Commodity Futures Trading

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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | February 10, 2023

• COTTON

General Comments: Cotton was lower mixed in directionless trading and still remains inside the trading range created since the beginning of November. The market recovered much of its losses after the WASDE report weas released. WASDE showed less domestic use and an increase in ending stocks to 230,000 bales. World data showed less production to help futures recover from the lows. Futures still appear destined to trade down to the bottom of that range at about 8000 March. Futures are still showing bad demand fundamentals as the weekly export sales reports have shown moderate sales at best. Sales were moderate in the reports released yesterday. Overall, the demand for US Cotton has not been strong although better demand has developed over the last couple of weeks. Some ideas that demand could soon increase as China could start to open its economy in the next couple of months as Covid outbreaks should start to weaken as people get vaccinated or immune. Covid is now widespread in China so the beneficial economic effects of the opening are being delayed but these effects should start to be felt as the people there achieve immunity over the next few weeks.
Overnight News: The Delta will get isolated to scattered showers and above normal temperatures. The Southeast will see scattered showers and above normal temperatures. Texas will have mostly dry conditions and near to below normal temperatures. The USDA average price is now 83.32 ct/lb. ICE said that certified stocks are now 1,147 bales, from 8,900 bales yesterday. USDA said that weekly net Upland Cotton expot sales were 262,800 bales this year and 4,800 bales next year. Net Pima sales were 1,300 bales this year and 0 bales next year.
Chart Trends: Trends in Cotton are mixed. Support is at 83.10, 82.00, and 81.30 March, with resistance of 87.00, 87.50 and 88.90 March.

• FCOJ

General Comments: FCOJ was higher again yesterday and closed at new highs for the move. The moves were supported by a new round of USDA production reports released on Wednesday. The reports showed that Florida produced only 16 million boxes of Oranges this year. Florida oranges are the main food stock for the FCOJ processors. Chart trends are up on the daily and weekly charts. Demand should start to improve as the northern Winter passes by. Historically low estimates of production due in part to the hurricanes and in part to the greening disease that have hurt production, but conditions are significantly better now with scattered showers and moderate temperatures. The weather remains generally good for production around the world for the next crop including production areas in Florida that have been impacted in a big way by the two storms seen previously in the state. Brazil has some rain and conditions are rated good.
Overnight News: Florida should get mostly dry conditions. Temperatures will average above normal. Brazil should get scattered showers and near normal temperatures.
Chart Trends: Trends in FCOJ are up with no objectives. Support is at 257.00, 251.00, and 245.00 March, with resistance at 271.00, 277.00, and 283.00 March.

DJ Retail OJ Prices Surge to New Record — Market Talk
0926 ET – Retail orange juice prices have reached a new record-high, according to data from Nielsen. Average price rose to $8.78 a gallon, which is up 3.1% from Nielsen’s previous assessment and a record high. The uptick in retail OJ prices comes as futures prices have surged in recent days, finding new record highs in reaction to the USDA pegging Florida orange production at 16 million boxes in the 2022/23 marketing year — down from roughly 41 million boxes last year. However, FCOJ futures on the ICE are down 3.8% this morning. If they close down, then it’ll be the first time in the past 13 trading sessions that FCOJ futures have dropped — with some traders pointing out that orange crops in other countries like Brazil are robust. ([e-mail]; @kirkmaltais)

• COFFEE

General Comments: New York and London closed lower again yesterday. Price trends are sideways on the charts, but both markets show the potential to work lower into next week. Ideas of big production for Brazil continue due primarily to rains falling in Coffee production areas now and as offers stayed strong from Brazil and increasingly from Vietnam. Vietnam is estimated to have veery good production this year due to a good growing season and less rain now as harvest expands again. There are ideas that production potential for Brazil had been overrated. The weather in Brazil is currently very good for production potential but worse conditions seen earlier in the growing cycle hurt the overall production prospects as did bad weather last year.
Overnight News: ICE certified stocks are lower today at 0.880 million bags. The ICO daily average price is now 172.50 ct/lb. Brazil will get isolated showers in northern areas with near to above normal temperatures. Central America will get scattered showers. Vietnam will see scattered showers.
Chart Trends: Trends in New York are mixed to up with objectives of 204.00 and 237.00 March. Support is at 170.00, 167.00, and 165.00 March, and resistance is at 178.00, 184.00 and 186.00 March. Trends in London are mixed to up with no objectives. Support is at 2020, 2000, and 1970 March, and resistance is at 2110, 2120, and 2150 March.

