Jack Scoville is an often quoted market analyst in the grain and soft commodities sectors. You will find his commentary throughout the Reuters, Wall Street Journal, Dow Jones, Bloomberg, and Barron's publications. Contact Mr. Scoville at (312) 264-4322
General Comments: Cotton was lower in reversal trading and after making new highs for the move. The export sales report was good, but not as strong as the previous two weeks, and that gave some a reason to sell. Still, it was a strong month for Cotton prices and the potential for higher prices down the road is still there. Speculators were early buyers and later sellers. Speculators are already long, and mills have been forced to buy to cover open on call positions in the cash market. The futures market is watching the harvest roll along and is debating the demand for US and world Cotton. Some traders say that USDA is seriously underestimating demand for the fiber, while the others look to the high USDA ending stocks estimates and suggest that any demand can be easily met. Farmers are reported to be quiet sellers right now. Harvest conditions are good in just about all areas.
Overnight News: The Delta and the Southeast should get mostly dry conditions. Some precipitation is likely next week Temperatures should be near to above normal through tomorrow, then near to below normal. Texas will see mostly dry conditions. Temperatures will be above normal early in the week and below normal late in the week. The USDA average price is now 71.16 ct/lb. ICE said that certified stocks are now 47,729 bales, from 47,951 bales yesterday. ICE said that 0 contracts were tendered for delivery yesterday and that total deliveries for the month are 0 contracts.
Chart Trends: Trends in Cotton are mixed to up with objectives of 7500 March. Support is at 7230, 7100, and 7080 March, with resistance of 7340, 7380, and 7420 March.
General Comments: FCOJ closed lower in liquidation trading. Short term trends turned down with the price action yesterday, but the move lower could be limited as the freeze season is just around the corner and the current crop is still very small. Overall weather conditions are considered good in Florida at this time. The harvest is progressing well and more fruit is starting to go to processors and the fresh fruit packers. Trees in Florida that are still alive now are showing fruit of good sizes, although many have lost a lot of the fruit. Florida producers are actively harvesting what is left as cleanup from the hurricane is about over now. The emphasis is on the fresh fruit market now, with processors mostly getting packing house eliminations at this time. However, processors are taking deliveries from producers now as well.
Overnight News: Florida should get mostly dry weather and near to above normal normal temperatures. Scattered showers are expected today. Brazil should get mostly dry conditions and near to above normal temperatures. Some showers are possible this weekend. ICE said that 9 notices were posted for delivery today and that total deliveries for the month are now 38 contracts.
Chart Trends: Trends in FCOJ are down with objectives of 160.00 and 156.00 January. Support is at 160.00, 157.00, and 155.00 January, with resistance at 165.00, 168.00, and 169.00 January.
General Comments: Futures were lower in New York and in London yesterday on fund and other speculator selling. New York shed about 400 points in just a couple of minutes. It appears that one fund or other large player decided to sell in big volume, and was able to push the fragile market into other sell stops. The move collapsed the potential up trend for now. The trade will search for a new move starting today as the new month gets underway. The trends remain sideways to down in London. The market expects an increase in offers of Robusta from Vietnam in the short term, but those offers have been slow in coming. Internal prices in Vietnam remain at high levels compared to London. Many Arabica traders had been expecting the market to move higher due to ideas of smaller crops from all over Latin America, and especially Brazil. Brazil exports are reduced on what is called reduced inventories held by exporters and producers. Many are concerned about the potential for reduced Brazil production due to earlier drought and the cold and dry Winter. There is plenty of rain in some areas now, but dry weather could return soon and stress the trees again There are also reports of short crops in parts of Central America and some areas in South America due to the lack of farmer investment from the low prices.
Overnight News: Certified stocks are slightly lower today and are about 1.921 million bags. The ICO composite price is now 116.73 ct/lb. Brazil will get showers and storms again today and then starting Monday. Temperatures should average near to below normal. Colombia should get scattered to isolated showers. Central America and southern Mexico should get scattered showers or dry conditions. Temperatures should average near to above normal. ICE said that 81 delivery notices were posted against December contracts today and that total deliveries for the month are now 2,272 contracts.
Chart Trends: Trends in New York are mixed. Support is at 127.00, 126.00, and 125.00 March, and resistance is at 133.00, 134.00 and 136.00 March. Trends in London are mixed to down with no objectives. Support is at 1700, 1680, and 1650 January, and resistance is at 1780, 1800, and 1830 January.
