The Softs Report

The Soft Spot(66)

Robin Rosenberg — 2012-05-25T14:54:00Z

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: 41.50 cents to $3.37.5 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

According to Rabobank, Arabica coffee is the most undervalued member of the soft commodities group. The Robusta variety reached eight month highs in London Monday. Expectations are for a slight decline in Robusta prices over the near future. Robusta exporters other than Vietnam are reporting their shipments are slowing. Lower demand should limit Robusta’s upside for now. Arabica coffee appears to be ready to retake the lead.

It may take some time for this to come together. The market has to face harvest pressure from Brazil and large, yet to be sold inventory from the l211-12 growing season. Rabobank expects Arabica Coffee prices to remain in a trading range of 175 to 185 until October. Most end users have covered their needs until the 2012-13 Brazilian Coffee crop becomes available. Increased demand is expected to be strong through autumn. 2013-14 will be an off year in Brazils on/ off Coffee crop cycle. No one wants to be caught off guard if the next crop is subpar.

A U.S. attaché in Bogota reports Colombian Coffee production is expected to increase by at least five percent in 2012-13. That will bring Colombia’s production to nine million 60 kilo bags. This didn’t happen by accident. Favorable weather and improved crop husbandry did the trick. Disease and insect infestations had contributed to four years of subpar Coffee production. Costa Rica is also set to produce a good crop this season. After an excellent flowering period the Costa Rican Coffee Institute is urging the country’s Coffee growers to begin fertilizing their plantations this month. Wet weather in Brazil’s Coffee growing areas could delay the harvest as much as 30 days. This according to the country’s National Coffee Council.

Technical analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.

Weekly technical indications on Friday, May 25th: At this time the week’s trading range is 181.35-165.10, the last print is 167.40. The stochastic remains in buy mode, but it won’t take much downside to cause a sell signal to be issued. RSI at 23.36 is weaker than last week’s indication of 27.69. The M.A.C.D. histogram at 00.1 is higher than last week’s reading of -0.14. A weekly close of 177.20 or lower in July coffee will turn the weekly trend down.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

Cameroons second main harvest is expected to get underway in two to three weeks. According to The National Organization of Cocoa and Coffee Producers some Cocoa has been arriving from Cocoa farms. This has signaled that Cocoa will soon be coming to market. Cocoa traders have decided to delay their buying until harvest begins. This has caused many Cocoa farmers to lower the asking price for their Cocoa.

There had been concern that Cameroon’s forecast record Cocoa production of 250,000 tonnes would not be reached. This saw demand for Cocoa beans to rise sharply over the last month. This is a strange predicament. Cocoa futures are under pressure, demand in the growing areas remains strong and farmgate prices are in a downtrend. What is the market telling us?

Intense rain and limited sunshine over the last month has created problems for Cameroon’s Cocoa farmers. Those that dry their Cocoa crops naturally have had a hard time doing so. The distribution network has been adversely affected as well. The heavy rains have washed away portions of more than a few dirt roads. A shortage of government approved insecticide has Cocoa farmers in southwest Nigeria battling insect infestation. There is much concern that insect damage will negatively affect both output and quality of the regions Cocoa crop.

Barry Callebaut is the world’s leading manufacturer of high-quality Cocoa and chocolate products. The companies Cameroon based branch, Sic Cacao purchased 28,033 tonnes of Cocoa from August 2011 through April 2012. Last season the company purchased 26,167 tonnes during the same time period. Cocoa Demand continues to climb due to demand from the worlds developing economies.

Weekly technical indications for Friday, May 25th: At this time the week’s trading range is 22.75-20.94 the last print is 21.15. The stochastic has issued a sell signal. RSI at 39.4 is weaker than last week’s indication of 44.82. The M.A.C.D. histogram at 12.09 is slightly lower than last week’s indication of 12.16. The market is trading at the lower boundary of a six month old trading range as well as the lower Bollinger band. A weekly close of 23.09 or higher in July cocoa will turn the weekly trend up.

COTTON

Forty Year Trading Range: 26.84 cents to $2.27.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

China imported 509,693 tonnes of Cotton in April. A year ago that number stood at 210,418. In fact the General Administration of Customs indicated that China’s Cotton imports from January through April were 2.08 million tonnes. That’s up 96 percent from a year ago and one whopper of an increase. China is the world’s number one producer and importer of the soft and fluffy. As of now It appears that the state reserves are going to stay just that.

Cotton farmers located n the San Joaquin Valley of California are reporting excellent progress. The weather has been warm but on the mild side. Moisture present in surface soils could be somewhat better, but no one is complaining. The majority of Cotton looks good and new leaves are developing faster than thrips can destroy them and that’s a good thing. There has been some damage to later planted Cotton from high winds over the last week or so.

Rabobank remains bearish on Cotton. Further weakening of fundamentals and macroeconomic conditions are to blame. Oversupply also remains an issue. Recent supply demand reports put global ending stocks at record high levels. Following completion of U.S. plantings the bank is calling for lower Cotton prices. Presently 62 percent of the U.S. Cotton crop is planted. At this time last year the figure was 52 percent. The average for this time of year is 53 percent planted.

Weekly technical indications for Friday, May 25th: At this time the week’s trading range is 79.05-70.53, the last print is 73.20. The stochastic is in sell mode. RSI at 27.68 is weaker than last week’s indication of 31.56. The M.A.C.D. histogram at -1.85 is lower than last week’s reading of -1.21. July Cotton futures fell to new contract lows this week. View rallies to resistance as selling opportunities. A weekly close of 78.02 or higher in July Cotton will turn the weekly trend up.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Sugar futures fell to new 20 month lows this week. It was the first time they traded below 20 cents since September of .2010. The shorts are most definitely in command of this market. Traders had been expecting for this weeks. A self fulfilling prophecy if you will. The International Sugar Organization expects a surplus of 6.5 million tonnes following the 2011-12 marketing year.

China buys on the cheap – again. According to the General Administration of Customs the country imported 311,091 tonnes of Sugar in April. A 98 percent increase compared to a year earlier. From January to April China imported 810,345 tonnes of Sugar. That is an increase of 242 percent year over year. Rabobank expects an average price of 20 cents per pound in the second half of 2012. Supply is expected to increase more than demand. China’s buying should keep international Sugar prices in line. There may be some short term supply tightness as we await the Brazilian harvest. Short term weather forecasts for Brazilian growing areas call for dry weather. This should assist in speeding up harvest progress. Weakness in Brazil’s currency (real) and new all time lows for India’s rupee against the U.S. dollar could bring on aggressive producer selling.

The Australian Sugar industry is continuing its recovery. The Australian Sugar Milling Council has forecast that crushed cane will increase eleven percent to 31.2 million tonnes next crop year.

Rabobank has cut it’s forecast for Sugar futures. The bank’s revised figures call for an 8.1 million tonne production surplus in 2011-12 and a 4.6 million tonne surplus in 2012-13. These figures are higher than those forecast by the International Sugar Association. Rabobank is a leader in the food and agribusiness fields.

Weekly technical indications for Friday, May 25th: At this time the week’s trading range is 20.47-20.66, the last print is 19.36. The stochastic remains in sell mode. RSI at 32.24 is weaker than last week’s indication of 35.02. The M.A.C.D. histogram at -0.82 is lower than last week’s indication of-0.48. The market continues to trade along the lower Bollinger band. Any bullish fundamental news could spook the shorts and give birth to a sizable short covering rally. A weekly close of 19.88 or lower in July Sugar will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

The Soft Spot(65)

Robin Rosenberg — 2012-05-18T14:54:00Z

The Soft Spot

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: 41.50 cents to $3.37.5 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

At this point in time Coffee prices remain under pressure. Brazilian producers had been holding back Coffee supply awaiting higher prices. Well, those prices never arrived and their selling took Coffee futures down near 40 percent over the last year. How’s this for an eye opener? Non – commercial investors began the month of May net short 18,000 contracts of New York Arabica Coffee futures. One of the largest concentrations of shorts in history. This is fuel for one heck of a short covering rally.

The Arabica Coffee market faces the possibility of a serious supply shortage in 2013-14 when Brazil enters an off year of it’s higher then lower production cycle. Brazil’s off year production will have to be large to avoid a global supply deficit. Many of the country’s growing areas are desperately in need of moisture. As the flowering period approaches drenching rains would be Ideal.

Meanwhile Robusta Coffee prices in Vietnam have reached a yearly high of $2.02 per kilo. Vietnamese Coffee officials expect the price will (want it to) rise further due to tight global supply. The International Coffee Organization has reiterated it’s warning cautioning buyers awaiting lower bean prices. Coffee consumption has reached an all time record of 137.9 million 60 kilo bags. Average annual growth stands at 2.5 percent since the year 2000. Coffee drinking increased nine percent in the Philippines and 22 percent in Vietnam last year. The global growth rate dropped to 1.7 percent.

Weekly technical indications on Friday, May 18th: At this time the week’s trading range is 182.15-173.90, the last print is 181.30. The stochastic is in buy mode. RSI at 31.58 is stronger than last week’s indication of 26.82. The M.A.C.D. histogram at 0.37 is higher than last week’s reading of -0.59. The market has moved up to the 9 bar moving average. Higher prices will likely induce short covering. A weekly close of 174.90 or lower in July coffee will turn the weekly trend up.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

Brazil’s Cocoa grindings reached a record 4.09 million 60 kilo bags for 2011-12. Beating the previous record set in 2007-08 by five percent. Meanwhile Brazil’s 2011-12 Cocoa production was down nine percent. Brazilian Cocoa imports reached nearly 960,000 bags. That’s 33 percent more than during 2010-11 and one whopper of an increase. This is undoubtedly not a onetime occurrence. Expect global Cocoa demand to continue to rise. The world’s developing economies are coo coo for Cocoa.

