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 higher and appears to be trying to force a bottom at this time. Support came from talk of significant progress in the US-China trade war meetings held in Beijing this week. Ideas are that the dispute could be resolved by the March deadline or at least very close to that date. The Indian crop remains smaller, but the US crop appears big enough to meet any and all of the demand that has been much reduced so far this year. World production and supplies are going still lower due to bad weather in the growing season for major producers around the world, including India, Pakistan, and Australia. India has said that it could be a strong importer this year due to crop losses there. Pakistan has also faced crop losses. China had problems with its growing weather, too, and has been forced to import a lot of Cotton this year. Demand for US Cotton has been disappointing, as the weekly export sales reports have shown average demand at best since the start of the marketing year. China has not bought any US Cotton this year and has been active in other markets, especially India. US prices are down and China might start to look at the US crop, but there have been worries about the quality of the US crop due to some extreme growing conditions in Texas and the Southeast over the Summer and Fall. Ideas are that the quality worries have kept some importers of US Cotton away from the market.
Overnight News: The Delta should get mostly dry weather and above normal temperatures, but more rain appears on Friday and Saturday. The Southeast will get drier weather until rain appears on Saturday. Temperatures should be near to below normal. Texas will have mostly dry weather through Thursday light rain on Friday, and a dry weekend. Temperatures will be near to above normal. The USDA average price is now 68.70 ct/lb. ICE said that certified stocks are now 124,937 bales, from 124,937 bales yesterday.
Chart Trends: Trends in Cotton are mixed to down with objectives of 7000 and 6500 March. Support is at 7160, 7060, and 7000 March, with resistance of 7380, 7420, and 7650 March.
General Comments: FCOJ was higher. The Oranges harvest is active in Florida as the weather is warm and mostly dry. The fruit is abundant, but arrivals to packing houses and processors are reported behind last year. Florida producers are seeing small-sized to good-sized fruit, and work in groves maintenance is active. Irrigation is being used in all areas. Packing houses are open to process fruit for the fresh market, and all processors are open in the state to take packing house eliminations and fresh fruit. Mostly good conditions are reported in Brazil.
Overnight News: Florida should get mostly dry conditions until some showers appear for Friday and the weekend. Temperatures will average near to below normal. Brazil should get mostly dry weather and above normal temperatures. ICE said that 0 notices were posted for delivery today and that total deliveries for the month are now 66 contracts.
Chart Trends: Trends in FCOJ are mixed to down with objectives of 122.00 January. Support is at 122.00, 120.00, and 117.00 January, with resistance at 126.00, 128.00, and 132.00 January.
General Comments: Futures were higher in New York in sympathy with the dry weather outlook for Brazil and the lower Real against the US Dollar. London was a little lower. Funds were the best buyers and appeared to be covering short positions as trends started to turn up on the daily charts. Long commercials and speculators appear to be using the rally to liquidate positions as well. Cash markets were quiet. The Brazil crops are almost harvested, and production estimates now range as high as 63.7 million bags. It is a big crop and the main reason to see prices in New York as low as they are right now. Producers expect production to drop next year as it will be the off-year in the biennial cycle. El Nino remains in the forecast and Coffee areas in Brazil could be affected by drought that could hurt production even more. Many areas are dry now, and the forecast calls for more dry weather. Vietnam is active in its harvest and middlemen were said to be active buyers of the harvest at levels just above the industry. The harvest will wind down this month. Production in Vietnam is estimated less than 30 million bags due to uneven weather during the growing season.
Overnight News: Certified stocks are higher today and are about 2.463 million bags. The ICO composite price is now 102.83 ct/lb. Brazil will get mostly dry weather. Temperatures should be near to above normal. Colombia should get isolated showers. Central America and southern Mexico should get showers or dry conditions. Vietnam will get mostly dry weather.
Chart Trends: Trends in New York are up with objectives of 109.00 and 115.00 March. Support is at 103.00, 102.00, and 99.00 March, and resistance is at 107.00, 110.00 and 112.00 March. Trends in London are mixed to up with objectives of 1600 and 1670 March. Support is at 1530, 1500, and 1480 March, and resistance is at 1560, 1610, and 1630 March.
DJ ICO Coffee Index Slumped in December on High Supply Forecasts
By David Hodari
LONDON–The International Coffee Organization’s composite indicator price in December 2018 fell 8.2% on heavy supply and currency moves.
The ICO composite indicator slipped to 100.61 U.S. cents a pound from 109.59 cents in November .
Prices declined for robusta and all groups of coffee. Among arabica types, Brazilian naturals slipped 9.9%, with other milds down 7.3% and Colombian mild prices decreasing 8.2%. Robusta beans fell 7.1%.
