The Softs Report

The Soft Spot(74)

Robin Rosenberg — 2012-07-06T14:54:00Z

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

Commerzbank has joined ranks with other major agricultural lenders by forecasting higher prices for Brazilian arabica coffee. Citing weather damage, the bank expects arabica futures to gain on robusta futures. The Brazilian arabica coffee crop had been expected to be a bin buster. Mother Nature provided a bit too much in the way of inhospitable weather.

Brazil’s crop was faced with frost and drought conditions early in it’s development. Recent heavy rains could adversely affect the quality of the beans. When coffee trees are hit with heavy rain at this time in their development many ripe coffee cherries are knocked to the ground. Increased labor costs prevent many growers from picking them up.

The USDA estimates Brazil’s 2012-13 arabica output to reach 40.2 million 60 kilo (132 lb) bags. The 2012-13 growing season is an ON year in the country’s alternating ON / OFF production cycle. During the 2010-11 ON season Brazil’s arabica production stood at 41.8 million 60 kilo (132 lb) bags. So we have ON year production that is smaller than the prior ON season. Hopefully this is not the beginning of a trend.

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, July 6th: At this time the week’s trading range is 187.10-169.70, the last print is 177.80. The stochastic remains in buy mode. RSI at 42.97 is stronger than last week’s indication of 37.36. The M.A.C.D. histogram at 0.02 is higher than last week’s reading of -0.15. Coffee has had a 20 cent rally over three weeks time. The market pierced the center Bollinger band, reversed and now trading just below it. Buy on sharp breaks to support and use sound money management. A weekly close of 150.60 or lower in September 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

Second quarter grinding data will be released later this month. Traders expect Europe’s to be poor based on the region’s economic woes. Funds are holding a sizable short position. If there are surprises in that data cocoa futures will move higher in response. Short term weather forecasts are predicting rain through week’s end. Rain, rain and more rain. Cocoa trees could use some sunshine. It would assist in producing a good flowering season for the 2012-13 crop.

The Nigerian government has officially announced that cankerworm attacks in Ondo state have been brought under control. In addition, the 2012-13 main crop is not expected to be negatively affected. I don’t believe that for a New York minute! Ondo state produces 40 percent of Nigeria’s cocoa. There was no mention of this year’s mid crop. Often times that which is not said is more important than what is. This leads me to believe Nigeria’s mid crop will be very poor. Nigeria was once one of the largest producers of cocoa in West Africa. Cocoa exports made up a substantial chunk of the country’s foreign exchange earnings. This is not so today.

Weather plays an extremely important role in the development of cocoa. Rainy season begins in May and runs through October. The dry season runs from November through April. Cocoa trees flourish in the lower growth of the tropical rain forest in the shade. The temperature must fall between 66 F and 92 F with high humidity. Evenly distributed monthly rainfall exceeding 1500 mm (59.1”) is necessary. Rainfall of less than 100 mm (3.9”) per month for three months running will severely damage cocoa trees.

Weekly technical indications for Friday, July 6th: At this time the week’s trading range is 23.75-22.61 the last print is 22.96. The stochastic remains in buy mode. RSI at 49.57 is stronger than last week’s indication of 49.36. The M.A.C.D. histogram at 17.8 is higher than last week’s indication of 9.377. Buy on breaks to support and use sound money management. The present weekly bar is signaling that change is in the wind. Stay alert – Stay very alert! A weekly close of 21.65 or higher in September 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)

According to USDA statistics U.S. acreage planted with cotton stands at 12,635 million acres. This agreed with trade expectations, but was lower than March’s estimate of 13,155 million acres. Last year’s figure was 14,735 million. Hot, dry weather in major growing areas is raising the hackles of cotton farmers. My view has not changed. The lows may be tested; but I certainly would not sell into a retest.

China cancelled the major portion of a huge order for U.S. cotton. This reeks of market manipulation, plain and simple. The order caused the soon to expire July contract to rally as high as 89.48. The market then reversed and fell to 67.70. There is speculation that a group of traders holding large long positions conspired to create a price spike to the upside. They got there spike alright. Speculators holding short positions were out smarted by the rally and forced to liquidate. This was a short squeeze if I ever did see one. An official statement from China would be welcomed. Who do you think sold their sold the contracts back to the shorts?

Egypt’s new government will be allowing an increase in cotton exports. Planting intentions are one thing, but actual plantings are the real thing. Cotton plantings in Northern Hemisphere are lower than was originally expected. The country’s cotton spinners are presently facing extremely tight domestic cotton supplies. In an effort to alleviate the situation Egypt’s government will be issuing permits to import cotton sometime this fall. These will be the first cotton import permits issued since October 2011. Egypt’s cotton imports in 2012-2013 are expected to reach 530,000 during the 2012-13 marketing year. A 77 percent increase above 2011-12.