Cameroon has approved the construction of a new Cocoa processing plant. Cie.Cherifienne de Chocolaterie, a Moroccan Cocoa processor expects to break ground for the new plant in June. Located in the port city of Douala, the facility is expected to process 40,000 tonnes of Cocoa annually. An investment of between $58 and $97 million will be required to complete the project. This seems like an awfully wide spread to me. This is a windfall for the country’s Cocoa sector. Until now only Sic Cocoa a division of Swiss based Barry Callebaut AG operated the one and only Cocoa processing plant in Cameroon. It has the capacity to process 30,000 tonnes of Cocoa annually. Cameroon has a 30 percent stake in it’s operation. There has been no mention of a partnership in the new endeavor. My guess is that the country will own a similar percentage of the new operation.

The aroma of freshly processed Cocoa wafts through the air just north of downtown Chicago. Bloomer Chocolate Company, once a mom and pop operation is now the largest Cocoa processor in North America. The company is a sizable investor in Cocoa sustainability projects. Having already invested $13 million the company expects to invest $45 million by 2020. According to Blommer, by 2020 Cocoa demand could exceed production by one million tonnes. That’s equal to 25 percent of the current global supply. Growth will be driven by the rapidly developing economies and expanding populations of Brazil, China, India and me!

Weekly technical indications for Friday, May 18th: At this time the week’s trading range is 23.03-22.20 the last print is 22.70. The stochastic is in buy mode. RSI at 45.32 is slightly weaker than last week’s indication of 47.38. The M.A.C.D. histogram at 23.37 is slightly higher than last week’s indication of 23.28. The market is trading on the 9 bar average and center Bollinger band. A weekly close of 22.87 or lower in July cocoa will turn the weekly trend down.

COTTON

Forty Year Trading Range: 26.84 cents to $2.27.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

The UDSA has released its first Cotton forecasts for the 2012-13 marketing year. According to the USDA the farmgate price for Cotton has the potential to fall to 65 cents a pound on the heels of the largest inventories in history. Global output is forecast to decline by 7.7 million bales in 2012-13.

Production is expected to fall in the majority of the world’s growing areas. Exceptions being the U.S. and the French speaking countries of Africa. China’s Cotton crop is forecast to drop by 3.0 million bales and India’s is forecast to drop by 1.5 million bales. The estimates come after a multitude of surveys that indicated reduced sowings of Cotton this growing season. U.S. Cotton production is forecast to increase by 17 million bales. The increase is not due to additional sowings, but reflects an expected lower rate of abandonment compared to last season when Texas experienced severe drought.

Thrips, Leafhoppers, False Chinch bugs and Plant bugs are present in some areas of the southeast and mid-south U.S. Cotton growing areas. So far I have heard no reports of Boll Weevils and that’s a good thing. Boll Weevils have been virtually eliminated from U.S. growing areas. Field reports indicate that the insect problem is much less severe that had been expected. It’s still very early in the growing season and much Cotton remains to be planted. Use of insecticide and herbicides not only kills off insects and weeds, it slows down the development of the Cotton plant as well. The less spraying the better.

Weekly technical indications for Friday, May 18th: At this time the week’s trading range is 80.65-76.26, the last print is 77.17. The stochastic is in sell mode. RSI at 30.87 is weaker than last week’s indication of 32.42. The M.A.C.D. histogram at -1.27 is lower than last week’s reading of -0.67. Cotton futures fell to 21-month lows this week. A new leg to the downside has begun. View rallies to resistance as selling opportunities. A weekly close of 78.80 or higher in July Cotton will turn the weekly trend up.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Speculators have cut the size of their net long position in Sugar to two year lows. It’s exceedingly possible the last move down in Sugar produced a perfect setup for a sharp move to the upside. The latest CFTC Commitments of Traders data indicates funds closed out 20,387 longs through May 8^th. This is generally the time of year Sugar moves higher. The Muslim holiday of Ramadan is likely the reason. So, the longs have abandoned ship and the market has a very good chance of moving higher. These factors alone could slingshot the market higher with a vengeance. Personally I’m not so sure it will. The risk-off psychology permeating the global economy may put a stop to it. Expectations of increased Sugar exports from India and Improved production from Thailand have eliminated earlier concerns that the Brazilian crop would be disappointing.

It’s old news that India lifted all restrictions placed on Sugar exports. However exporters will need to register their export contracts. A maximum of 10,000 tonnes will be allowed per application. An exporter can submit as many applications as they like – one at a time. Exporters must ship their approved applications within 30 days following approval. India’s government believes this will eliminate volatile price swings in it’s domestic Sugar market.

Weekly technical indications for Friday, May 18th: At this time the week’s trading range is 20.93-20.07, the last print is 20.70. The stochastic is in sell mode. RSI at 37.12 is stronger than last week’s indication of 33.31. The M.A.C.D. histogram at -0.46 is unchanged. The market continues to trade along the lower Bollinger band. I have grown suspicious of this bear market. The Muslim holiday of Ramadan begins July 19^th this year. Muslim nations begin stockpiling Sugar at this time of year for use during the holiday. Usually this drives Sugar prices higher. Dips to support should be viewed as buying opportunities. A weekly close of 20.36 or higher in July Sugar will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(64)

Robin Rosenberg — 2012-05-11T14:54:00Z

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

This week’s report contains basic information all traders need to know. The who, what and where of these markets are explained, albeit briefly.

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

The Coffee futures contract we trade consists of mild washed Arabica Coffee. It trades on the Intercontinental exchange or ICE. In the period spanning 1972 to 2012 Coffee futures traded at an average price of 1.22.52. Contract specs allow growth from 19 countries to be accepted for delivery. Guess what? Brazilian growth is not one of them!

Brazil is the largest producer and exporter of mild washed Arabica Coffee. Colombia, India, Indonesia, Guatemala, Ethiopia, Mexico are also major producers. Colombian Coffee production has been on the down swing for some time now. The country may soon lose its top producer status. Brazilian growth will be accepted beginning with the March 2013 Coffee contract.

There is much negative talk regarding the 2012-2013 Central and South American Coffee crop. I’m hearing that the weather has been poor and many of the growing areas are suffering from blight. If the situation becomes dire we will see higher Coffee prices sooner rather than later. Coffee trees in Colombia, Central America and Mexico have begun to flower. There is a need for rain. If it does not do so over the next week or so there will likely be problems. The market appears to be thinking along similar lines.

Annual Coffee consumption in China is currently a fraction of that consumed by western nations. As an example, annual U.S. Coffee consumption stands at four +/- kilos per capita. China’s annual Coffee consumption per capita is less than one half kilo. Expect it to climb rapidly in years to come. Changing lifestyles and higher disposable incomes are leading the charge. As we know China’s traditional drink is tea. The country’s population is being drawn towards city life as rice paddies are converted to more profitable uses.

Yes there are Starbucks stores in China. In fact they number in the hundreds. They serve tonnes of tea as well. The demand for Coffee is steadily increasing; it has become one of the world’s favorite beverages.

Enter Dunkin Donuts. Dunkin has opened it’s flagship store in Bangalore India. Starbucks has partnered with Tata Corporation and is in the process of opening fifty new stores this year. Let’s not leave out Café Coffee Day. Café Coffee Day is the retail arm of India's largest coffee conglomerate, The Amalgamated Coffee Bean Trading Company. They operate more than 1700 outlets. Most are located in India. The company is the largest producer of Arabica Coffee beans in Asia. With clients across the U.S., Europe and Japan it is one of India’s leading Coffee exporters as well.

Weekly technical indications on Friday, May 11th: At this time the week’s trading range is 179.60-172.20, the last print is 177.55. The stochastic is in sell mode. RSI at 27.11 is stronger than last week’s indication of 23.75. The M.A.C.D. histogram at -0.55 is higher than last week’s reading of -1.35. At this point the market is between the 9 bar average and center Bollinger band. This week’s lower low likely stopped out quite a few longs. There is a good possibility that we have seen the lows. A weekly close of 175.60 or higher in July coffee will turn the weekly trend up.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

Cocoa is one of the world’s smallest soft commodity markets. It’s price affects a multitude of businesses worldwide. Cocoa import / export companies, candy makers, food processors and retailers come to mind. From 1959 to 2012 Cocoa futures traded at an average price of 15.13. The world’s five largest producers of Cocoa are the Ivory Coast, Ghana, Indonesia, Nigeria and Cameroon. I know this is elementary to a majority of traders, but newcomers to the futures markets need to know. So do veteran traders that don’t!

Cocoa demand in China has been in an uptrend since the melamine crisis in 2008. The country’s Cocoa processing and grinding facilities are set to expand as well. Western eating habits are on the rise and we are seeing growth in Cocoa powder based items like ice cream, baked goods and candy. China’s growing middle class has developed a taste for chocolate. What’s not to like? Record crops are fine and dandy, but with new consumers coming online they mean very little. Eventually demand will outstrip supply and the all time highs will be in our rear view mirrors.

There are reports of supply tightness in West Africa. The small size of Cocoa beans arriving at ports for export indicates West African main crop supplies are at an end. Mid crop supply is tight as the majority of producers have not yet begun harvest activities. Supply tightness rallied Cocoa futures to six week highs this week.

