Softs | The Hightower Report

Tag Archives: Softs

Coffee: Looking to Retest Last Week’s Lows

by Terry Roggensack on April 26, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

July coffee remains on the defensive this morning, although prices have avoided a retest of last week’s lows for the move so far. There was no near-term catalyst for Wednesday’s selloff but there were reports of producer selling near this week’s highs, which more than likely eroded positive market sentiment fairly quickly. A lack of bullish supply news has kept the market’s focus on a potentially record-sized Brazilian coffee crop later on this year, and kept the coffee prices from sustaining any strong move above the longer-term downtrend. Yesterday’s severe downdraft triggered the ICE exchange’s circuit-breaker, which could further add to the market’s anxiety during today’s session. Sluggish global equity markets and a rebound in the Dollar are likely to put additional pressure on coffee prices this morning as well. ICE exchange coffee stocks were down 2,806 bags at 1.524 million as of April 25th, with 17,710 pending review.

TODAY’S GUIDANCE: July coffee looks to be heading towards a retest of last week’s lows for the move later on during the session, as prices are not finding support from outside markets this morning. Given the volatile nature of coffee’s recent price action, a decisive move below the 173.90 level could lead to another sharp selloff during today’s trading.

TODAY’S MARKET IDEAS: July coffee selling resistance will be around the 178.40 level with 171.30 and then 169.40 as next downside targets.

Cocoa: Finding Support from Supply News From West Africa; Held Back Outside Markets

by Terry Roggensack on April 26, 2012

July cocoa was able to post moderate gains early in today’s session but has fallen back into negative territory this morning. A report that Asian first quarter cocoa grindings were up 5.7% from last year’s levels points towards emerging market demand as a longer-term source of strength for the market. However, this morning’s rebound in the Dollar as well as sluggish global equity markets are likely to weigh on cocoa prices during today’s trading. News of violence in the Ivory Coast today could cause some anxiety in the cocoa market, as any extended supply disruption from that nation would have far-reaching effects around the globe. There are reports that this season’s cocoa production in Cameroon may be 10% to 20% below last season’s levels, due in large part to poor weather and caterpillar infestation. A major US confectionary firm stated that global demand for cocoa would exceed supply by over 1 million tonnes by the end of this decade, unless there is a dramatic increase with cocoa bean yields in West Africa.

TODAY’S GUIDANCE: July cocoa continues to find support from bullish supply news out of West African production areas but any recovery later this morning may be held in check by lukewarm outside market factors. A positive turnaround in macro-economic sentiment should help to lift cocoa prices back towards this week’s highs.

Sugar: Short-Term Supportive News Not Likely to Turn the Downward Trend

by Terry Roggensack on April 12, 2012

With the improving crop outlook for Brazil and a continued supply of exportable surplus sugar from Thailand and India, the market looks vulnerable to further price erosion ahead. Fund traders still hold a hefty net long position in sugar and the trend appears to be down. As a result, selling could intensify on breaks. Improved weather appears to have stabilized the production outlook for Brazil and the government forecast for a 5.3% rise in production for the 2012/13 season which begins soon and this is adding to the negative tone. Sugar closed slightly higher on the session yesterday as the early break to the lowest level since March 14th failed to attract new selling pressures. Talk of the oversold condition of the market after the recent collapse plus a positive tilt to outside market forces (strong stock market and lower US dollar) were factors to support the short-covering bounce. Rains for much of the Brazil center-south region for the past week helped to improve the new crop production outlook which has been seen as a negative force. US foodmakers are requesting that the US allow for additional imports of near 1 million tonnes to relieve tightness and this news may have helped to support. The official (CONAB) Brazil sugar production forecast for the 2012/13 season is estimated at 38.9 million tonnes which is near the high end of trade expectations and compares with 36.9 million tonnes for this season. There will be further production estimates from the Brazil industry group Unica today and traders are anxious to see if this group confirms the higher production outlook.

TODAY’S GUIDANCE: With the smaller Mexico crop, the push to expand import quotas for the US by 1 million tonnes could provide some short-term support but this may not be enough of a force to turn the trend.

TODAY’S MARKET IDEAS: Look for selling resistance for July sugar at 23.41 and 23.52 with 22.97 and 22.39 as next downside targets. Aggressive traders can sell a bounce. There is some light support at 23.12 which held on a closing basis yesterday so new sellers might wait for a recovery bounce before pressing the short side.