DJ Brazil Coffee Exports Fell 16.8% in January, Cecafe Says
By Jeffrey T. Lewis
SÃO PAULO–Brazilian coffee exports fell in January amid scant reserves from previous crops and reluctance by farmers to sell their remaining stocks, according to exporters group Cecafe.
The South American country exported 2.8 million 132-pound bags of coffee last month, a decline of 16.8% from the same month a year earlier, Cecafe said Thursday. From a year ago, sales abroad of the arabica variety of coffee dropped 18.7%, to 2.4 million bags, while exports of robusta beans fell 12.3%, to 87,584 bags.
Exports of ground, roast and soluble coffee fell 0.6% from a year ago, to 322,506 bags, Cecafe said.
The crops of 2021 and 2022 were both hit by bad weather that reduced output, leaving less beans available for sale ahead of this year’s harvest, said Cecafe President Marcio Ferreira.
“We are in the off-season, after two smaller harvests that were impacted by strongly adverse weather in the last few years. There is also still some resistance on the part of producers to sell their 2022 harvest stock at the current price,” which has fallen significantly since October, Mr. Ferreira said.

• SUGAR

General Comments: New York and London closed higher again yesterday and trends are turning up on the daily charts. Ideas are that the market has priced in production losses in India and is providing renumeration for Indian and Thai exporters who want to sell. Ideas of better supplies coming might keep futures prices in check even with a rather tight nearby scenario. Good production prospects are seen for crops in central and northern areas of Brazil, but the south should turn dry again and so should some northern areas. The harvest is active in Thailand. Australia and Central America harvests are also active. Mills in Brazil are shutting down now with the majority of the harvest now complete and processed.
Overnight News: Brazil will get scattered showers. Temperatures should average near to above normal. India will get mostly dry conditions and near to above normal temperatures. ICE NY said that 98 notices were post4ed against March futures for Sugar 16 contracts
Chart Trends: Trends in New York are mixed to up with objectives of 2150 and 2200 March. Support is at 2130, 2100, and 2050 March and resistance is at 2190, 2220, and 2250 March. Trends in London are mixed to up with objectives of 603.00 and 692.00 March. Support is at 569.00, 555.00, and 547.00 March and resistance is at 574.00, 579.00, and 583.00 March.

DJ Brazil Center-South Mills Crushed 307,300 Tons of Sugar Cane in 2H January
By Jeffrey T. Lewis
SAO PAULO–Brazilian sugar mills in the country’s center-south region continued to operate in the second half of January after crushing no cane in the same period a year earlier, according to industry group Unica.
Center-south mills crushed 307,300 metric tons of cane in the period, Unica said Friday. They produced 17,000 tons of sugar, after producing none a year earlier, and made 213.1 million liters of ethanol, an increase of 30%.
The production mix for the second half of January was 43.1% sugar to 56.9% ethanol, compared with 100% ethanol in the same period a year ago.
The center-south accounts for about 90% of Brazil’s sugarcane production. Bad weather limited the amount of cane available for processing in 2021 and early 2022, so mills in the center-south closed earlier than normal a year ago.
In the period from April 1 through Jan. 31, mills in the region crushed 542.4 million tons of cane, up 3.8% from the same period a year earlier. Sugar production rose 4.5%, to 33.5 million tons, and ethanol output climbed 3.5%, to 27.9 billion liters.
The production mix for the season through Jan. 31 was 45.9% sugar to 54.1% ethanol, compared with 45% sugar and 55% ethanol in the same period a year earlier.

• COCOA

General Comments: New York closed a little lower and London closed lower yesterday with currency considerations most important. Both markets show that futures are starting to turn down from mostly a range trade, with London leading the way down. Talk is that hot and dry conditions reported in Ivory Coast could curtail mid crop production, but main crop production ideas are strong. Ghana has reported a disease in its Cocoa to hurt production potential there. The rest of West Africa appears to be in good condition. The North American grind was 8.1% lower and the EU and Asian grinds were about 2% lower. Good production is reported for the main crop and traders are worried about the world economy moving forward and how that could affect demand. Supplies of Cocoa are large at ports. The weather is good in Southeast Asia.
Overnight News: Mostly dry conditions are forecast for West Africa. Temperatures will be near normal. Malaysia and Indonesia should see scattered showers. Temperatures should average near normal. Brazil will get scattered showers and near to above normal temperatures. ICE certified stocks are higher today at 4.952 million bags.
Chart Trends: Trends in New York are mixed to down with objectives of 2470, 2460, and 2420 March. Support is at 2540, 2510, and 2490 March, with resistance at 2630, 2650, and 2670 March. Trends in London are mixed. Support is at 1950, 1930, and 1880 March, with resistance at 2010, 2030, and 2050 March.

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