Weekly technical indications for Friday, May 11th: At this time the week’s trading range is 23.63-22.51 the last print is 23.28. The stochastic has issued a buy signal. RSI at 47.56 is stronger than last week’s indication of 45.99. The M.A.C.D. histogram at 23.64 is again higher than last week’s indication of 17.96. The market is trading above the 9 bar average and center Bollinger band. A weekly close of 22.60 or lower in July cocoa will turn the weekly trend down.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

The Cotton futures contract we trade is 100 percent U.S. grown Upland Cotton. It trades on the Intercontinental exchange known as the ICE. From 1912 to 2012 Cotton futures traded at an average price of 56.48. Upland Cotton is oftentimes referred to as “Mexican” Cotton. That is where the strain is thought to have originated.

The world’s key Cotton producers in order of production are China, India, the United States, Pakistan, Brazil, Australia and Uzbekistan. The United States is the world’s largest exporter of Cotton (40%) and China the largest importer. Australia, Brazil India and Uzbekistan also export a sizable amount of Cotton.

The state of Texas produces near 25 percent of the U.S. Cotton crop. Cotton farmers there are wringing their hands hoping the drought that paralyzed the state’s agricultural industry last season dissipates. Many farmers say they can wait until June 1^st to plant, but now would be a most excellent time. Another three weeks of hot, dry weather accompanied by moisture robbing high winds is not what Texas Cotton farmers need at this time. Reasonably warm temperatures and soaking rains are. There has been more rainfall this year compared to the same time last year. We need more of the same, a lot more.

Weekly technical indications for Friday, May 11th: At this time the week’s trading range is 88.42-77.16, the last print is 79.29. The stochastic is in sell mode. RSI at 32.69 is weaker than last week’s indication of 42.23. The M.A.C.D. histogram at -0.64 is lower than last week’s reading of -0.04. This week the market broke below the lower Bollinger band and appears to have finally escaped it’s trading range. This could be the start of a new leg to the downside. A weekly close of 84.70 or lower in July Cotton will turn the weekly trend down.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Brazil is the world’s largest producer of Sugar; followed by India, China, Thailand and the United States. From 1912 to 2012 Sugar futures have traded at an average of 9.95 cents a pound. The majority of refined Sugar is derived from cane. Other sources of Sugar include beets, date palm, sorghum and the sugar maple tree. The most popular futures contract is Sugar #11 which trades on the Intercontinental exchange known as ICE.

Some Brazilian growing areas are experiencing a spate of good luck. Dry weather is extremely helpful to harvest activities. Rain is not expected until week’s end. The moisture will be quite helpful to late developing cane. As we know, what’s good for the crop is not so good for futures prices. This week Sugar futures retreated to four month lows.

Last season Thailand’s Sugar production was 9.64 million tonnes. This season’s crop is expected to be somewhere north of ten million tonnes and a new record! The country’s exporters will provide a portion of the Sugar for the Muslim holiday of Ramadan. Muslim nations will likely take advantage of the surplus production of Thailand to stockpile Sugar leading up to the holiday. They will import from Brazil when the center south region harvest begins.

Weekly technical indications for Friday, May 11th: At this time the week’s trading range is 21.17-20.13, the last print is 20.38. The stochastic is in sell mode. RSI at 33.28 is weaker than last week’s reading of 35.78. The M.A.C.D. histogram at -0.64 is lower than last week’s reading of - 0.36. The market continues to trade along the lower Bollinger band and remains bearish. A weekly close of 20.99 or higher in July Sugar will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(63)

Robin Rosenberg — 2012-05-04T14:54:00Z

The Soft Spot

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Supply Supply Supply - Everywhere I turn I’m being told global Coffee output will be more than substantial. Coffee is trading at it’s lowest level since 2010. The highs of $3.00 a distant memory. Vietnam has raised it’s 2012 export forecast by 1.6 million sixty kilo bags. Nicaragua expects record Coffee production this season. The countries export numbers don’t jive with this. Coffee farmers there must be holding back their Coffee awaiting higher prices. This supply driven market just can’t get out of it’s own way.

The low of 173.90 in July Coffee made on April 16^th has the characteristics of an important bottom. It was accompanied by massive volume. Bull and bear markets rally and break on volume provided by traders that are wrong the market. The violent up thrusts in bull markets are caused by short covering, not new buyers. The reverse is true of bear markets. This is just the type of behavior that takes place at market tops and bottoms. If you dig a little deeper you will find that open interest drops when high volume moves occur. That’s all the proof we need.

Drinking Coffee has been said to reduce the risk of diabetes. A group of Chinese researchers believe they know why. There are three major compounds in Coffee that can prevent and reverse diabetes. They seem to block the accumulation of a toxic protein linked to an increased risk of developing type 2 diabetes. Studies have found that those who drink four or more cups of Coffee daily cut their risk in half. The new study is published in the Journal of Agricultural and Food Chemistry.

Weekly technical indications on Friday, May 4th: At this time the week’s trading range is 185.40-175.40, the last print is 177.25. The stochastic has issued a sell signal. RSI at 25.12 is stronger than last week’s indication of 24.45. The M.A.C.D. histogram at -1.17 is higher than last week’s indication of -1.91. The market remains in a trading range. A weekly close at or above 177.40 in July coffee will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE

from 3:00 a.m. to 1:00 p.m. CDT

La Nina generally brings heavy rains to West Africa. This benefits Cocoa production in the Ivory Coast and Ghana. The two year old La Nina event has assisted in bringing us two bountiful harvests in a row from West African Cocoa producers. Indonesia on the other hand receives too much rain. So much that at times it floods the growing areas and damages the crop. Indonesia is the world’s third largest Cocoa producer. The constant moisture sets the stage for black pod disease as well as an assortment of fungal diseases and viral infections.

The price of Cocoa fell some 30 percent in 2011. The 2011-2012 marketing year is the second in a row that Cocoa prices ended the year lower. Will 2012 be another down year for Cocoa? It certainly looks that way now, but we know how fast things can change.

Let’s touch on a subject that affects the lives of many West African children. The Ivory Coast provides us with near 35 percent of the worlds Cocoa. Children are being held captive on Ivory Coast Cocoa plantations. They work like dogs and receive no pay, nothing. This sounds like child slavery to me – how about you? Something must be done to eliminate this. We get all bent out of shape when China clamps down on one dissident. Child slavery in 2012 is unacceptable! This makes the Ivory Coast nothing more than a candy covered narco state. To make matters worse, two of the three multinational processors of Cocoa operating in the Ivory Coast are based in the U.S.

Weekly technical indications for Friday, May 4th: At this time the week’s trading range is 23.60-21.46 the last print is 23.28. The stochastic has issued a buy signal. RSI at 47.50 is stronger than last week’s indication of 46.15. The M.A.C.D. histogram at 20.38 is again higher than last week’s indication of 14.06. This week the market appears that it will finish above both the 9 bar average and the center Bollinger band. It appears the market will close above both this week. A weekly close at or below 21.71 in July cocoa will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

U. S. Cotton farmers are off to an early start. Pigweed is emerging and flowering much earlier than usual. Pigweed wreaks havoc on farm machinery. Additionally, farmers are finding it tough to apply pre-emergent herbicides and insecticides before the Cotton seedlings emerge from the soil. Some farms are so huge that when the farmer is ready to apply the chemicals the Cotton seedlings have already begun to grow above ground. Dry soils and a lack of moisture have halted some planting activity as well.

There are reports of heavy concentrations of thrips and grasshoppers. Grasshoppers are a product of the dry winter. Thrips populations are generally pretty thick this time of year. The fact that the season is beginning earlier than usual has farmers seeing a lot more of them than is normal during planting.

The government of India really should step back and take a deep breath. Last week the news was that India would likely continue it’s ban on Cotton exports for the balance of the marketing year. This week they have decided to lift the export restrictions entirely. Cotton can now be exported in any quantity. The records will be closely monitored and will be audited at two week intervals. Needless to say this indicates India’s Cotton crop is larger than had been expected.

The international Cotton Advisory Committee expects global Cotton production to fall 1.85 million tonnes. Farmers are faced with too much red tape and high costs when farming Cotton. There is concern that farmers will just switch to crops that are less expensive to grow and pay higher profits.

Weekly technical indications for Friday, May 4th: At this time the week’s trading range is 91.65-87.87, the last print is 81.30. The stochastic has issued a sell signal. RSI at 44.03 is weaker than last week’s indication of 48.26. The M.A.C.D. histogram at 0.13 is higher than last week’s reading of 0.21. This week the market has drifted below the 9 bar moving average and center Bollinger band. The trading range was within the high and low of the key reversal of two weeks ago. This market is range bound. A weekly close at or below 85.75 in July Cotton will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Despite the recent 15 percent break from the April’s high, Sugar futures continue to trade at historically high price levels. China will be importing less Sugar this marketing year and that’s a fact. There is more downside coming in Sugar. It appears to be headed for the 18.00 level

Sugar and most other soft commodities have had some wild and wooly trading sessions of late. This volatility is due to a host of factors, but the one factor that takes the cake is the inability of traders to make up their minds. One week the they are bullish as all get out. The following week the bottom falls out. Volatility offers many trading opportunities. It’s just that a trader needs to adjust their approach to match market conditions.

Markets like this are experts at account decimation. If you want to be long buy in on a break to support. Conversely, if you want to be short sell on a rally to resistance. By doing so you are buying the weakness of the strength or selling the strength of the weakness. As a trader you have got to place the odds in your favor. If by chance you want to wait for trading opportunities and take to the sidelines by all means do so. There are three positions: Long, short and out. Out produces less stress and allows a trader that has been battered by a market get their bearings.