Weekly technical indications for Friday, July 6th: At this time the week’s trading range is 73.05-70.05, the last print is 70.05. The stochastic remains in buy mode. RSI at 30.01 is stronger than last week’s indication of 31.05. The M.A.C.D. histogram at -1.35 is higher than last week’s reading of -1.86. Buy on breaks to support and use sound money management. A weekly close of 66.88 or lower in October 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

Kingsman of Switzerland has lowered it’s estimate for Brazil’s center south by 3 percent to 31.8 million tonnes. Many agricultural consultancies had forecast a bumper crop in 2011-12. Mother Nature had different plans. Now Just about every one of them has thrown in the towel. Sugar cane needs sun and some water in the final stage of development. The drop in output is attributed to low sucrose content in the sugarcane and delays in crushing.

According to the Indian Sugar Mills Association the country’s sugar production is expected to fall one million tonnes to 25 million in 2012-13. India’s major growing areas have received inadequate rainfall. This year’s monsoon rains are said to be 30 percent less than is normal at this time. Many of India’s cotton farmers have decided to plant more chickpeas and oilseeds this season. Sugar production is forecast to be 10 percent lower in 2012-2013 in Maharashtra state, the country’s largest sugar producing state.

Sugar has rallied to ten week highs. Everywhere I turn production forecasts for the 2012-13 sugar crops have been lowered. The rainy weather has delayed harvest and shipping. Copersucar, one of the top sugar and ethanol producers in Brazil is taking delivery of 2,216 ICE July sugar contracts. This is the first time a producer has taken delivery in at least 50 years. Copersucar is one producer that will fulfill it’s commitments. This is why we have futures markets!

Weekly technical indications for Friday, July 6th: At this time the week’s trading range is 22.69-221.03, the last print is 22.13. The stochastic remains in buy mode. RSI at 51.37 is stronger than last week’s indication of 43.64. The M.A.C.D. histogram at 0.05 is higher than last week’s indication of-0.15. Buy on breaks to support and use sound money management. A weekly close of 20.72 or higher in October Sugar will turn the weekly trend up.

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(73)

Robin Rosenberg — 2012-07-02T14:54:00Z

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

Coffee had been in a major bear market for nearly 14 months. It’s become extremely oversold and the technicals are screaming buy. User and producer inventories are reported to be near record lows. While the changing dynamics are positive on their own, the frost season should put a floor under the market.

Standard Charter Bank has added arabica coffee to it’s buy list. Arabica demand had softened due to high prices. The market has fallen a bit more than 50 percent from it’s April 2011 highs. Setting a new contract low in the spot July contract of $1.49.20 per pound. At this price level I expect that dynamic to disappear in short order. Talk is that coffee packagers plan to continue using robusta coffee as filler even though arabica’s price has fallen markedly. I don’t blame them as their profit margins likely suffered when arabica was near it’s highs.

Coffee consumption is inelastic and continues to climb on a global scale, particularly in the emerging markets. A 50 percent retracement would take coffee up to $2.25. If next years off cycle Brazilian crop suffers weather related damage the rally now underway could become more than just a retracement.

Weekly technical indications on Friday, June 29th: At this time the week’s trading range is 168.55-154.10, the last print is 165.60. The stochastic has issued new buy signal. RSI at 33.02 is stronger than last week’s indication of 22.38. The M.A.C.D. histogram at -0.5 is markedly higher than last week’s reading of -1.56. This is one strong market. Buy on breaks to support and use sound money management. A weekly close of 150.60 or lower in September 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

The elderly trading range that began in late December of 2011 continues to tread wearily along. Consumption continues to climb. Demand from countries with developing economies will likely fill in for any lack of European and / or U.S. demand.

Dry weather, disease and insect damage have taken a toll on this year’s mid crop cocoa. Cocoa beans sampled from this season’s mid crop are of low quality. Some mid crop harvests have been delayed by heavy rains. Talk is that cocoa beans from this year’s mid crop are small in size. This mid crop harvest will be smaller than was expected. Welcome to the world of climate change.

The short term supply situation is worsening. Odds are we have seen the lows in cocoa. Ivory Coast mid crop is expected to be a bust. Much lower production than had been expected. It will take more beans to make a block of chocolate. Both fundamentals and technicals are bullish.

Weekly technical indications for Friday, June 29th: At this time the week’s trading range is 22.59-20.85 the last print is 22.32. The stochastic has issued a new buy signal. RSI at 46.93 is stronger than last week’s indication of 41.21. The M.A.C.D. histogram at 5.32 is higher than last week’s indication of -0.97. Buy on breaks to support and use sound money management. A weekly close of 21.65 or higher in September 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)

Last season, the southwestern U.S. was hit with extreme drought brought on by La Nina. Now La Nina has dissipated and El Nino has taken its place. There should be more than enough moisture this time around for the Southwestern U.S. The major problem facing U.S. cotton farmers this season are insects. The early spring will result in at least one more generation, maybe two more than is normal.

Weeds will also be a challenge. Insecticides and herbicides cannot just be applied any time a farmer wishes. Both of these products can slow plant development. There is one weed in particular that can wreak havoc in the cotton fields. P-I-G-W-E-E-D This troublesome weed has become very difficult to control. The plant has become herbicide resistant. This mutant can produce stalks of three to four inches in diameter that can cause major damage to expensive farm equipment.