Cotton: Without Weather Problems, Vulnerable to More Selling

by Terry Roggensack on April 12, 2012

The surge higher in the May contract on tightness concerns for the old crop supply helped to support the strong gains in cotton into the mid-session yesterday. However, while the May contract stayed strong, July cotton closed near the lows of the day and just slightly up on the session. Traders believe short-covering in the May futures plus talk that China continues to build a strategic reserves helped to support the rally. The lack of follow-through buying after the early surge in buying and the lower close for the December cotton leaves the market vulnerable to further price erosion ahead. While China demand looks strong ahead, the market also faces a massive global surplus this season and a record high world beginning stocks. World usage was revised lower again by near 1 million bales to 107.74 million bales. In addition, a major revision higher for beginning stocks sparked a surge in world ending stocks for the 2011/12 season to a whopping 66.07 million bales as compared with 50.5 million last year and 47.09 million two years ago. A high percentage of the stocks are expected to be from China and India and this has helped to provide some support. This pushes the world stocks/usage to 61.3% from 44.1% last year and 39.6% two years ago. Certified deliverable stocks against the ICE exchange increased to 102,888 bales from 99,774 bales the previous session.

TODAY’S GUIDANCE: Without a weather issue, the market looks vulnerable to more selling ahead. The massive world stocks and the move by India to allow exports of sales on the books could keep the sellers more active over the near-term.

TODAY’S MARKET IDEAS: July cotton selling resistance is at 90.38 with 87.55 and 84.99 as next downside targets. December cotton resistance is at 88.43 and 88.94, with 86.12 and 84.60 as next objectives.

Cotton: Questionable Demand and Fund Long Liquidation Pressures Market

by Terry Roggensack on April 4, 2012

With a jump in the US dollar and a sharp sell-off in gold and the stock market, it is difficult to find new buyers in cotton and the market looks to struggle today. The market managed to consolidate and chop sideways since the bearish acreage report on Friday and this shows some relative strength for cotton. However, the market will need a catalyst such as China buying or weather in the US to expect trade house or commercial buying interest in cotton. The USDA pegged planted area at 13.155 million acres on Friday, up from pre-report estimates centered around 12.75 million acres. Traders believe actual planted area will be smaller than Friday’s estimate as producers in the delta and southeast switch to soybeans and there are also some concerns over water restrictions in California and the impact on plantings. Traders await any news from India this week as the trade expects to hear if India will limit future exports to China. At this point, many traders believe that India will not allow new exports in their meetings this week and will likely keep the export ban in place until at least July. Soil conditions in Texas have improved dramatically since last year and even with 1.5 million acres less, US production could be higher than last year if yield is more normal.

TODAY’S GUIDANCE: Ideas that the China and world economies will slow and that China demand for cotton will decline could keep outside market forces negative and spark selling in cotton and other commodity markets short-term. However, this could change quickly and traders might be overly pessimistic on China and global demand. If India keeps the export ban in effect through the summer, China may shift more short-term demand to the US.

TODAY’S MARKET IDEAS: Outside market forces look negative for today but traders should expect support to emerge on corrective breaks until the industry has a better grasp on the new crop global supply and demand situation. Look for support for July cotton at 91.65 and 90.07 with 93.20 as resistance. Fund trader long liquidation selling looks to pull the market lower today.

Sugar: Weak Thailand Cash Concerns Bulls

by Dave Hightower on April 4, 2012

The market looks vulnerable to further long liquidation selling from speculators. Outside market forces look negative for today and fund traders still hold a very large net long position in sugar. The technical pattern is turning more negative and longs face the outlook for improving supply just ahead as the Brazil harvest will begin soon. There seems to be plenty of exportable surplus sugar in the meantime as Thailand is working through their second record production season in a row. May sugar closed moderately lower on the session yesterday and experienced the lowest close since March 13th. Another weak close in London sugar yesterday, ideas that there is plenty of sugar available to fulfill short-term needs on the world market due to Thailand and India offers and talk that supply will be on the rise in the weeks and months just ahead when Brazil harvest gets underway helped to pressure. In addition, there is talk that speculative long liquidation selling is picking up steam with the recent more negative technical action. As of March 27th, trend-following fund traders were still net long nearly 83,000 contracts and this suggests increased long liquidation selling if support levels are violated.

TODAY’S GUIDANCE: The weak Thailand cash basis is a concern for the supply bulls as buyers are beginning to see less and less reason for the premium of May to July and October contracts. A bounce to 24.49 for May sugar looks like a selling opportunity.

TODAY’S MARKET IDEAS: The technical action remains bearish with May sugar resistance now at 24.44 and 24.52 with 23.76 and 23.20 as next downside targets. A close under 24.22 turns the chart pattern more negative.