Cane crushing in Brazil has begun. According to UNICA the Brazilian Sugar cane industry group, the world’s number one Sugar producer expects a recovery in production to 33.1 million tonnes this season. Last season’s production was dogged by poor weather. Thailand, the world’s second largest Sugar exporter has expectations that the 2012-2013 crop will reach 11 million tonnes. Beating the previous record of 10.5 million tonnes reached in 2011-2012. India’s Sugar production may exceed the Indian Sugar Mills Association’s forecast of 26 million tonnes. There is one heck of a lot of Sugar waiting to wind it’s way through supply channels. It will be quite an effort for Sugar to hold above 20.00 a pound.

Weekly technical indications for Friday, May 4th: At this time the week’s trading range is 21.45-20.50, the last print is 20.88. The stochastic remains in sell mode. RSI at 35.99 is weaker than last week’s reading of 37.11. The M.A.C.D. histogram at -0.36 is lower than last week’s reading of - 0.27. The market is staying mighty close to the lower Bollinger band. This is bearish! A weekly close at or above 21.47 in July Sugar will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(62)

Robin Rosenberg — 2012-04-27T14:54:00Z

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

The International Coffee Organization (ICO) has increased it’s world Coffee production forecast by 2.4 million bags. The forecast now stands at 131 million 60 kilo bags (60 kilos = 132 LBS). Though the estimate has improved the ICO cautioned that expectations for continued improvement in the world’s Coffee supply should not be taken for granted.

Improved Coffee production is expected from India. By producing 5.2 million bags Peru has joined the ranks of the world’s leading Coffee producers. Brazil, the world’s largest producer of Arabica Coffee is enjoying an on year in it’s on / off Arabica Coffee growing cycle. The ICO also noted that damage to Coffee crops in Central America is less than had previously been thought. Upgrades have been made to production estimates of Honduras, Costa Rica and Guatemala.

There is much disagreement regarding the actual size of the Brazilian Coffee crop. The country’s crop forecaster, CONAB predicts 2012-13 output will reach 50.6 million bags. 37.7 million bags of the Arabica variety and 12.9 million bags of the Robusta variety. A 16.2 percent increase over and above last season’s production.

There are limited prospects for production increases in other countries. The high cost of labor along with surging cost of petroleum based products could negatively affect the incomes of Coffee producers. Farmers will have no other choice than to cut expenses. The result will be a decrease in productivity which will result in smaller yields. Global Coffee consumption is steadily increasing. If we continue to produce Coffee as it has been for many years there will be a time in the future that your morning cup of Java will become a luxury.

Weekly technical indications on Friday, April 27th: At this time the week’s trading range is 185.70-175.25, the last print is 176.45. The stochastic remains in buy mode. RSI at 24.45 is lower than last week’s indication of 25.38. The M.A.C.D. histogram at -1.91 is higher than last week’s indication of -2.45. Coffee has not closed above the weekly 9 bar average since January 2012. I consider the market to be in a basing phase until it does. View pull backs to support as buying opportunities. A weekly close at or above 180.05 in July coffee will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

As a measurement of the general condition of the Cocoa market it’s useful to know what the world’s major Cocoa trading firms have been doing. Barry Callebaut purchased 24,954 tonnes of Cocoa from August 2011 through March 2012. During the same time frame in the prior marketing year the company purchased 29,167 tonnes. So, from this information alone we can deduce that business has slowed. As I’ve written in the past we can trust a publicly owned company to give us a clear picture. They must answer to their shareholders.

According to the Cocoa and Coffee Interprofessional Board (CCIB) Cameroon exported 168,497 tonnes of Cocoa from August 1, 2011 and February 29, 2012. Down 8.3 percent from last season’s 183,806 tonnes. Buying activity has picked up over the last two weeks in West Africa. Traders in Cameroon report cash sales taking place at two week highs. Ivory Coast reports that demand has lifted farmgate prices for cocoa as well. As usual, market participants are becoming concerned regarding supply during the period between the end of the main harvest and mid crop harvests.

Ivory Coast arrivals at ports for export cannot be viewed as a measuring stick. Sure, they may say they exported X and are X amount above last season. Last season there was much civil unrest in the country and Cocoa exports were curtailed for a period. This is where statistics can throw one for a loop.

With main harvests reaching their end, thoughts are now focused on the upcoming mid crop. Hopes for large mid crop output in Nigeria have been dashed. Heavy rain was falling over the growing areas until Monday when they just up and quit. My opinion – There is far too large a bearish consensus. Too many cooks spoil the soup. This is pointing to change. Just remember change does not necessarily mean up. Cocoa futures are well known for long lasting, directionless chop.

Weekly technical indications for Friday, April 27th: At this time the week’s trading range is 31.68-31.17 the last print is 31.36. The stochastic remains in sell mode. RSI at 46.15 is higher than last week’s indication of 44.98. The M.A.C.D. histogram at 14.06 is a good amount higher than last week’s indication of 9.79. Cocoa appears to have bottomed. This week’s price action pierced the 9 bar moving average and center Bollinger band. It appears the market will close above them this week. A weekly close at or below 21.31 in July cocoa will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

The USDA reports that 17 percent of the U.S. Cotton crop is in the ground. The five year average at this time of the year is 13 percent. The traditional optimum cotton planting period is only about ten days away on the Texas High Plains. There is concern that dry soils and the mini heat wave now taking place will get Cotton off to a poor start. Farmers keeps hoping this season will not be as bad as last, but with heat and dryness in April it appears it could be. Drought may again have the upper hand again this growing season.

There’s a good chance that India’s ban on Cotton exports will remain in place for the balance of this marketing year. USDA’s New Delhi bureau expects it will. Due to the tightness in the country’s supplies I would not be surprised if a curb were placed on India’s Cotton exports next marketing year.

There is little Cotton on hand at India’s mills. Under more normalized conditions a mill keeps enough Cotton on hand to operate for near five months. Citing the losses many mills took in the 2010-2011 marketing year banks are reluctant to lend them money for inventory. Spinning mills in India and other countries were hurt financially when Cotton prices ran up to post Civil War highs and then fell like a brick. India’s Cotton farmers are getting fed up with the regulatory hurdle jumping to farm Cotton. They may just chose to grow other crops.

Weekly technical indications for Friday, April 27th: At this time the week’s trading range is 92.86-90.05, the last print is 91.95. The stochastic has issued a buy signal. RSI at 48.26 is higher than last week’s indication of 46.60. The M.A.C.D. histogram at 0.21 is higher than last week’s reading of 0.0003. This week the market traded above the 9 bar moving average and center Bollinger band, a majority of this week’s price action took place between them. The market is respecting the key reversal of last week. Treat breaks to support as buying opportunities. A weekly close at or below 85.72 in July Cotton will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Brazil, the world’s number one producer of sugar expects to harvest near 615 million tonnes in 2011-2012. India’s Sugar output is expected to be near 26 million tonnes. China’s National Development and Reform Commission expects the country’s domestic Sugar production to increase by at least one percent.

USDA staff in Beijing has forecast that China’s Sugar imports will be strong this coming marketing year. Chinese Sugar imports are forecast to reach. 2.1 million tonnes. A bit less than the 2.3 million tonnes imported last season.

Quite a number of analysts have become bullish on China’s Sugar imports. Each year China’s Sugar production is about 11 million tonnes. Domestic consumption is nearly 14 tonnes and expanding. It’s simple mathematics. Growing prosperity has increased domestic demand. The expanding demand is set to continue for a long time to come. Recent production in Yunnan province had to put up with exceedingly dry weather. In Guangzi province too much rain fell.

In an attempt to limit drawdown of state inventories the Chinese government increased the amount paid out to Sugar cane growers a multiple number of times. In some provinces the amount has doubled! According to my sources the ploy has not improved output to the extent that China expected. We should be ready for a sizable increase in Chinese Sugar imports over the next marketing year.

Do you remember the five year plans of the U.S.S.R.? China’s latest five year plan calls for less dependence on domestically produced Sugar and increased reliance on imports. The country is aiming for a self sufficiency rate of 85 percent in Sugar by 2015. According to U.S.D.A. this is the first time that China published a supply target. There are changes coming to the marketplace. It’s our job to keep up with them.

Weekly technical indications for Friday, April 27th: At this time the week’s trading range is 22.07-21.01, the last print is 21.13. The stochastic remains entrenched in sell mode. RSI at 37.11 is lower than last week’s reading of 39.05. The M.A.C.D. histogram at -0.27 is lower than last week’s reading of - 0.14. A weekly close at or above 21.83 in July Sugar will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(61)

Robin Rosenberg — 2012-04-20T14:54:00Z

The Soft Spot

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

How would you like some hot Coffee? A truck hauling 38,000 pounds of unroasted Coffee beans from Mexico was stolen near Los Angeles this week. Will the crook hold back the Coffee for higher prices? It seems like everyone else does.

Coffee companies are reaping the benefits of falling Coffee prices. They have been able to provide better products to consumers while maintaining the same or even larger profit margins. Growers on the other hand are up in arms. Small Coffee growers may no longer be able to afford farming.

This week Ice U.S. Arabica Coffee futures traded at their lowest level in eighteen months. Coffee prices have already retreated near 23 percent in 2012. The oncoming Brazilian Coffee harvest is expected to be huge. Favorable weather throughout this growing season is said to be the reason behind it. Coffee farming is becoming modernized and mechanized. Coffee farmers are becoming educated in the treatment of disease and the eradication of insect pests. We will have to wait for the new supply to enter the distribution network. Keep in mind this could very well be a sell the rumor buy the fact situation.

Brazil’s Coffee farmers had been playing hide the Coffee in order to boost prices. With the new harvest on the horizon they are now selling their remaining supply before the new harvest begins. In 2002 Brazil produced a record Coffee crop of 48.5 million 60 kilo bags. Last month CONAB, the Brazilian agricultural forecasting agency said it expected Brazil’s Arabica Coffee crop to reach a new record of 52.3 million 60 kilo bags.

