Softs Report 01/11/2023

COTTON       

General Comments:  Cotton was lower yesterday and remains firmly inside the trading range created over the last couple of months.  Traders are preparing for all of the USDA reports that will be released tomorrow.  Ideas of weak demand continue to be heard and the weekly export sales report was poor once again.  Futures have been stuck in the same trading range since the beginning of November but are showing signs of wanting to work higher despite bad demand fundamentals.  Overall, the demand for US Cotton has not been strong.  Some ideas that demand could soon increase as China could start to open its economy in the next couple of months were hurt by news of Covid outbreaks in China.  Covid is now widespread in China so the beneficial economic effects of the opening are being delayed but these effects should start to be felt as the people there achieve immunity over the next few weeks.

Overnight News:  The Delta will get mostly dry conditions and above normal temperatures.  The Southeast will see mostly dry conditions and near to above normal temperatures.  Texas will have mostly dry conditions and above normal temperatures.  The USDA average price is now 83.37 ct/lb.  ICE said that certified stocks are now 8,900 bales, from 8,901 bales yesterday.

Chart Trends:  Trends in Cotton are mixed.  Support is at 83.90, 82.50, and 80.50 March, with resistance of 88.00, 89.00 and 89.90 March. Bloomberg Cotton Survey of Estimates

2022-23:	Avg	Low	High	Dec.	Avg vs Prior
US Production	14.14	13.84	14.32	14.24	-0.096
US Exports	12.12	11.75	12.30	12.25	-0.131
US End Stocks	3.50	3.10	3.82	3.50	0.003
World Production	115.58	115.00	116.00	115.73	-0.151
World Consumption	111.57	111.00	112.00	111.70	-0.131
World End Stocks	89.46	88.50	90.53	89.56	-0.099

 

FCOJ

General Comments:  FCOJ was a little lower yesterday in consolidation trading.  Trends are still trying to turn up again on the daily charts.  Demand should start to improve now with the holidays now over.  Futures look weak on the daily charts.  The supply situation in the US and in the world market looks very tight.  Historically low estimates of production due in part to the hurricanes and in part to the greening disease has hurt production remain in place but are apparently part of the price structure now.  The weather remains generally good for production around the world for the next crop but not for production areas in Florida that have been impacted in a big way by the two storms.  Brazil has some rain and conditions are rated good.  Mostly dry conditions are in the forecast for the coming days.

Overnight News:  Florida should get mostly dry conditions.  Temperatures will average near to above normal.   Brazil should get scattered showers and near normal temperatures.  ICE NY said that 0 notices were posted for delivery against January contracts and that total deliveries for the month are now 0 contracts.

Chart Trends:  Trends in FCOJ are mixed to up with objectives of 212.00 and 220.00 March.  Support is at 204.00, 201.00, and 197.00 March, with resistance at 209.00, 214.00, and 217.00 March.

 

COFFEE                                                                     

General Comments:  New York and London closed lower yesterday on ideas of big production for Brazil and as offers stayed strong from Brazil and increasingly from Vietnam.  Vietnamese sellers should remain more active in the next couple of weeks as they ty to get sales on the books before the Tet holiday.  Buying interest is also reduced, but ideas are that the buy side needs Coffee now.  There are ideas that production potential for Brazil had been overrated and reports of too much rain in Vietnam affected the harvest progress.  The weather in Brazil is currently very good for production potential but worse conditions seen earlier in the growing cycle hurt the overall production prospects as did bad weather last year.  Ideas are that the market will have more than enough Coffee either way when the next harvest comes in a few months.  Vietnam exported 187,077 tons of Coffee last month, up 53% from the previous month.   Vietnamese 2022 exports were 13.8% higher than in 2021.

Overnight News:  ICE certified stocks are higher today at 0.836 million bags.  The ICO daily average price is now 149.73 ct/lb.  Brazil will get isolated showers in northern areas with near normal temperatures.  Central America will get scattered showers.  Vietnam will see scattered showers.