General Comments: Futures were mixed in New York and a little higher in London in consolidation trading. The market faded from recent highs and seemed affected by strength in the US Dollar. Chart trends are still turning up again longer term as the market rallies in part with strength in energy markets and in part on US Dollar weakness. However, the market has been fading against resistance areas for the last few sessions and might need to correct a bit more before resuming any rally attempt. Brazil features a strong sugarcane crush and continued emphasis on ethanol production and reduced Sugar production as it moves to cover domestic demand at the expense of exports. Sugar production is now below year again levels. Trends could be turning up longer term in London and in New York after the price action last week on ideas of reduced availability of Sugar to the market due to the ethanol use. The lack of demand against ideas of big world production remains the major negative factor.
Overnight News: Brazil should feature showers and storms again starting on Thursday. Temperatures should be near to below normal
Chart Trends: Trends in New York are mixed. Support is at 1500, 1480, and 1460 March, and resistance is at 1530, 1550, and 1580 March. Trends in London are mixed to up with objectives of 406.00 March. Support is at 385.00, 383.00, and 380.00 March, and resistance is at 396.00, 399.00, and 405.00 March.
General Comments: Futures closed sharply lower in both markets and it looks like lower prices are coming as the new crop comes to market in West Africa. There should be plenty of Cocoa available to the market as the main harvest in West Africa has been active. Weather consultants think that the crops are in mostly good condition, and the condition is likely to stay good in La Nina brings increased rains to production areas. It has been unseasonally wet in parts of West Africa, so some diseases could be forming. Demand ideas are holding strong as processor margins have been great. Ivory Coast processing data was strong in a report released Tuesday. World production ideas remain high.
Overnight News: Mostly dry conditions are expected in West Africa. Temperatures will average near to above normal. Malaysia and Indonesia should see frequent showers. Temperatures should average above normal. Brazil will get scattered showers and near to above normal temperatures. ICE certified stocks are lower today at 3.714 million bags. ICE said that 10 notices were posted for delivery today and that total deliveries for the month are now 422 contracts.
Chart Trends: Trends in New York are mixed to down with no objectives. Support is at 2040, 2030, and 2010 March, with resistance at 2110, 2130, and 2150 March. Trends in London are down with no objectives. Support is at 1480, 1460, and 1430 March, with resistance at 1540, 1560, and 1590 March.
DJ ICCO Cuts Global Cocoa Surplus Estimate for 2016-17 Season
By David Hodari
LONDON–The International Cocoa Organization on Thursday cut its estimate for global cocoa surplus in the 2016-17 season, partly thanks to signals of increased consumption.
The Abidjan-based organization said in its quarterly report said that supply would surpass demand by 335,000 metric tons, down from its late-August estimate of 371,000 tons.
World cocoa production has now hit 4.733 million tons, up from the 4.700 million tons in the previous estimate, and up 18.5% year-on-year the ICCO said.
That slight increase in the ICCO’s production forecast belied the extent to which supply in 2016/17 grew from the previous year. End of season stocks in 2016/17 were up 23.5% year-on-year, the Ivory Coast-based agency said.
The season’s global record crop came thanks to a leap in production out of the Ivory Coast and Ghana–the world’s two largest cocoa producers, the ICCO said. Together, the two nations account for 63% of global cocoa production. Overall production in Africa was estimated to have risen by 23% on-the-year, the ICCO said.
Ivorian production grew by 27.8% to 2.02 million tons, and Ghanaian production increased by 25% to just under 970,000 tons, the report said.
Looking ahead, though, “all attention is now focused on the world’s output for the 2017/18 season, as there is the expectation of a lower supply surplus, as excess rainfall in West Africa is reported to have had an impact on the main crop production in the region,” the ICCO said.
In the Americas, an abundant year for Ecuadorian cocoa production helped production to rise 11% to 750,000 tons.
In Asia and Oceania, however, production was revised down by 19,000 tons to 379,000 tons–a 12.9% slip from last year figure. Combined, the two regions account for 24% of global production.
Processing of raw cocoa into cocoa products, known as grinding, rose by 5.4%–or 224,000 tons–to 4.351 million tons in 2016-17, the ICCO said.
Grinding figures are often used as a proxy for demand but traders say they can also reflect the location and importance of factories or the movement of beans.
The November forecast doesn’t include official estimates for production for the current 2017-18 season, which began in West Africa in October and runs until September.
London-traded cocoa futures were last down 0.27% at GBP1,491 a ton. New York-traded futures were last up 0.44% at $2,058 a ton.
Questions? Ask Jack Scoville today at 312-264-4322
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