Vietnam has exported 760,000 tonnes of Coffee in 2011-2012. That’s up from 740,000 tonnes during the same time period last crop year. The country’s General Statistics office had expected March exports of 190,000 tonnes. Actual exports were 187,073 tonnes. Lower than February’s exports, but an increase of 16 percent over March of last year.

Jacu bird Coffee – what? The Jacu Bird is a South American native. It just loves eating the ripest bright red Coffee cherries. Now comes the interesting way in which Jacu bird Coffee is processed. The birds cannot digest the Coffee beans within the cherries. So, when the cherry passes through the bird’s digestive tract out come the beans. These little piles of beans are collected by the Coffee farms, washed and packaged for our pleasure. People that have enjoyed this Coffee say it is a very pleasing cup of smooth, well balanced Brazilian Coffee. Crappuccino anyone?

Weekly technical indications on Friday, April 20th: At this time the week’s trading range is 181.35-173.90, the last print is 177.80. The stochastic remains in buy mode. RSI at 24.95 is lower than last week’s indication of 25.83. The M.A.C.D. histogram at -2.54 is higher than last week’s indication of -3.03. On a day to day basis Coffee appears to have bottomed. View pull backs to support as buying opportunities. A weekly close at or above 181.00 in July coffee will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

Arrivals of Cocoa at Ivory Coast ports for export are running 18,000 tonnes above last year at this time. Lest we forget, political unrest had the countries Cocoa industry up for grabs last year. A five percent drop in Cocoa purchases by the Ghanaian government has signaled that Ghana’s supply of main crop of Cocoa is running out. Cameroon’s National Cocoa and Coffee Board (NCCB) reports Cocoa exports fell 12 percent by the end of March when compared to this time last season. Long lasting bone dry weather and mass caterpillar attacks are to blame. The drop had been expected.

This is a quiet time for Cocoa. Major growers are winding down their harvest activities as the main harvest’s come to a close. Commercial interests are uneasy. They are concerned about near term supply. This likely led to the large mid-week drawdown of ICE certified Cocoa stocks. Mid crop harvests will soon begin in West Africa. There is much handwringing by Cocoa farmers. More than a few Cocoa farmers are concerned that the dry weather took a toll on the mid crop. They do not like what they see. The condition of their Cocoa trees and constant threat of dryness has them forecasting lighter than expected mid crop production. Recent rains over many West African production areas have improved the condition of the mid crop Cocoa pods.

1^st quarter North American Cocoa grindings were down 4.04 percent. The trade was looking for 4 percent higher to 5.5 percent lower. Cocoa grindings are an indicator of demand. Keep in mind this covers the previous quarter and is not a strong indicator of future demand.

It was 1918; the Great War had just begun. Chocolate was to become a permanent addition to the soldier’s daily rations. Caley’s, an English candy company was chosen to manufacture what they christened “Caley’s Marching Chocolate”. It was lovingly referred to as “Marcho” by the British troops. One can purchase that same Marching Chocolate today.

Weekly technical indications for Friday, April 20th: At this time the week’s trading range is 22.93-21.62 the last print is 22.16. The stochastic remains in sell mode. RSI at 43.06 is higher than last week’s indication of 41.98. The M.A.C.D. histogram at 6.6 is lower than last week’s indication of 8.01. Cocoa appears to have bottomed. This week’s price action pierced the 9 bar moving average and center Bollinger band. It now sits just below them. A weekly close at or below 20.44 in July cocoa will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

The fact that China has completed re-stocking it’s state reserves has created downside pressure on Cotton prices. The USDA is calling for a decrease in world Cotton consumption of 6.8 million bales. Many analysts do not believe this figure will be anywhere near the USDA’s presumption. In addition expected ending stocks following the 2011-2012 growing season have been adjusted upwards to 66.07 million bales. The adjustment was made to compensate for errors discovered in India’s Cotton production data. That’s equal to 61.3 percent of annual usage or one heck of a lot of Cotton swabs.

Massive global ending stocks and light demand have created a bearish fundamental environment for Cotton. Lower prices will cause farmers to plant less Cotton than was forecast by March’s prospective plantings report. Drought in the Southwest continues and is spreading. Mother Nature’s stance on this is unknown. Questionable growing conditions and less planting could put a floor under this market.

This is the earliest spring in a long, long time. It’s really nice for a change, isn’t it? Well, it’s nice for insects too. They will produce at least one additional generation this year. Their numbers increase with each generation. The number one insect pest of Cotton is the tarnished plant bug. This all boils down to more spraying of insecticide and cost more to produce Cotton. Since insect pests are a problem for all farmers, other crops will also become more expensive to grow. If it costs more to raise it’s going to cost everyone up and down the supply chain more.

When you have to look up to see down there is a very good chance the big break is over. The psycho babbling and anxiety attacks are contrarian in nature and indicate that a bottom may be in place. Based on this I’d expect some strength to develop in Cotton. Long term resistance peers down from above at 91.21 and 98.85. Remember, this is all speculative on my part and I could certainly be wrong.

Weekly technical indications for Friday, April 20th: At this time the week’s trading range is 92.25-86.55, the last print is 90.29. The stochastic remains in sell mode. RSI at 45.18 is higher than last week’s indication of 44.46. The M.A.C.D. histogram at -0.06 is higher than last week’s reading of -0.18. The market traded above the 9 bar moving average and center Bollinger band. This week Cotton painted a key reversal to the upside on the weekly chart. Treat breaks to support as buying opportunities. A weekly close at or above 90.80 in July Cotton will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

This is the longest running bear market in Sugar since 2007. Recent price action points to extremely large production from the world’s major Sugar producers. In fact I’ve heard this season’s global crop will create a glut of ten million tonnes. That’s about equal to one year of U.S. consumption. There is concern that the following growing season will produce another glut. The last time this occurred Sugar prices were at a much lower level. In 1985 Sugar reached a low of 2.63. Yes, 2.63 cents per pound.

Dryness in Brazilian Sugar growing areas could bring an early start to harvest. Government officials expect Brazilian Sugar output to reach 602.2 million tonnes this marketing year. The country’s center south region generally accounts for 90 percent of that production. Production there is expected to be six percent higher than last season. According to the USDA Brazil produces near 54 percent of global Sugar exports.

Thailand is the world’s second largest exporter of Sugar. The country’s Cane and Sugar Board expects exports to reach an all time record this season. India is expecting a bumper Sugar crop – AGAIN! This will be the third growing season the country has produced a surplus. From October 1^st through April 15^th the country produced 24.63 million tonnes of Sugar. Up 13.3 percent when compared to the same time period last season.

Expectations are that India’s Sugar production this growing season will reach 25 to 25.5 million tonnes. Domestic consumption runs near 22 million tonnes. India’s food Minister K.V. Thomas has said, “we are not against releasing some more Sugar for export.” India has already approved three million tonnes under the open general license scheme during the 2011-2012 marketing year. Open general license (OGL) is just another way of saying unrestricted. The final one million tonnes of approved Sugar exports have yet to be distributed. A ministers panel will meet April 25^th to design the method that will be used to determine the quantity of Sugar each mill can export. The food ministry will consider and likely approve additional exports as well.

Weekly technical indications for Friday, April 20th: At this time the week’s trading range is 22.92-21.65, the last print is 21.73. The stochastic remains in sell mode. RSI at 45.10 is lower than last week’s reading of 45.34. The M.A.C.D. histogram at -0.05 is higher than last week’s reading of - 0.19. This week the market painted a key reversal to the upside on the weekly chart. A weekly close at or above 22.99 in July Sugar will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(60)

Robin Rosenberg — 2012-04-15T14:54:00Z

The Soft Spot

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Your ‘Colombian” Coffee may have been grown in Peru. To make up for low Coffee production Colombia has been purchasing Coffee from nearby Peru. In fact purchases have tripled when compared to last season. The Peruvian Chamber of Commerce said Colombia has purchased 99,518 sixty kilo bags this marketing year; last year the number purchased was 36,545 bags. Colombia purchased 22 percent of Peru’s production in January and February.

After several years of subpar production Colombian Coffee production is expected to reach 25 year lows this year. Severe rainfall and disease are responsible. Colombia has been a great customer for Peruvian Coffee. The country has been purchasing Coffee from Peru for the past few seasons.

This seasons purchases make Colombia the second largest buyer of Peruvian Coffee beans following the United States. Peruvian Coffee production is set to take off. Over the next ten years the Country plans to improve infrastructure and double the number of it’s Coffee plantations. Trade agreements are also in the works with Asian and other major Coffee buyers.

A nutritional developer based in Austin, Texas says their “Green Coffee” extract has been proven to aid in weight loss. During the 22 week study, GCA (the extract) 16 obese adults were given the extract in varying dosages. One control group was given placebo. Primary measurements were body weight, body mass index and fat mass. Heart rate and blood pressure were measured. There was a marked decrease in all except blood pressure.

Weekly technical indications on Friday, April 13th: At this time the week’s trading range is 22.29-2052, the last print is 183.25. The stochastic has flashed a buy signal. RSI at 28.26 is higher than last week’s indication of 27.96. The M.A.C.D. histogram at -2.42 is higher than last week’s indication of -3.35. There has been little change in the market’s behavior. It remains range bound a very choppy. Continue to view pull backs to support as buying opportunities. A weekly close at or below 179.60 in May coffee will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

The German Cocoa Trade Association has forecast the cocoa supply deficit to fall somewhere between 30,000 and 70,000 tonnes. This is lower than the International Cocoa Organizations forecast for a global supply deficit of 71,000 tonnes. Cocoa production is extremely sensitive to weather conditions. Though the Ivory Coast growing season started off well the countries growing areas were assaulted by heavy rains followed by strong, hot and dry Harmattan winds. This caused great concern for the development of Cocoa scheduled to be harvested towards the tail end of the country’s main crop.