Though cotton prices have retreated near 40 percent the U.S. apparel industry has not bounced back from the high priced cotton of 2011. If only we were able to build consumer and business confidence the economy would improve markedly. Cotton apparel would be in high demand. The main driver behind the U.S. economy is the consumer. Robert Reich, now a professor at the University of California, Berkeley describes the situation perfectly. “It’s because American consumers, whose spending is 70 percent of economic activity, don’t have the dough to buy enough to boost the economy – and they can no longer borrow like they could before the crash of 2008”. Nuff said.

Weekly technical indications for Friday, June 29th: At this time the week’s trading range is 70.68-66.10, the last print is 69.80. The stochastic remains in buy mode. RSI at 27.14 is stronger than last week’s indication of 25.95. The M.A.C.D. histogram at -1.98 is higher than last week’s reading of -2.43. Cotton is turning up. Buy on breaks to support and use sound money management. A weekly close of 66.88 or lower in October 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

Unica, Brazil’s Sugarcane Industry Association is preparing to revise it’s forecast for the country’s key center south sugar production area. Heavy rains continue to interfere with harvest activity. Sugar production for the first two weeks of June was 1.37 million tonnes. That’s a decrease of 32 percent compared to the same time last season. Nearly every Brazilian growing area has been affected. Unica expects to issue the new forecasts by the end of July.

Many of Brazil’s growing areas have received twice their normal rainfall this growing season. Water at this stage of the game will cause yet to be harvested sugarcane to grow like there’s no tomorrow. That’s not a good thing at this point. The sugar content of the cane will not be anywhere near normal. A larger amount of cane must be crushed to refine a tonne of sugar. This is certainly not positive for the sugar grower’s bottom line. The Macquarie Group has rescinded it’s forecast calling for an increase in Brazil’s sugar production compared to 2010-11.

Sugar is poised for a move to the upside. The second half of the year is strewn with holidays and consumption climbs. Sugar usually moves higher from the beginning of summer through year’s end. Unusually high volume, coupled with higher highs and higher lows indicate the sugar market has bottomed. The fundamentals and technicals are bullish.

Weekly technical indications for Friday, June 29th: At this time the week’s trading range is 21.39-19.71, the last print is 20.73. The stochastic remains in buy mode. RSI at 41.35 is stronger than last week’s indication of 33.34. The M.A.C.D. histogram at -0.17 is higher than last week’s indication of-0.3. Buy on breaks to support and use sound money management. A weekly close of 20.72 or higher in October 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(72)

Robin Rosenberg — 2012-06-29T14:54:00Z

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

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

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)

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

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

The Soft Spot(71)

Robin Rosenberg — 2012-06-22T14:54:00Z

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

Arabica Coffee futures have declined near 33 percent in 2012. Expectations of a record Brazilian harvest had traders shorting Coffee with reckless abandon. With a majority of the speculators on the short side it was only a matter of time before the market corrected to the upside. In Guatemala business was reported to be rather slow, but demand was picking up. I wrote last week that all surprises will likely be to the upside – surprise!

Costa Rica and Guatemala are concerned about further drops in price and are selling off their Coffee inventories. Uneasiness related to Tropical Storm Carlotta likely pressured a large number of shorts to liquidate their positions. After battering the southern coast of Mexico early this week this storm has weakened. At least three fatalities and an excess of 1,000 injuries are blamed on the storm.

The advance decline indicator or ADX has confirmed the end of the down trend. The macroeconomic picture has taken a turn for the better. Developing economies are drinking more Coffee. Brazil’s crop will be smaller next year as it’s an off year in the countries on / off Coffee growing cycle. There are many reasons to buy on weakness. Coffee is screaming for your attention!

This market is far more oversold than you may think. This brings back recollections of Coffee’s rise to $3.00 plus in April of 2011. The week saw Coffee put in it’s largest weekly trading range since March of this year. An assortment of indicators have been scraping the bottom as well.

Weekly technical indications on Friday, June 22nd: At this time the week’s trading range is 161.50-150.10, the last print is 157.75. The stochastic is in sell mode. RSI at 25.11 is stronger than last week’s indication of 17.72. The M.A.C.D. histogram at -1.42 is a higher than last week’s reading of -1.76. This market has bottomed after breaking more than 50% from it’s highs of 300.15. A weekly close of 154.75 or higher in September Coffee will turn the weekly trend up. Expect all surprises to be to the upside.

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

Eighteenth century Swedish botanist Carolus Linnaeus re-named the Cocoa tree Theobroma Cacao which is Greek for “Food of the God’s”. It remains the official botanical name to this day.

Chicago based Mars Chocolate intends to purchase close to 90,000 tonnes of certified Cocoa in 2012. The Company’s 2011 Cocoa purchases were certified according to Rainforest Alliance and UTZ Certified standards. At present Mar’s sells six products worldwide that are labeled through the Rainforest Alliance and UTZ Certified. In 2011Mar’s announced plans to partner with Fairtrade International. Visit the sites of these organizations. What they do is well respected and much needed.

Mars has focused on three distinct areas of the Sustainable Cocoa Initiative. Mapping the Cocoa genome in partnership with IBM and the U.S. Department of Agriculture. Transferring advanced technology and agricultural methods to Cocoa farmers aiming to increase productivity. With emphasis on the company’s Vision for Change program whose focus is on the Ivory Coast as well as third party certification. I would very much like to see more of this from other major chocolatiers.