The arbitrage between low-grade robusta and its higher-quality peer fell by 13.5%, while intraday volatility slipped to 6.9%, the ICO said in a report.
The 2018-19 coffee season is expected to be the second consecutive season of surplus, as global output–estimated at 167.47 million bags–exceeds world consumption of an approximate 165.18 million bags, the ICO said.
Given stronger demand growth, inventory surplus for 2018-19 is projected at 2.29 million bags–1 million fewer than in 2017-18.
“This excess in supply continues to put downward pressure on prices that will likely continue over the next few months,” the ICO said in its report.
Among the factors weighing on prices during December was strength for the U.S. dollar and relative weakness for Colombia’s peso.
London-traded robusta was last down 0.13% at $1,533 a ton, and arabica was down 0.76% at $1.05 a pound.
General Comments: New York and London closed lower on selling tied to a stronger Real against the US Dollar and despite stronger world petroleum prices. March Crude Oil futures have broken through an important resistance area, and trends are turning up again for that market. Brazil has been using a majority of its Sugarcane harvest to produce ethanol this year instead of Sugar, and there is some talk the mills might switch back to Sugar as ethanol blending has not been profitable for refiners in recent weeks. Northwest India had been experiencing hot and dry weather that could cut yields. Industry sources told news wires that there is plenty of Sugar in the country to sell. There does not appear to be much buying interest, and the government there is now thinking of subsidizing ethanol production as a way to reduce the surplus. Dry conditions continue in northern Brazil, while the rains continue in the south. Conditions are mostly good in Ukraine. Very good conditions are reported in Thailand, but the next production could be less as farmers might switch to other crops due to low prices for Sugarcane.
Overnight News: Brazil will mostly dry weather in the north and showers in the south. Temperatures should be near to below normal.
Chart Trends: Trends in New York are mixed. Support is at 1250, 1220, and 1190 March, and resistance is at 1300, 1320, and 1350 March. Trends in London are mixed. Support is at 343.00, 340.00, and 339.00 March, and resistance is at 351.00, 354.00, and 355.00 March.
General Comments: Futures closed lower in both New York and London. The index rebalancing is underway and it is expected that the funds will need to sell Cocoa contracts to get the rations into line with the underlying index. Trends are still up in both markets, and the weekly charts show that a significant up side move is possible. Daily charts show a consolidation pattern for the short-term. It is becoming a weather market due to the hot and dry conditions seen in West Africa.. The outlook for strong production in the coming year is still around, and ports are said to have plenty of Cocoa on offer. The main crop harvest is active in West Africa. Main crop production ideas for Ivory Coast and Ghana are being reduced, and ideas are increasing that the mid crop harvest will be much smaller than normal. The crop production estimates might become smaller due to Harmattan winds that could appear at any time and hot and dry conditions that have moved into West Africa. These conditions can take moisture out of the soil very rapidly and cause some very significant stress on the trees. Conditions appear good in East Africa and Asia. Demand is said to be improving as offers from the new harvest start to increase.
Overnight News: Mostly dry conditions are expected in West Africa. Temperatures will average above 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 3.466 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2350, 2320, and 2290 March, with resistance at 2400, 2440, and 2480 March. Trends in London are mixed to down with objectives of 1690 and 1500 March. Support is at 1700, 1660, and 1590 March, with resistance at 1750, 1770, and 1800 March.
DJ Nigeria Cocoa Association Cuts 2018-19 Output Forecast Again
By Obafemi Oredein
Special to Dow Jones Newswires
IBADAN, Nigeria–The Cocoa Association of Nigeria has again lowered its cocoa production forecast for the 2018-19 season, citing weather issues.
Cocoa output is now expected at 260,000 tons compared with the 310,000 tons previously forecast, CAN president Sayina Riman said Thursday.
“The [cocoa crop] yield last year wasn’t as much as expected, it fell short of our projections,” Mr. Riman said, while commenting on talk of an early end to the season’s main crop cocoa harvest.
Prior to the latest downgrade, Mr. Riman had in September said output could be around 280,000 tons instead of the 310,000 tons originally expected due to heavy flooding on farms and an outbreak of black-pod disease.
Farmers and traders in Nigeria’s major cocoa-producing southwest in October said the main crop harvest was weak due to poor cocoa tree fruiting and climate problems, while CAN vice president Joshua Oyedele also said at the time that he thought the season’s low yield was connected to climate change.
With the final main crop harvest already underway, farmers and traders dashed any earlier hopes that the harvest would continue well into the new year–around March–because of last year’s later-than-usual rainfall in the southwest and southeast.
“Cocoa is virtually gone,” Mr. Oyedele said, while trader Johnbull Ewerami called the midwest harvest “poor and skeletal.”