Nigeria is the world’s fourth largest Cocoa producer. Cocoa output is expected to drop near ten percent to 210,000 tonnes. The Nigerian crop was damaged by excessive rainfall and high humidity. The fact that President Goodluck Jonathan cut fuel subsidies cut output as well. You can’t grow Cocoa profitably without fuel. With energy prices as high as they are, now is not the time to cut fuel subsidies. Cocoa must be transported from farms to grading centers and from grading centers to ports for export. Farmers located in Nigeria’s Osun state have stopped selling Cocoa due to the low prices being offered for their product. Heavy rains in Nigeria’s southwest have caused flowers and Cocoa pods to sprout.

Cameroon expects Cocoa production to decrease 20 percent from last season’s record harvest. Capsid (sap sucking) insects caused major damage in the country’s Center region. Caterpillars ravaged the crop in the South West region. So, the forecast for record breaking West African Cocoa harvests will not come to pass. Mother Nature throws the Cocoa industry a sinking curve ball.

Indonesian Cocoa production is back on track. A Cocoa crop of 500,000 tonnes is expected. Last year La Nina hammered growing areas with abnormal rains that damaged Cocoa trees. The La Nina weather pattern in the equatorial Pacific Ocean is weakening. Hopefully it will dissipate and give the agricultural industry a respite for a few years.

Weekly technical indications for Friday, April 13th: At this time the week’s trading range is 22.29-20.52 the last print is 22.24. The stochastic remains in sell mode. RSI at 43.91 is higher than last week’s indication of 43.00. The M.A.C.D. histogram at 11.76 is lower than last week’s indication of 14.11. The trend remains sideways to down. A weekly close at or above 21.42 in May cocoa will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

The USDA March Planting Intentions offered nothing in the way of bullish news for Cotton. Indications are that U.S. Cotton farmers will plant 13.2 million acres of Cotton in 2012. This was in line with the National Cotton Councils February report and the USDA’s February estimate. Many industry participants were expecting the planting intentions report to reflect smaller plantings due to the muted economic growth rates of China and Europe.

The kudzu bug has been causing it’s share of commotion in Georgia and South Carolina. Kudzu bugs generally eat Kudzu and soybeans. Kudzu is an invasive plant that made it’s way to the U.S. via Japan. Some dead Kudzu’s were found in shipping containers shipped to Honduras from Georgia. This prompted Honduran officials to stop accepting all container imports from the states of Alabama, Georgia, South Carolina, North Carolina and Tennessee.” Cotton exporters in these states are faced with a big problem. They are not able to export their Cotton to Honduras. More than 4,000 containers from these states are being held by Honduran authorities. This is an example of how Cotton distribution can be affected by an insect that does no harm to the Cotton plant.

India will join China in building a national strategic reserve of Cotton. This put’s the U.S. in the position of being the world’s only Cotton exporter of size. Not only are we the largest producer of Cotton, we are the largest exporter of Cotton in the world. U.S. Cotton growths are low priced. This should see U.S. exports continue to expand.

Weekly technical indications for Friday, April 13th: At this time the week’s trading range is 93.75-88.50, the last print is 93.35. The stochastic has issued a buy signal. RSI at 49.36 is lower than last week’s indication of 43.00. The M.A.C.D. histogram at .29 is higher than last week’s reading of -0.06. The market is above the 9 bar moving average and center Bollinger band. This market appears to be readying itself for a substantial move. Treat breaks to support as buying opportunities. A weekly close at or above 94.41 in May Cotton will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Conab, the Brazilian governments crop forecasting service has forecast a two million tonne increase in Brazil’s Sugar output this growing season. Sugar production will rise to 38.9 million tons from 36.9 million tonnes. The increase comes on the heels of a season that was negatively affected by poor weather and frost. This increase will take Brazilian Sugar production to a new all time record.

Large speculative long positions have been providing support to the Sugar market. Sugar is trading at high prices compared to historic records. A constant flow of bullish news is necessary to hold Sugar prices at this level. An increase in output is not what the Sugar Bulls wanted to hear. This caught Sugar investors by surprise. The resultant selling drove Sugar futures down two percent to their lowest level in a month.

Russia will be planting less Sugar beet this season. Last year’s production was much larger than demand. This will see the country importing less Sugar this season. China however, has downgraded their forecast for their Sugar crop by three million tonnes to 12.2 million tonnes. This is due to subpar yields of cane with below normal sucrose content. China will be the largest importer of Sugar this marketing year.

Weekly technical indications for Friday, April 13th: At this time the week’s trading range is 24.86-23.80, the last print is 24.03. The stochastic remains in sell mode. RSI at 48.97 is lower than last week’s reading of 51.50. The M.A.C.D. histogram at 0.11 is lower than last weeks reading of 0.19. The market remains range bound and choppy. A weekly close at or below 24.48 in May Sugar will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(59)

Robin Rosenberg — 2012-04-05T14:54:00Z

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Could both large and small speculators be misreading the Coffee markets? Of course they could. The situation now brewing could vaporize their account balances in short order. Arabica Coffee has declined in price nearly 40 percent since last May. Robusta Coffee has increased about 15 percent this year. Word is that many traders are buying Robusta and selling Arabica Coffees on a spread basis en masse.

ICE U.S. Coffee futures are of the Arabica variety. Brazil is the world’s number one producer of Arabica Coffee. This coming season will be an “ON” season in Brazil’s on/off Coffee crop cycle. Traders don’t want to be long Arabica Coffee heading into what should be a banner growing year. NYSE Euronext (London) Coffee futures are of the Robusta variety. Vietnam is the world’s number one producer of Robusta Coffee. Last year’s Vietnamese crop was a good one, leaving farmers flush with cash. They can well afford to hold on to their Coffee in an attempt to raise prices.

Brazil’s harvest begins in July. Arabica Coffee stockpiles are nearing critical levels with speculators massively short Arabica Coffee futures. Any supply tightness will likely get shorts to begin unwinding positions. If the market takes out resistance levels above more shorts will run for the exit. Vietnamese Coffee farmers will not hold back their Coffee forever. Indonesian Robusta Coffee will begin to enter the supply lines this month. Vietnamese Coffee farmers will release Coffee from their stockpiles in earnest. This will create downside pressure on Robusta prices and cause those holding long positions to liquidate.

It’s just too obvious. When a market gives off obvious vibes it’s time to dig deeper.

Weekly technical indications on Thursday, April 5th: At this time the week’s trading range is 190.45-178.70, the last print is 183.25. The stochastic remains in sell mode, albeit barely. RSI at 28.27 is higher than last week’s indication of 27.43. The M.A.C.D. histogram at 3.33 is higher than last week’s indication of -4.07. Would you believe this week’s high and low took place in one trading session? A weekly range of near 12.00 points all in one trading session! This market is about to turn up. View pull backs to support as buying opportunities. A weekly close at or below 179.25 in May coffee will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

The International Cocoa Organization has kept it’s global Cocoa production forecast at four million tonnes. However, it lowered it’s forecast for the Ivory Coast and Ghana by a bit more than 250,000 tonnes. The hot dry weather over the past few months took it’s toll on West African Cocoa production. Expectations are that other growing areas will take up the slack i.e. Brazil.

Barry Callebaut, the world’s largest chocolate products manufacturer expects Cocoa prices to trade within a band of £1,400 to £1,600 ($2236-$2555) for the next few months. These people have been extremely accurate in the past. There is plenty of Cocoa supply available due to the bumper crop of 2010-2011. There are good prospects for Ivory Coast mid-crop production as well.

When it comes to the subject of Cocoa prices Dutch bank ABN Amro is optimistic. Predicting global Cocoa production to decline 8.7 percent to 3.88 million tonnes in 2011-2012, their expectations are that Cocoa prices will average $2500 a tonne through 2012. This points to a supply deficit that will support Cocoa prices.

Many times I’ve written that we cannot trust what users and producers say. In the case of banks and publicly owned companies it’s quite the opposite. The banks grant credit lines to the growers. Banks as you know are generally quite thorough when it comes to lending. Public Companies have to answer to share holders. We can give credibility to what they have to say.

Weekly technical indications for Thursday, April 5th: At this time the week’s trading range is 22.74-20.60 the last print is 20.80. The stochastic remains in sell mode. RSI at 37.68 is lower than last week’s indication of 41.96. The M.A.C.D. histogram at 13.53 is lower than last week’s indication of 30.37. The trend remains down. A weekly close at or above 22.70 in May cocoa will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

China shielded it’s mills from high Cotton prices for two years. This depleted the country’s Cotton reserves. To rebuild those reserves China purchased 14.4 million bales of it’s domestic Cotton production and imported 4.5 million bales. According to The China Cotton Association replenishment of those reserves has now been completed.

The Cotton industry is concerned this program will create uncertainty in the Cotton market for some time to come, perhaps even years. China’s Cotton reserves will account for two thirds of the increase in world Cotton stocks following 2011-2012. The International Cotton Advisory Committee has voiced concern that China’s Cotton stockpile will create long term risk to global Cotton prices. The stockpiling did a great job of supporting domestic and international Cotton prices in 2011-2012. Will China’s imports drop off following this growing season? If so, look out below. Remember China is the world’s largest consumer of Cotton.