The size and quality of freshly harvested Cocoa beans is not up to par. Farmers are hoping for better results as the mid crop harvest’s kick into high gear. In some growing areas harvest has not yet begun, but will in short order. If issues with quality and size persist a sizable amount of this year’s mid crop Cocoa will be exported in processed form. Ghanaian Cocoa officials have forecast a 15 percent decline in production compared to last year. This situation is bullish and if it continues I would expect higher Cocoa prices in the near future.

Weekly technical indications for Friday, June 22nd: At this time the week’s trading range is 22.66-21.24 the last print is 21.30. The stochastic remains in sell mode. RSI at 41.84 is lower than last week’s indication of 46.27. The M.A.C.D. histogram at 4.4 is higher than last week’s indication of -0.19. This market appears to have bottomed. Buy breaks against support. A weekly close of 21.86 or lower in September 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)

Less Cotton was planted by U.S. Cotton farmers than was expected. According to Informa Research U.S. Cotton acreage was cut by one million acres to thirteen. Corn and soybeans benefitted from the decrease as their acreage estimates were increased. India’s monsoon season has gotten off to a slow start and weather in Texas and Chinese growing areas has not been as favorable as farmers would have liked.

October Cotton has put in a reversal to the downside. This is bearish for Cotton prices. Cotton futures have rallied near 30 percent in two weeks. One could make a case that the market has set itself up for a large break. The tail of this rally was attributed to short covering due to news of an order from China for 744,000 running bales of U.S. Cotton. This is a huge order. The exporter handling it faces one heck of a challenge. The Cotton necessary to fulfill the order must be shipped by July 31^st. Rumor has it that a U.S. Cotton merchant is paying a premium over July Cotton futures to fulfill the order.

Bob Rose, chief meteorologist with the Lower Colorado River Authority in Austin, Texas expects El Nino to mature some time later this year. Most likely during the late summer or early fall time frame. El Nino generally provides plenty of rain in the Southwestern U.S.

Weekly technical indications for Friday, June 22nd: At this time the week’s trading range is 75.00-67.00, the last print is 68.61. The stochastic remains in buy mode. RSI at 25.42 is weaker than last week’s indication of 27.25. The M.A.C.D. histogram at -2.48 is lower than last week’s reading of -2.68. I’m bullish Cotton; however this week’s market action has painted a key reversal on the charts. A weekly close of 67.20 or lower in October Cotton will turn the weekly trend down. Expect surprises to be to the upside.

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

Expectations for a large Sugar crop from Brazil this season have been dashed. The heavy rains that fell in May hampered crushing operations at center south region Sugar mills. They have lost near nine days of production thus far. Weather will come and go. It’s not a permanent problem, but old cane stock is an ongoing problem. Until old cane stock is replaced the country will produce less Sugar going forward. This has been a problem for quite some time. Unica has indicated that large areas of land have been cleared and are waiting replanting with cane.

Annual Sugar production in the Center South is usually makes up near 90 percent of the country’s annual Sugar production. Center South mills have produced 3.53m tonnes of sugar in 2012-13. Declining 26% compared to the same time in 2011-12. According to Unica, the Brazilian Sugarcane Industry Association, Sugar cane processing stands at 35.62 tonnes. This is a drop of 17.6 percent compared to the same time last season. Rain remains a risk through June.

Southern Hemisphere Winter officially began June 20^th. The risk of frost this winter is lessened by the development of the El Nino (ENSO) in the equatorial Pacific Ocean. An El Nino can cause weather patterns that cap Sugar production in other world growing areas. India’s monsoon can be much weaker than normal. Drought can cause Sugar production in Malaysia to come to a screeching halt. Southeast Asia generally receives very little moisture during an El Nino event.

Weekly technical indications for Friday, June 22nd: At this time the week’s trading range is 21.14-19.75, the last print is 20.70. The stochastic remains in buy mode. RSI at 39.72 is stronger than last week’s indication of 33.91. The M.A.C.D. histogram at -0.25 is higher than last week’s indication of-0.39. Sugar has bottomed. Expect surprises to be to the upside. A weekly close of 20.01 or lower in October 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(70)

Robin Rosenberg — 2012-06-15T14:54:00Z

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

Colombia’s 2012 Coffee production may be it’s lowest in more than 30 years. The historic production of years past might never be reached again. The country’s output last year was 7.8 million 60 kilo (132 lbs) bags and the lowest in three decades. This caused Colombia to slide from the world’s third largest Coffee producer to fifth. Behind Brazil, Vietnam, Indonesia and Ethiopia.

Coffee output has been negatively affected by four years of heavy rains as well as disease. An additional factor affecting the country’s Coffee production is the plantation renovation program put in place by the government. It will take some time for new Coffee trees to mature and begin producing. The average maturation time for a Coffee tree is three to five years. Peak production is reached in ten to fifteen

In the twelve months preceding April there were declines in output compared to a year earlier. April’s Coffee production was estimated to be 580,000 60 kilo (132 lbs) bags and up eleven percent from a year ago. The Colombian Coffee growers’ federation Fedacafe estimates May production to be 689,000 60 kilo (132 lbs) bags. If so that would equal a two percent rise above last year. This could very well be the start of a positive turnaround for Colombia’s Coffee production.