Chart Trends:  Trends in New York are down with objectives of 141.00 and 138.00 March.  Support is at 149.00, 146.00, and 143.00 March, and resistance is at 154.00, 159.00 and 163.00 March.  Trends in London are mixed.   Support is at 1810, 1790, and 1770 March, and resistance is at 1890, 1910, and 1950 March.

 

SUGAR                                                                                                              

General Comments:  New York and London closed higher again yesterday.  Reports indicate that the fund selling seen in recent days has dried up, allowing a recovery rally to develop.  Ideas are that mills in Brazil will be encouraged to produce more Sugar than Ethanol due to policy changes proposed by the Lula administration.  These ideas were enhanced by news that Brazil president Lula has frozen fuel taxes at current levels, giving Ethanol producers a reason to switch to Sugar as Ethanol profit margins could be squeezed by the tax moves.  The harvest has been delayed in Thailand.  Australia and Central America harvests are also delayed.  There is talk that production in India will be reduced this year after some bad weather and reduced yields reported in Maharashtra.  The weather in Brazil remains good for the next crop but bad for harvest and loading at ports as it is still raining in production areas.  World Sugar is expected to be in a big surplus production next year.

Overnight News:  Brazil will get scattered showers.  Temperatures should average near normal.  India will get mostly dry conditions and near to above normal temperatures.

Chart Trends:  Trends in New York are mixed.  Support is at 1930, 1890, and 1850 March and resistance is at 1980, 2010, and 2030 March.  Trends in London are mixed.  Support is at 541.00, 535.00, and 527.00 March and resistance is at 556.00, 565.00, and 568.00 March.

 

DJ Brazil Sugar Crush Up to 2.6M Tons in 2H December

By Jeffrey T. Lewis

SAO PAULO–Brazilian sugar mills in the country’s center-south region crushed more cane in the second half of December compared with a year earlier, according to industry group Unica.

Center-south mills crushed 2.6 million metric tons of cane in the second half of December, an increase from 8,500 tons in the same period a year earlier, Unica said Wednesday.

Production for the second half of December came out to 165,000 tons of sugar, compared with no sugar production a year earlier, and 322.2 million liters of ethanol, an increase of 92%.

The production mix for the second half of December was 46% sugar to 54% ethanol, compared with 100% ethanol in the same period a year ago.

A drought last year hurt the center-south sugar crop, leading many mills to close earlier than normal because of a lack of raw material.

In the period from April 1 through Dec. 31, mills in the region crushed 541.6 million tons of cane, up 3.6% from the same period a year earlier. Sugar production rose 4.4% to 33.5 million tons and ethanol output climbed 3.1% to 27.5 billion liters.

The production mix for April 1 through Dec. 31 was 45.9% sugar to 54.1% ethanol, compared with 45% sugar and 55% ethanol in the same period a year earlier.

 

COCOA

General Comments:  New York was much lower and London closed lower yesterday as the markets gave back most of the Monday rallies.  The Monday strength had come from reports off dry weather in West Africa that could hurt production potential.   Ivory Coast arrivals appear to have improved lately with the recent rally in futures prices.  Ivory coast arrivals are now 1.172 million tons, up 14% from last year.  The Ivory Coast Cocoa grind is now 113,803 tons, up 6.9% from last year.  Good production is reported and traders are worried about the world economy moving forward and how that could affect demand.  Supplies of Cocoa are as large as they will be now for the rest of the marketing year.  Reports of scattered showers along with very good soil moisture from showers keep big production ideas alive in Ivory Coast.  Nigeria is reporting that Harmattan winds have arrived, but no significant effects are reported for now.  The weather is good in Southeast Asia.

Overnight News:  Mostly dry conditions are forecast for West Africa.  Temperatures will be near normal.  Malaysia and Indonesia should see scattered showers.  Temperatures should average near normal.  Brazil will get scattered showers and near normal temperatures.  ICE certified stocks are lower today at 4.961 mi0lion bags.

Chart Trends:  Trends in New York are mixed.  Support is at 2570, 2540, and 2520 March, with resistance at 2640, 2670, and 2700 March.  Trends in London are mixed.  Support is at 2020, 2000, and 1980 March, with resistance at 2060, 2090, and 2120 March.

Questions? Ask Jack Scoville today at 312-264-4322