest of Latin America. Central America is offering all qualities. Differentials appear steady to weak. Brazilian differentials are strong and Colombia differentials are also strong.
Overnight News: Certified stocks are lower today and are about 1.316 million bags. The ICO composite price is now 138.34 ct/lb. Brazil will get mostly dry weather. Temperatures should average near to above normal Colombia should get scattered to isolated showers. Central America and southern Mexico should get mostly dry conditions. Temperatures should average near to above normal. ICE said that 129 contracts were delivered against March futures today and that total deliveries for the month are now 129 contracts.
Chart Trends: Trends in New York are mixed. Support is at 147.00, 145.00, and 143.00 May, and resistance is at 149.00, 154.00 and 155.00 May. Trends in London are mixed to up with objectives of 2170, 2230, and 2260 March. Support is at 2110, 2090, and 2050 March, and resistance is at 2150, 2180, and 2200 March.

SUGAR
General Comments: Futures were lower on what appeared to be some long liquidation. Reduced cane processing in Brazil as noted by UNICA was not enough to cause a rally, although prices did climb back from the lows of the day to end with more moderate losses. A weaker US Dollar did not provide much Support to futures. Futures are still in a big trading range. The near term supply tightness is supporting the market once again. Much of the trading is rolling of liquidating of March positions as New York stops at the end of the month. The near term supply news continues to be bullish for prices, and demand news remains concentrated on ideas of increased Indian buying interest. The big world producers are producing less Sugar. Indian production estimates have dropped due to the bad monsoon weather and there are more reports that mills are closing early because there is no cane to process. Many analysts think the country will import. Brazil producers are not selling and might be sold out. The stronger Real keeps the mills there out of the export market. It remains dry in northeast Brazil, but some very beneficial rains are in the forecast for this week.
Overnight News: Brazil will get dry weather or just light showers. Temperatures should average near to above normal.
Chart Trends: Trends in New York are mixed. Support is at 1990, 1970, and 1930 May, and resistance is at 2050, 2070, and 2100 May. Trends in London are mixed. Support is at 544.00, 540.00, and 533.00 May, and resistance is at 556.00, 562.00, and 572.00 May.

COCOA
General Comments: Futures markets closed higher on follow through buying tied to news that Ivory Coast Cocoa workers are on strike due to low pay and low prices. No one is making money on Cocoa there right now, but the country anticipates a record of near record production of between 1.9 and 2.0 million tons. Ghana is now expecting production near 800,000 tons, down 50,000 tons from its early estimate. Trends remain down in both markets, but futures could be nearing the end of the big selloff. Ideas are that there is plenty of Cocoa available to the world market, but the demand has fallen and needs to be rebuilt. Ideas of bigger production in West Africa continue, and prices are very weak. The problems in West Africa due to recent defaults from local industry have hurt prices even more, and now some Cocoa is being left to rot on trees or in storage. Ivory Coast is looking for ways to keep the Cocoa flowing and to support producers. Production estimates from West Africa have been high and are strong from Southeast Asia.
Overnight News: Mostly dry conditions are expected in West Africa, but some light showers are possible. Temperatures will average near to above normal. Malaysia and Indonesia should see scattered showers in all areas. Temperatures should average near normal. Brazil will get mostly dry conditions or light showers and near to above normal temperatures. ICE certified stocks are higher today at 3.671 million bags. ICE said that 6 contracts were posted for delivery today and that total deliveries for the month are now 179 contracts.
Chart Trends: Trends in New York are mixed to down with objectives of 1830 May. Support is at 1940, 1890, and 1860 May, with resistance at 2070, 2100, and 2140 May. Trends in London are mixed to down with objectives of 1500 May. Support is at 1590, 1540, and 1510 May, with resistance at 1650, 1680, and 1710 May.
Questions? Ask Jack Scoville today at 312-264-4322

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