Weekly technical indications on Friday, June 15th: At this time the week’s trading range is 157.90-148.85, the last print is 150.55. The stochastic remains in buy mode. RSI at 19.35 is weaker than last week’s indication of 20.03. The M.A.C.D. histogram at -1.06 is a bit lower than last week’s reading of -0.63. The market continues to trade just above the lower Bollinger band. Again, markets always look their worst at the bottom. A weekly close of 158.15 or higher in July coffee will turn the weekly trend up. Expect all surprises to be to the upside.

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

Civil unrest is again kicking up it’s heels in the Ivory Coast. Last Friday seven U.N. peacekeepers from Niger were killed in a raid in the southwestern town of Tai near the Liberian border. Talk is that the U.N. peacekeepers lost their credibility by taking one side and are not keeping the peace. This has to be stopped in it’s tracks immediately. The country’s Cocoa industry is at risk. This attack is likely related to the trial of the country’s former president Laurent Gbagbo. Proceedings are scheduled to get underway June 18^th at The Hague.

The Cankerworm (think Inchworm) attacks in Southwest Nigeria have been brought under control. Fortunately the Nigerian government provided the proper insecticide (the pathogen Bacillus thuringiensis) in the quantity necessary to do so. If not, the damage would have devastated the Cocoa crop as well as the farmer’s pocketbooks. Did you ever watch an Inchworm eat? It can devour a leaf in what seems like no time. All that is left are the stem and branch veins. Prices for graded Cocoa beans in southwest Nigeria are higher due to their scarcity. Nigeria’s 2012-13 main Cocoa crop is scheduled to begin in August.

Mid crop harvest is starting late in the Ivory Coast this year. Early reports indicate the long dry spell earlier in the season damaged it’s Cocoa trees. The harvested beans are smaller than normal. Small beans are difficult to market. My guess is they will be processed and sold as semi finished or finished products like powder and butter. This is one of the reasons the country has become a major Cocoa processor. The International Cocoa Organization has said it expects emerging market Cocoa demand to remain strong this season. This could assist in holding Cocoa prices at their present level or higher.

Weekly technical indications for Friday, June 15th: At this time the week’s trading range is 22.14-21.79 the last print is 22.05. The stochastic remains in sell mode. RSI at 45.35 is higher than last week’s indication of 44.92. The M.A.C.D. histogram at 4.82 is higher than last week’s indication of 3.23. The majority of this week’s market action again took place between the 9 bar average and the center Bollinger band. Top to bottom the market pierced both of those indicators and now resides just below the center Bollinger band. A weekly close of 21.72 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)

I’m getting quite scientific this week. This is the second time I’ve mentioned BT (Bacillus thuringiensis). BT Cotton is a variety of cotton seed developed with BT that keeps insects away. Concerns had been raised over toxins produced by BT crops. In the U.S. there is concern that BT crops are killing off the Honey bee population.

Cultivation of BT cotton seeds in India began in 2002-03. Since then the average income of the countries Cotton farmers has increased by near 375 percent. Yield has improved by 4.95 percent and Cotton growing area by 4.91 percent. Overall, production has increased some 9.25 percent across India’s Cotton growing areas. As long as wildlife is not negatively affected it looks like we are on to something here. Insecticide manufactures are not happy about this development.

Cultivation of hybrid BT cotton seeds, which began in 2002-03, has seen the average income of farmers increasing by almost 375 percent, the average cotton yield by 4.95 percent, cotton areas by 4.91 percent and production by 9.25 percent across India’s major cotton growing states,” said the study.

The USDA has forecast 2012-13 world Cotton ending stocks at a record of 74.51 million 480 pound bales. That’s up 1.03 percent from last week’s estimate of 73.75 million bales.

Weekly technical indications for Friday, June 15th: At this time the week’s trading range is 81.37-73.27, the last print is 79.92. The stochastic is in buy mode. RSI at 42.49 is stronger than last week’s indication of 32.23. The M.A.C.D. histogram at -1.76 is lower than last week’s reading of -2.45. Currently above the 9 bar average, July Cotton had it’s best upside week in months. A weekly close of 69.19 or lower in July Cotton will turn the weekly trend down. Expect surprises to be to the upside.

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

China’s January through June Sugar imports stand at 600,000 tonnes. 500,000 tonnes of which were purchased in the first quarter of 2012. The second half of 2012 could see China’s Sugar imports down 25 percent on the year. So, China’s Sugar imports will have little effect going forward in 2012.

There are a number of issues that should be supportive to Sugar prices. If Brazil’s poor early Center South crush is an indication of what’s to come Sugar prices could continue to move higher. The Indian monsoon may not bring the amount of rain necessary to produce a hefty crop. This is due to the formation of an El Nino the equatorial Pacific Ocean. El Nino can also cause severe drought in Southeast Asia. In 1998 the region suffered the worst drought in 100 years due to the effects of an El Nino.