If the 2012-2013 crop is subpar, anticipate another bull run in Cotton. Don’t expect China to release theirs. Perhaps a small amount as a token gesture, but that’s likely it. If Northern Hemisphere Cotton production this season reaches bumper crop proportions the Chinese cotton in storage could negatively affect prices. I believe we should treat the stockpile as if it didn’t exist. Prior to lending support to their Cotton industry there was a stockpile of Cotton in China as well – or was there? After all, the business climate must improve before Cotton consumption does.

Net Upland sales for the week of March 29^th, 2012 were 392,200 running bales for the 2011/2012 marketing year. Up 19 percent from the previous week and up 15 percent from the prior 4-week average. A marketing year record!

Weekly technical indications for Thursday, April 5th: At this time the week’s trading range is 93.80-88.92, the last print is 89.15. The stochastic remains in sell mode. RSI at 43.82 is lower than last week’s indication of 49.52. The M.A.C.D. histogram at -0.01 is higher than last week’s reading of -0.05. The market is above the 9 bar moving average and center Bollinger band. This market appears to be readying itself for a substantial move. A weekly close at or below 92.82 in May Cotton will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

The majority of Brazil’s growing areas received less than half their normal rainfall this past growing season. In response to the unusually light rainfall Macquarie bank has forecast higher Sugar prices through 2012. Higher prices could continue in 2013-2014 as well. Peak production for Sugarcane runs from eight to twelve years. Much of Brazil’s Sugarcane stock has aged well beyond that. This elderly cane should be replaced A.S.A.P.

Macquarie cut it’s estimate for Brazil’s key Center South Sugar output by 20 million tonnes to 500 million tonnes. Inadequate rainfall has caused irreparable damage to Sugarcane in portions of Parana and Mato Grosso do Sul states. The dry weather arrived at a time crucial for sucrose development. Crop forecasting can be a useful tool but Mother Nature always holds the trump card. Sometimes she just doesn’t play it.

New Sugarcane is produced by cutting mature cane stalks into seed cane sticks (setts) about 40 centimeters in length. The setts are placed in a furrow with fertilizer and covered with soil. Germination takes anywhere from 10 to 21 days depending on the temperature and moisture content of the soil. New shoots grow from buds that form on the joints of the setts. The shoots break out of the buds and reach for the sky. So now when someone says “you trade Sugar? I’ll bet you don’t even know how Sugar is grown”. You can just say, “how much do you want to bet?”

Now for the latest regarding the hijacked Iranian Sugar ship. According to the Iranian Navy it took 48 hours of intense fighting to regain control of the ship and its precious cargo of Sugar. The pirates were arrested; the ship was unharmed.

Weekly technical indications for Thursday, April 5th: At this time the week’s trading range is 24.78-24.15, the last print is 24.60. The stochastic remains in sell mode. RSI at 51.69 is lower than last week’s reading of 52.25. The M.A.C.D. histogram is nearly unchanged at 0.2. The market is range bound and very choppy. A weekly close at or below 23.98 in May Sugar will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(58)

Robin Rosenberg — 2012-03-30T14:54:00Z

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

The international Coffee Association had forecast Brazil’s Coffee crop to be fifty million bags. Trade sources say the crop will be quite a bit larger. Rain is forecast over Brazil’s major Coffee production areas for the next few days. This will strengthen the shorts resolve. No matter how large the crop turns out to be we have been conditioned to believe this Brazilian harvest will have the world swimming in Coffee. Not to worry, these things have a way of working themselves out.

Recently Vietnamese Coffee officials forecast the country’s March exports would reach 3.17 million 60 kilo bags. Much higher than the 2.1 million bags they had forecast earlier in the month. If they made an error in their calculations so be it. However, if we were purposely misled it should not come as a surprise.

The world’s second largest producer of Arabica beans could produce a smaller crop than it did last year. Again this season the crop was hit with heavy rains. According to Colombia’s National Federation of Coffee Growers the crop will be somewhere in the neighborhood of 7.5 to 7.8 million 60 kilo bags. Last season Colombia’s Coffee production was 7.81 million bags, the smallest since 1976.

With a lack of fresh fundamental news, the unwinding of positions has taken center stage this week. The end of a quarter oftentimes brings unusual market behavior. Tuesday’s sharp rally was likely fueled when a large short position was offset. The rally offered an excellent level for those long from the 180.00 area to take profits. Traders covering positions makes for a fast moving, range bound market.

Weekly technical indications on Friday, March 30th: At this time the week’s trading range is 187.85-175.90, the last print is 179.30. The stochastic remains in sell mode. RSI at 24.50 is higher than last week’s indication of 24.02. The M.A.C.D. histogram at -4.29 is higher than last week’s indication of -4.45. A weekly close at or above 179.05 in May coffee will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

The International Cocoa Organization has forecast a 71,000 tonne supply deficit following the 2011-2012 marketing year. Extremely unfavorable weather conditions and caterpillar infestations are the root cause. This is the fourth deficit in the last six seasons. In addition Governments have cut or discontinued fuel subsidies. The high price of fuel calls for subsidies, not their discontinuance! Just what are these people thinking?

Demand for Cocoa when measured by grindings is expected to increase 2 percent. Africa is expected to consume 10 percent more Cocoa. Having returned to normalcy following last year’s civil war, the Ivory Coast’s domestic Cocoa demand will return to normal levels. Production of Cocoa in West Africa is expected to drop 8 percent. Well below last season’s record high production of 4 million tonnes. West Africa’s weather was a far cry from the near perfect weather in the 2010-2011 season. This season’s weather was much closer to reality.

Two of Nigeria’s parched southwest states have received heavy rains. Cocoa farmers there had been very concerned that hot, dry weather would negatively affect their coming mid crop production. The Mid crop harvest has begun in the country’s southeastern Cross River state.

The intricacies of smuggling Cocoa between the Ivory Coast and Ghana. This is how it all goes down. Far from official border crossings trucks move Cocoa to the border area. Motorbikes carrying three 60 kilo bags speed off to navigate the bush on narrow dirt tracks. Upon arrival in Ghana the Cocoa is re-bagged and marked produce of Ghana. Benefitting from better handling, crop spraying and fertilization, Ghana constantly reminds us that their Cocoa is better than that of the Ivory Coast. Ivorian farmers of course disagree. They say they can grow Cocoa that is exactly the same Ghanaian Cocoa. These countries share borders and soil of similar characteristics. In all honesty there should not be much difference between Cocoa produced in the Ivory Coast and Ghana. My thoughts are that Ghana was first to establish proper management of it’s Cocoa industry and has been reminding us for years. It’s just that other countries are now catching up.

Weekly technical indications for Friday, March 30th: At this time the week’s trading range is 23.84-21.94 the last print is 22.28. The stochastic has issued a buy signal. RSI at 42.24 is lower than last week’s indication of 44.86. The M.A.C.D. histogram at 31.01 is lower than last week’s indication of 39.71. The market remains in a major down trend. A weekly close at or above 23.51 in May cocoa will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

Are tight Cotton supplies on the horizon? If that’s the case we could see a repeat of the rally that took Cotton prices to post Civil War highs. There is much discussion as to the accuracy of the USDA’s Indian Cotton balance sheet. After careful analysis of the country’s own data the findings show that the USDA is overestimating India’s 2011-2012 ending stocks by more than 5 million 480 pound bales. India’s government has said that their Cotton Advisory Board overestimated the amount of Cotton on hand at the end of last season due to larger exports.

At this time India’s Cotton stocks stand at 3.3 million 170 kilo bales. Quite a bit lower than USDA’s figure of 4.83 million. USDA should rework it’s balance sheet and alert the Cotton industry to this fact. From what I’m seeing and hearing business is picking up and many participants could be caught short inventory or futures. This situation is very much the same as the one that existed just prior to the last vicious bull campaign. The CFTC’s latest commitments of traders report indicated speculators have raised their short positions to three year highs. Don’t get caught with those Cotton khakis down!

Cotton merchants report that Cotton is flying out the door. What to do? What to Do? It’s the inventory cycle in action once again. Cotton prices are low and so are inventories. If demand continues to improve where will the Cotton come from? From higher prices that’s where! Spinning mills are sitting idle worldwide. As everyone attempts to refresh inventories and fulfill customer orders the price of Cotton will have nowhere to go but up.

Net Upland sales for the week of March 22^nd, 2012 were 152,800 running bales for the 2011/2012 marketing year. Down 22 percent from the previous week and down 2 percent from the prior 4-week average.

Weekly technical indications for Friday, March 30th: At this time the week’s trading range is 94.39-89.36, the last print is 92.60. The stochastic remains in sell mode. RSI at 48.27 is higher than last week’s indication of 43.21. The M.A.C.D. histogram at -0.11 is higher than last week’s reading of -0.45. The market is above the 9 bar moving average and center Bollinger band. A further probe to the upside appears to be in the making. A weekly close at or below 88.95 in May Cotton will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

With the focus on supply, the timing of wet weather over Brazil’s Sugar cane growing areas could not have been better. Or worse, if you are / were positioned on the long side. The country’s parched Sugar growing areas were desperately in need of moisture. This has the longs on the ropes. Many will liquidate their positions if downside pressure continues to move below levels of support. The market is no longer respecting the key reversal of the week before last. This bear trap has now reversed and is pursuing the bulls. Additional rain is forecast for the country’s center south region over the next few days. This should further improve the condition of the Sugar crop and increase downside pressure on Sugar prices. This market is no picnic. This type of price action leads me to believe that Sugar is bound and determined to continue to trade in a trendless range for now.

The latest commitments of traders report from the CFTC indicates that large and small speculators (non commercial) were net long 184,851 contracts. 40,745 of those positions were added the prior week! As illustrated by this week’s market action, the large increase in long positions created an overbought situation.

