MORNING SOFTS COMMENTS
Jack Scoville
Thursday,
October 17, 2019
COTTON
General Comments: Cotton was higher on what appeared to be speculative buying tied to
hopes for increased Chinese demand.
Speculators hope China will buy US Cotton but so far China has shown no
interest. It is more interested in meats
and feed and oilseeds. The Southeast was
getting a lot of rain early this week but is now drier and ideas are that any
losses will be transient. The market is
still finding support from deteriorating crop conditions. Weekly USDA reports still show a tale of two
crops with some crops very good to excellent but some crops very poor. This dynamic was seen in the crop condition
reports this week and brings into question the overall production potential. USDA has estimated a big crop, but the crop
might be a little smaller than they think.
This trend has been a feature of the market all year as the Texas
Panhandle and nearby areas have been very hot and dry for a big part of the
growing season. Crop progress remains
slightly above average.
Overnight News: The
Delta should see mostly dry weather, and Southeast should see drier weather. All areas should see showers this weekend Temperatures should
be near to below normal. Texas will have
mostly dry conditions. Temperatures will
be near to above normal. The USDA
average price is now 61.68 ct/lb. ICE
said that certified stocks are now 10,435 ba1es, from 10,523 bales yesterday.
Chart Trends: Trends in Cotton are mixed to up with
objectives of 6460, 6590, and 6650 December.
Support is at 6370, 6220, and 6180 December, with resistance of 6470, 6530,
and 6580 December.
FCOJ
General
Comments: FCOJ was mixed in quiet
trading. Trends remain sideways. USDA estimated Florida production at 74
million boxes last week. The weather has
been great for the trees as there have been frequent periods of showers and no
hurricanes or other severe storms so far this year. Some areas have been dry lately and some
irrigation has been used. Crop yields
and quality should be high for Florida this year. Inventories of FCOJ in the state are high and
are about 32% above last year. Rains
have started to fall in Brazil and trees should be flowering now. Dry conditions have hurt production potential
in Mexico.
Overnight
News: Florida should get scattered showers on Friday,
otherwise mostly dry weather.
Temperatures will average near to above normal. Brazil should get scattered showers this
week and drier weather this weekend and above normal temperatures.
Chart Trends: Trends in FCOJ are mixed. Support is at 98.00, 96.00, and 95.00
September, with resistance at 101.00, 104.00, and 105.00 September.
COFFEE
General
Comments: Futures were lower. Trends in both markets are down again. New York was weaker on more reports of good
flowering in Brazil and Real weakness against the US Dollar. The Real is now testing recent lows. London has been the weaker market this week as
the Asian harvest is underway. Vietnam
exports remain behind a year ago, but the market anticipates bigger offers as
producers and traders will need to create new storage space and are expected to
do this by selling old crop Coffee. The
Arabica growing areas got needed rains to start the flowering last week and reports
indicate that flowering is off to a very good start. More rain is expected this weekend or early
next week. Many now anticipate a big
crop from Brazil next year. However,
there was some extreme cold and drought conditions earlier in the year that
might have stressed trees and could hurt production potential for this year
despite the good weather now. Vietnam
crops are thought to be big despite some uneven growing conditions this
year. It has been warm and dry at times,
then the growing areas have seen some very heavy rains. The rains are more moderate now. Demand has been quiet over the last couple of
weeks. Differentials have been stable but buyers are not aggressive.
Overnight News: ICE certified stocks are higher today at 2.245
million bags. The ICO daily average
price is now 94.26 ct/lb. Brazil will
get dry weather until some showers appear later in the weekend with above normal
temperatures. Vietnam will see scattered
showers in all areas.
Chart Trends: Trends
in New York are mixed to down with objectives of 90.00 December. Support is at 91.00, 88.00, and 85.00 December,
and resistance is at 95.00, 98.00 and 99.00 December. Trends in London are down with no objectives. Support is at 1180, 1150, and 1120 November,
and resistance is at 1230, 1250, and 1280 November.
SUGAR
General Comments: Futures closed lower as the
Brazilian Real moved lower to test recent lows.
London was also lower and failed against the upper end of its recent
trading range. Futures remain in a
trading range but have been unable to turn trends up in the last few sessions. Even talk of better demand from China could
not create any buying interest. USDA
noted that Sugar prices in China are moving up and that industry was looking to
buy in the world market. Europe and
Russia are probably buying in the world market after poor growing seasons. Reports of improving weather in Brazil imply
good crops there. World petroleum prices
are relatively cheap and are not supporting ethanol demand ideas. Reports from India indicate that the country is
seeing relatively good growing conditions and still holds large inventories
from last year. The weather there has
improved with the monsoon and some areas are seeing some excessive rains The
weather has been much more uneven in production areas from Russia into western
Europe. Those areas had a very hot and
dry start to the growing season and there are reports of crop losses this year.
Overnight News: Brazil will get mostly dry weather today and
scattered showers starting about Thursday.
Temperatures should be near normal.
Chart Trends: Trends in New York are mixed. Support is at 1220, 1210, and 1190 March, and
resistance is at 1260, 1290, and 1300 March.
Trends in London are mixed.
Support is at 340.00, 337.00, and 335.00 December, and resistance is at
349.00, 355.00, and 357.00 December.
COCOA
General
Comments: Futures closed a little lower in consolidation trading after the big
rally on Tuesday. Ideas of increasing
harvest pressure offset positive grind data from Europe. North America and Asia will release grind
data for the quarter in the next couple of days. The reports from West Africa imply that a big
harvest is possible in the region, but no one knows how to
handle to new marketing and producer support programs imposed by the
governments of Ivory Coast and Ghana. Ivory
Coast arrivals are off to a fast start and are above year ago levels two weeks
into the season. The weather in Ivory
Coast has improved due to reports of frequent showers. The precipitation is a little less now so
there are no real concerns about disease.
Ideas are that the next crop will be very good. Both Ivory Coast and Ghana are doing what
they can do boost Cocoa prices and maintain good earnings for producers by
paying a living wage differential and are looking to regulate the flow of Cocoa
into the world market. The moves could force the big
Cocoa processors and grinders to pay more as they contract for Cocoa well in
advance to ensure adequate supplies.
Overnight
News: Scattered showers and storms are expected in
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 lower today at 3.574 million bags.
Chart
Trends: Trends in New York are mixed to up with
objectives of 2580 and 2680 December.
Support is at 2490, 2460, and 2440 December, with resistance at 2540, 2560,
and 2570 December. Trends in London are mixed. Support is at 1890, 1870, and 1850 December,
with resistance at 1930, 1950, and 1990 December.
DJ European Cocoa Demand Steadied in Second
Quarter: ECA - Market Talk -- Market Talk
0724 GMT
- European demand for cocoa steadied in the third quarter, according to data
from the European Cocoa Association that may allay traders' concerns about
consumption. The volume of raw cocoa beans processed by large chocolate
companies in the region rose 5.2% to 362,940 metric tons, from 344,890 tons in
the three months through June. However, processing volumes, a proxy for demand,
were still marginally lower than in the third quarter of 2018. Cocoa traders
will now turn their eyes to Asian and North American grinding data due later in
the week. Cocoa prices have been volatile recently, driven by the start of the
new export season in West Africa, signs of a strong harvest in Ivory Coast, and
the introduction of a new export-pricing system. (joe.wallace@wsj.com)
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