Ramadan is on the horizon and India’s wedding season is not far behind. I do not like the odds for a resumption of the down trend in Sugar. The ethanol, Sugar switchover point has been 19 to 20 cents a pound for quite some time. The need to factor in the Brazilian real’s depreciation has created a stumbling block for many analysts. According to Rabobanks Andy Duff Sugar was only marginally more renumerative than ethanol at the end of last month. If mills decide to convert more Sugarcane to ethanol production than refined white Sugar it will buoy Sugar prices as well.

Weekly technical indications for Friday, June 15th: At this time the week’s trading range is 20.62-19.81, the last print is 20.19. The stochastic is now in buy mode. RSI at 38.52 is stronger than last week’s indication of 36.90. The M.A.C.D. histogram at -0.32 is higher than last week’s indication of-0.44. The market pierced the 9 bar average, but failed to hold and broke back below it. A weekly close of 19.51 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.

The Soft Spot(69)

Robin Rosenberg — 2012-06-08T14:54:00Z

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

Swiss based trader Volcafe has forecast global Coffee production to reach 134.3 million bags in 2011-12. A 2.3 million bag increase over and above their previous forecast of 132 million bags. Global Coffee consumption in 2011was up 1.7 percent, but below the twelve year average. According to the International Coffee Organization (ICO) Higher Coffee prices were to blame. Coffee is affected by the global macroeconomic situation. That situation as it exists today is bearish.

What we have here is an unexpected spike in production and lower consumption. It’s no wonder Coffee prices have been under pressure. In fact this break has lasted longer than any other over the last 31 years! When Coffee futures exceed $3.00 they generally turn south in a hurry. Take a look at a long term weekly chart, it’s as plain as day. The Brazilian real continues to trend lower against the U.S. dollar. This will bring an increase in the country’s exports.

It may be time for one of the most profitable trades in soft commodities to be closed. The long Robusta, short Arabica Coffee trade to be exact. Arabica Coffee futures are down 27% this year. Robusta Coffee futures up 25%.Brazil’s 2012-13 crop year is an off year for Coffee production. If global macroeconomic conditions improve, demand for Arabica Coffee will increase and the spread will reverse. Another factor to consider is the stockpile of Vietnamese Robusta Coffee farmers are sitting on. They continue to wait for higher prices to sell. It’s only a matter of time until that Coffee hits the marketplace.

Weekly technical indications on Friday, June 8th: At this time the week’s trading range is 159.35-154.25, the last print is 155.50. The stochastic remains in buy mode, but just barely. RSI at 19.54 is weaker than last week’s indication of 20.03. The M.A.C.D. histogram at -1.02 is lower than last week’s reading of -0.11. The market is trading just above the lower Bollinger band. Markets always look their worst at the bottom. A weekly close of 160.35 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

We all know Africa is the world’s largest producer and exporter of Cocoa. If not, you do now. Overtaking a financially strapped Europe, Africa is about to become the world’s number one Cocoa processor as well. The International Cocoa Organization (ICO) has raised it’s estimate for world Cocoa production in 2011-12. The increase is directly related to better than expected production in the Ivory Coast. African Cocoa grindings are expected to reach 1.68 million tonnes. If so it will be the first time African grindings surpass European grindings. European grindings are forecast to decrease by 15,000 tonnes to 1.6 million tonnes.

Europe has been the world’s number one Cocoa processor for decades. The majority of processing plants are located throughout Germany and in and around Amsterdam. Firms that process Cocoa in the Ivory Coast receive a discount on export duties. This has large, cash rich corporate interests benefiting while local Cocoa farmers cry foul. Western chocolate producers are moving away from processing Cocoa themselves and someday in the future will have no need for Cocoa beans.

Sulawesi Island is the number one Cocoa production area in Indonesia. The country is the world’s third largest Cocoa producer. May’s Cocoa exports were 7,412 tonnes; down 6.3 percent from April’s exports of 7,912 tonnes. Selling Cocoa to local Cocoa processors is far more profitable than exporting. The tax on Cocoa exports is five percent or near $100 per tonne. That’s a sizable chunk of change. Sulawesi Island produces near 75 percent of Indonesia’s Cocoa. Cocoa exports from the island are down are down 47 percent, or 26,238 tonnes from a year ago at this time.

Weekly technical indications for Friday, June 8th: At this time the week’s trading range is 22.50-21.95 the last print is 21.95. The stochastic remains in a sell signal. RSI at 44.37 is higher than last week’s indication of 37.64. The M.A.C.D. histogram at 3.38 is higher than last week’s indication of 1.11. The majority of this week’s market action took place between the lower Bollinger band market and the 9 bar average. It did pierce both of those indicators, but failed to follow through. A weekly close of 20.99 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)

There is much concern that China will begin to sell Cotton from it’s large inventory. Why would they do that? The reserves had been depleted until they were restocked last year and the country has been buying Cotton from it’s domestic growers to help ease their financial burden. Believe me, China will not do anything that lowers the value of it’s holdings. Whatever China does do will be well thought out and quietly executed. They are the perhaps the most astute traders in the world. Trust me; it won’t be on the evening news. Perhaps some of their inventory will be auctioned off prior to the arrival of the new crop to rotate stocks.