India’s ministerial panel has decided to allow the unrestricted export of an additional 1 million tonnes of refined white Sugar. Export approvals now total 3 million tonnes and are in line with industry expectations. The world’s second largest Sugar producer had previously approved exports of 2 million tonnes. One million tonnes is not a big number, but it should help alleviate tightness in the period leading up to Brazil’s Sugar harvest.

According to Mexico’s Committee for the Sustainable Development of Sugarcane, Sugar production in Mexico stands at 3.17 million tonnes. That’s down 13 percent compared to the same time last season. This year Mexico will seek to privatize nine Sugar mills it had nationalized more than a decade ago.

It’s not often the Sugar industry makes headline news, so here it is. According to the North Atlantic Treaty Organization’s shipping center a ship loaded with Brazilian Sugar destined for Iran has been hijacked by pirates in the eastern Indian Ocean.

Weekly technical indications for Friday, March 30th: At this time the week’s trading range is 25.66-24.11, the last print is 24.55. The stochastic has issued a sell signal. RSI at 51.48 is lower than last week’s reading of 57.50. This market is extremely choppy and may be setting up for a sizable move. A weekly close at or below 24.12 in May Sugar will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.

The Soft Spot(57)

Robin Rosenberg — 2012-03-23T14:54:00Z

By Robin Rosenberg,

PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

COFFEE

Forty Year Trading Range: $41.50 to $337.50 per lb

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Did you know that Coffee beans are actually the pit of a cherry like fruit? In Brazil Coffee is harvested by the stripping method. When 75 percent of the cherries have fully ripened and bright red in color they are stripped from the trees. They then fall to sheets placed on the ground. The sheets are lifted from the ground and the contents tossed into the air. Much like separating wheat from chaff. This way plant and other debris are blown away by the wind, leaving just the Coffee cherries. The cherries are then placed in 60 liter green baskets. Coffee producers use this method to calculate production and determine wages. From every 100 kilos picked there will be 12 to 20 kilos of export ready Coffee produced.

Brazil’s Coffee harvest is scheduled to begin in May. The expected bumper crop could cause production problems in the future. Lower Coffee prices equal less income for the Coffee farmer. This leaves less money to be spent on supplies and the replacement of growing stock past it’s prime. It takes nearly five years for a Coffee tree to mature and produce fruit. This will bring lower production in the future and lower production will bring higher prices. Who knows what the weather will bring.

The expected large supply has pressured Coffee prices to levels not seen since October of 2010. An interesting twist is that ICE exchange Coffee stocks have been decreasing since the first week of March. They had been rising since early November. Someone sees value at this price level.

Recent rains have certainly helped bring up the moisture levels in Brazil’s major Coffee growing areas. If dry conditions were to return it could put a good sized dent in Brazil’s production. Market participants are expecting a global surplus of one to two million bags following the 2012-2013 marketing year. Rainfall remains below normal and forecasts call for more of the same. One well known bank expects the surplus will amount to less than one million bags. Not enough to rebuild stocks that were depleted by a 3.1 million tonne deficit last season. Demand is continuing to expand in Coffee producing countries as well. Be very careful trading the short side of Coffee at this time. This could be one heck of a bear trap!

Weekly technical indications on Friday, March 23rd: At this time the week’s trading range is 188.45-174.45, the last print is 175.80. The stochastic remains in sell mode. RSI at 23.92 is lower than last week’s indication of 25.10. The M.A.C.D. histogram at -4.49 is lower than last week’s indication of -4.08. Riding the lower Bollinger band the market continued to move lower this week. A weekly close at or above 182.80 in May coffee will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COCOA

Forty Year Trading Range: $4.44 to $53.79 per Tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

Brazil’s Bahia state is expecting it’s largest mid crop in seven years. According to the Commercial Association of Bahia, output should exceed1.3 million 60 kilo bags. Mid crop harvest takes place from May to September. Strange as it may seem the state produces a larger amount of Cocoa during mid crop than during the main crop. Main crop is expected to reach 950,000 60 kilo bags.

Record Cocoa output is expected from the country’s Para state as well. Estimates call for production of 550,000 to 600,000 bags, a bumper crop for sure. Where is all this Cocoa coming from? Trees on newer Cocoa plantations have finally reached maturity and have begun to produce. It’s been quite some time since we’ve heard much about Brazil’s Cocoa crop.

Last week I touched on the subject of Cocoa smuggling between the Ivory Coast and neighboring Ghana. It’s estimated that between 75,000 and 100,000 tonnes of Cocoa crossed the border in 2010-2011. There are of course no official records.

Ghana’s Cocoa is of higher quality than that produced by the Ivory Coast. Ghana’s Cocoa Board (Cocobod) is extremely diligent when it comes to effective quality control and monitoring in an attempt to counter smuggling. Ghana purchases Cocoa from the farmer then buyers purchase the Cocoa from the Ghanaian government. Ghana has been increasing the price paid Cocoa farmers on a yearly basis. The price has risen to $2133 per tonne from $1600 per tonne in 2009-2010. The country’s Cocoa output in 2011-2012 is forecast to be equal to the record harvest of one million tonnes in 2010-2011. Favorable weather, government support and improved farming practices have allowed Ghana’s Cocoa industry to flourish.

Weekly technical indications for Friday, March 23rd: At this time the week’s trading range is 24.16-22.42 the last print is 23.00. The stochastic remains in buy mode, but the buy signal has weakened. RSI at 44.54 is higher than last week’s reading of 42.68. The M.A.C.D. histogram at 39.07 is lower than last week’s indication of 44.59. This week the market rallied above the center Bollinger band and 9 bar average. It then reversed and is now trading below them. A weekly close at or above 23.38 in May cocoa will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

COTTON

Forty Year Trading Range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

The USDA has predicted a 6.1 percent increase in Cotton production this year and a 5.2 percent drop in demand. According to the International Cotton Advisory Committee (ICAC) the ratio of supply to usage will reach 60 percent following this coming growing season. The ratio has not been that high since 1999.

China consumes near 40 percent of the worlds Cotton. The USDA expects Chinese Cotton imports to reach 18.5 million bales this season. The largest quantity imported in six years and 54 percent more than last year. China is replenishing it’s state reserves. By July those reserves could account for as much as 25 percent of the global Cotton stockpile. If China owns 25 percent of the worlds Cotton supply the stocks to usage number loses it’s meaning. In essence that Cotton has been removed from the marketplace.

India partially lifted a ban on exports earlier this month. The country has already shipped 9.5 million 170 kilo bales this season. That’s more than the 8.4 million bale surplus forecast by the government. Farmers will plant less Cotton this season due to lower prices and curbs on exports. The agriculture ministry is expecting a 6 percent decline in acreage planted with Cotton.

This could all lead to eventual tightness in the available Cotton supply. The 2012 Cotton market should prove to be interesting. We haven’t even considered the largest unknown – Mother Nature! Things are not as clear cut as they appear on the surface. After all, are they ever?

U.S. Cotton exports for the week ending March 15th, 2012 for the 2011-2012 marketing year were 197,000 running bales. Down 18 percent from the previous week, but up 30 percent from the prior four week average.

Weekly technical indications for Friday, March 23rd: At this time the week’s trading range is 90.50-87.43, the last print is 87.80. The stochastic remains in sell mode. RSI at 43.68 is higher than last week’s indication of 39.04. The M.A.C.D. histogram at -0.43 is lower than last week’s reading of -0.52. The market is respecting resistance offered at the 9 bar moving average. A weekly close at or above 88.24 in May Cotton will turn the weekly trend up.

Do not trade without the use of protective strategies such as stops and or options.

SUGAR

Forty Year Trading Range: 2.30 cents to 66.00 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

The International Sugar organization has cut it’s forecast for China’s Sugar production by 1.13 million tonnes to 11.5 million tonnes for the 2011-2012 growing season. Adverse weather throughout the growing and harvesting periods caused an unexpected 8 percent decline in Sugar output for the first four months of the season.

China has the finest state run commodity reserve program in the world. It appears that it may not reach it’s goal of 12 million tonnes this growing season. We all know what happens when China doesn’t reach agricultural goals; it raids the world’s pantry. China’s Sugar imports for January and February reached 235,932 tonnes. Up nearly 700 percent compared to the same time last year. At this pace China will overtake the E.U. and U.S. as the world’s largest Sugar importer.

This is the second year in a row that weather conditions are negatively affecting the Brazilian Sugar crop. Drought in South America will cost it’s Sugar plantations dearly. Thoughts are that Brazil’s Sugar mills will produce near 6 percent less than had been forecast. The country’s main growing areas have received only 50 percent of normal rainfall since February began. This is the time of year Sugar growth and sucrose development are generally at their zenith. No rain equals no growth. This is an incredibly troubling time for Brazil’s Sugar Industry.

About half of Brazil’s motor vehicles are powered by flex fuel engines. They can run on either 100 percent ethanol or gasoline. The common blend is E-20 or 20 percent ethanol / 80 percent gasoline. However, the country’s subpar Sugar output has caused ethanol’s price to exceed gasoline. We are now paying dearly for fuel in the U.S. I don’t expect it should be different anywhere else. Brazil’s problem is that this is occurring during a rapid expansion of the country’s economy. Demand for fuel is steadily increasing. Not a pretty picture at all.

Weekly technical indications for Friday, March 23rd: At this time the week’s trading range is 26.20-25.21, the last print is 26.06. The stochastic remains in buy mode. RSI at 59.31 is higher than last week’s reading of 56.49. The market is respecting last week’s key reversal to the upside. A weekly close at or below 24.22 in May Sugar will turn the weekly trend down.

Do not trade without the use of protective strategies such as stops and or options.