This week Cotton futures fell to their lowest level since November 2009. Demand will continue to fall if the world’s macroeconomic condition continues to worsen. As a firm believer in contrary opinion I find this situation to be out of control. At some point there will be a short covering rally to beat the band. Sure, slowing economic growth will cut demand, but as they say “how low can it go? This market has fallen dramatically. This is a very tricky situation. If demand were to improve on the back of low prices there’s no telling how high Cotton prices could go.

Plenty of rain fell over West Texas this week. Calming farmers fears of another drought like last years. Expect crop conditions to improve next week. The drought was directly related to the la Nina event which has since dissipated. Remember, markets always look their worst at the lows.

Weekly technical indications for Friday, June 8th: At this time the week’s trading range is 74.88-66.10, the last print is 72.36. The stochastic remains in sell mode. RSI at 31.39 is stronger than last week’s indication of 24.56. The M.A.C.D. histogram at -2.48 is slightly lower than last week’s reading of -2.46. July Cotton futures fell to new contract lows this week – again continues it’s slide down the lower Bollinger band. A weekly close of 68.62 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

Good bye and good riddance to La Nina. Hello to El Nino; otherwise known as the southern oscillation. There is a very good chance an El Nino will form this year. El Nino’s are known to bring drought to Indonesia and weaken the Indian monsoon. This is not a given, but it has a better than average chance of happening.

It’s critical that India receive a good monsoon. It will provide the moisture necessary to produce a large Sugar crop. If it doesn’t occur all the squawking and belly aching regarding the global surplus of Sugar will disappear and Sugar prices will head higher. Indonesia could experience drought as well.

According to the Indonesian Sugar Association the country’s Sugar prices rose ten percent in May. The Muslim holiday of Ramadan begins in July and ends in August this year. Demand is estimated to reach 275,000 – 300,000 tonnes in July and August. Demand generally runs near 220,000 tonnes during other months. They expect an additional rise of five to ten percent due to low local inventories. Indonesia is the largest consumer of Sugar in Southeast Asia.

Mexico’s 2011-12 Sugar production through Monday June 4^th was 4.77 million tonnes. That’s down four percent compared to the 4.97 million tonnes harvested during the same time last year. The country’s National Committee for the Sustainable Development of Sugarcane had forecast production of 5.31 million tonnes for the period. Unusually dry weather early in the growing period lowered the sucrose content of the cane. This requires that more cane be crushed to obtain the same quantity of Sugar if the cane had developed properly. Blame Mother Nature for this.

Weekly technical indications for Friday, June 8th: At this time the week’s trading range is 20.43-18.86, the last print is 19.69. The stochastic remains in sell mode, but is close to issuing a buy signal. RSI at 34.61 is stronger than last week’s indication of 29.60. The M.A.C.D. histogram at -0.46 is higher than last week’s indication of-0.53. The market spiked up to the 9 bar average, but failed and broke back. A continuation of the risk on psychology present this week could give birth to a sizable short covering rally. A weekly close of 19.35 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(68)

Robin Rosenberg — 2012-06-01T14:54:00Z

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

The La Nina weather event is dissipating. This should bring drier weather to the Coffee growing areas of Colombia and allow it to produce the quality and quantity of Coffee it is known for. Prior to the last few growing seasons Colombia was the world’s second largest producer of mild, washed Arabica Coffee. This past season Peru exported Coffee to Colombia to make up for tight supply. Production is expected to reach nine million bags next season. This would be the largest production number since 2008 when the Colombian Coffee crop reached 11.5 million 60 kilo bags.

It’s finally here! The Brazilian 2012-13 Coffee harvest has started in earnest. The Brazilian government expects a record crop of 50.45 million 60 kilo bags. The Brazilian real dropped to three year lows verses the U.S. dollar last week. Not what growers want when they have a record harvest on their hands. On Wednesday July Coffee futures fell to levels not seen in two years. The country’s currency weakness and bumper Coffee crop are to blame.

The U.S. Department of Agriculture expects Viet Nam’s Coffee output for 2011-12 to reach 21 million 60 kilo bags or 1.2 million tonnes. That’s an eight percent gain over the prior season. Good growing weather and investment in production are said to be behind the increase. Vietnamese growers continue to hold back Coffee supplies while awaiting higher prices.

Uganda’s Coffee exports are forecast to drop by as much as 27 percent in May. An exceedingly long rainy season is delaying the drying of the Coffee beans. The country was Africa’s largest Coffee exporter and the world’s ninth largest through September of 2011. The majority of Ugandan coffee is of the Robusta variety. Robusta is used to make espressos and instant drinks. In the 2010-11 marketing year Uganda exported 3.15 million 60 kilo bags and took in $448.89 million. Expectations for 2011-12 exports are 3.1 to 3.2 million 60 kilo bags.

Weekly technical indications on Friday, June 1st: At this time the week’s trading range is 169.45-158.35, the last print is 158.40. The stochastic is in sell mode. RSI at 20.37 is weaker than last week’s indication of 23.43. The M.A.C.D. histogram at -0.55 is lower than last week’s reading of 0.02. The market is trading between the 9 bar average and lower Bollinger band. A weekly close of 170.90 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

Ivory Coast’s 2011-12 production may surpass last season’s by a mere 5,000 tonnes. Ghana has purchased eight percent less Cocoa than it did last season at this time. Beans from West Africa’s 2011-12 main crop Cocoa production are small in size and the supply is tight. Rain is forecast through the end of the week. The moisture will assist the development of the yet to be harvested mid crop.

Nigeria’s mid crop Cocoa is under attack by insects. This time it is affecting all of the country’s growing areas. Cocoa farmers in the Cocoa producing states of Edo, Osun, Ondo and Oyo report that insects are eating the leaves of their Cocoa trees and damaging Cocoa pods. If these insect attacks aren’t stopped soon the farmers could lose 40 to 50 percent of the mid crop harvest. The countries Cocoa farmers are up in arms. Some believe they will lose their entire mid crop production. The government has provided insecticide and the hardware needed to apply it. Hopefully its effective.

Cocoa was once the lifeblood of the Nigerian economy. The country once ranked as a leading West African Cocoa producer. When the oil boom hit in the 1970’s the Cocoa sector was all but ignored. Little Government support was available to the Cocoa industry and caused the Cocoa industry to falter. Many plans to improve the country’s Cocoa production have been drafted over the years, but none have really been put in play. Today, the Federal Government’s Cocoa Transformation Agenda is committed to transforming Nigeria’s Cocoa production to the point where it once again becomes one of the world’s leading Cocoa exporters. There are plans to establish the Cocoa Market and Trade Corporation, or CMTC, to assist in creating profitable markets for Cocoa farmers and increase their incomes. We shall see about this; talk is cheap.

Weekly technical indications for Friday, June 1st: At this time the week’s trading range is 21.56-20.47 the last print is 20.72. The stochastic remains in sell mode. RSI at 37.94 is again lower than last week’s indication of 39.24. The M.A.C.D. histogram at 1.75 is much lower than last week’s indication of 11.74. The market traded to just below the lower Bollinger band this week and just barely below it’s five month old trading range. A weekly close of 21.44 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)

Sideways, range bound trading had been taking place near $1.00 a pound for almost four months. Over the last few weeks Cotton has declined markedly. At this point in time July Cotton has traded to a low of 70.53 cents a pound. The Cotlook “A” index represents the international offering price for Cotton. The index remained at or above $1.00 per pound from September of 2010 to the end of April 2012. There were a few brief visits below $1.00 from November 2011 on.

Let’s review the global Cotton situation. Global Cotton usage is down for the second consecutive season and Cotton mills are operating well below capacity. The breakout below $1.00 can be attributed to forecasts for a large increase in global ending stocks. If it comes to pass, ending stocks will have increased for the second consecutive season.

The International Cotton Advisory Committee (ICAC) expects ending stocks to rise by 41 percent in 2011-12 to 14.2 million tonnes. Add to that the nine percent increase ICAC expects in 2012-13 and global Cotton stocks will equal 59 percent of global production. The large uptick in global Cotton stocks is directly related to the eight percent increase in production in 2011-12 following the post Civil War highs of 2010-11.

Weekly technical indications for Friday, June 1st: At this time the week’s trading range is 75.33-70.38, the last print is 70.90. The stochastic remains in sell mode. RSI at 26.04 is lower than last week’s indication of 28.00. The M.A.C.D. histogram at is lower than last week’s reading of -2.29. July Cotton fell to new contract lows again this week. A weekly close of 73.68 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

Weakness in the Brazilian real is beginning to weigh heavily on Sugar prices. Jonathan Kingsman, chairman of Swiss based Kingsman SA expects global Sugar prices to continue moving lower over the coming months if weakness in the real continues. We must monitor this situation closely.

An increasing amount of Sugar is being used to refine ethanol and used as a sweetener to boot. Competing more and more with corn; it’s come to a point where weather in the growing areas of Brazil and India could become less important and Sugar may trade in step with grains. Is Sugar a grain in disguise? This sounds awfully strange to me, but things do change and traders have no choice but to change with them.

China is expecting a 2 million tonne shortfall in domestic Sugar production this season. Australian Sugar industry executives expect Chinese import demand and regional supply tightness to hold Sugar prices at a premium to benchmark global prices. This technically oversold market could use a correction to the upside. I am not saying it’s going to happen, but it certainly could.

Weekly technical indications for Friday, June 1st: At this time the week’s trading range is 19.82-19.22, the last print is 19.29. The stochastic remains in sell mode and extremely oversold. RSI at 30.30 is weaker than last week’s indication of 31.62. The M.A.C.D. histogram at -0.52 is barely lower than last week’s indication of-0.51. The market continues to trade along the lower Bollinger band. A weekly close of 19.91 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(67)

Robin Rosenberg — 2012-06-01T14:54:00Z

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

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

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)

U.S. exports of upland Cotton for the week ending October 7^th 2010 totaled 548,800 running bales. Down 1 percent from the previous week, and 9 percent lower than the previous four week average. These are extremely large numbers.

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

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

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.

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.

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.