Cotton: India off the Export Market and the Industry Needs to Replace That Supply

by Terry Roggensack on March 6, 2012

It is difficult to predict how much support and how much follow-through buying there may be from the decision by India to exit the export market. The market closed up the 4 cent limit yesterday and the exchange has already raised margin requirements. Once the importers has relocated exportable surplus cotton in the world, the impact will die down. May cotton has already seen as much as a 7.3% correction off of last week’s lows. Traders see a surge in world ending stocks to up to 60% of the world consumption for the 2012/13 season and the market was in the process of “pricing in” this large surplus. The surprise India announcement sparked aggressive short-covering and some new commercial buying but it may take more positive supply or demand news to shift the market to a positive trend. Weather in the US and China will be key factors this season as planted area is already on the decline. China is expected to see a drop of near 8-10% in planted area and US planted area is also down but US yield is also expected to be more normal which could result in higher production. India’s farm minister is already requesting that the export ban be lifted indicating he had been left in the dark on the situation. Australia and the US are likely to see a jump in short-term export activity and then the focus is likely to shift to the new crop supply/demand situation. It seems that India overcommitted exports for this year and the actions were taken to make sure they had enough cotton for their own textile industry. The COT reports as of February 28th showed Non-Commercial traders were net long 8,329 contracts, a decrease of 7,905 contracts for the week. The report also showed that trend-following fund traders (non-commercial with no index funds) had shifted to a net short position of 5,254 contracts so there is likely to be some short-covering ahead. Certified cotton stocks deliverable against the New York contract fell to 110,809 bales from 142,095 bales the previous session.

TODAY’S GUIDANCE: The longer-term price outlook is uncertain but in the short run, the industry will need to replace the India flow of cotton north into China and this may be difficult. Short-covering and new buying is likely to emerge if the market attempts to set-back today with a bearish tone to outside market forces.

TODAY’S MARKET IDEAS: May cotton resistance comes in at 95.06 with support at 92.28. Look for bounce to near 97.00 for now.

Sugar: Look for More Selling Pressure Short-Term.

by Terry Roggensack on March 6, 2012

Bearish outside market forces plus talk of the short-term overbought condition of the market looks to weigh on sugar prices over the near-term. May sugar closed moderately lower on the session yesterday and saw the lowest close since February 21st. India sugar officials see production for the 2011/12 season rising to above 26 million tonnes as compared with 24.3 million last year. India consumption is thought to be near 21.5-22.00 million tonnes. India’s Farm Minister indicated that the country can export another 1 million tonnes of sugar this season on top of the 2 million tonnes already approved. This could help to keep a negative supply tilt on the outlook as India, Brazil and Thailand all seem to have exportable surplus sugar. In addition, macro economic news of a slower growth outlook for China was seen as a negative force yesterday and weakness in equity markets plus a strong US dollar this morning looks to help to pressure. Indonesia issues an import permit to one firm for 240,000 tonnes of raw sugar as the country planned on the imports to make up for a white sugar shortage for the year. In other words, issuing the permit is not new news. Australia is expected to see higher exports this season with a better crop and exports are expected to reach 3 million tonnes.

TODAY’S GUIDANCE: The COT reports as of February 28th showed Non-Commercial and Nonreportable combined traders held a net long position of 192,413 contracts, up a whopping 65,332 contracts in just one week. This leaves the market technically overbought and with bearish outside market forces and the lack of a strong fundamental story, the market looks vulnerable to short-term, long liquidation selling pressures. The technical action for May sugar turned more negative with the move under key support at 24.45 and this level will now act as key resistance. The market looks vulnerable to further selling pressures with 24.03 and 23.61 as next key support levels.

TODAY’S MARKET IDEAS: Look for more selling pressure short-term.

Cocoa Special Report: World Production Deficit Ahead!

by Terry Roggensack on February 28, 2012

Below is an excerpt from The Hightower Report’s most recent Special Report. To receive access to this report, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

The cocoa market saw some extreme price movement during 2011, first reaching multi-decade highs in March and then losing nearly half of its value by year’s end. The main catalyst for the price volatility was the political situation in the Ivory Coast, where a civil war triggered by a disputed Presidential election resulted in an export ban for cocoa and other key commodities. Once opposition forces were able to gain control of the Ivory Coast, the resulting build-up of cocoa supplies was able to once again reach markets in Europe and North America. In addition, the 2011/12 season resulted in all-time record high cocoa crops for several major West African producers. Ivory Coast cocoa port arrivals were over 1.5 million tonnes, while official cocoa purchases in Ghana reached the 1 million tonne level for the first time ever. This resulting supply “glut” was matched by sluggish global demand levels late in the year and kept prices under considerable pressure. A turning point may have been reached early in 2012 that may provide cocoa prices with an opportunity to post solid gains during the next few months.

The Ivory Coast remains the focal point of the cocoa market, and it may be that this season’s crop will provide the cornerstone for an extended rally. Excessively dry conditions over the past few months, due in large part to a severe edition of the “Harmattan” winds, has caused a severe decline in recently harvested cocoa levels. The full impact of these negative crop conditions may not be fully seen until the upcoming mid-crop is harvested later on this year. As of mid- February, this season’s Ivory Coast cocoa port arrivals were running around 80,000 tonnes behind last season’s pace, and they are likely to lose further ground as the season goes on. Many analysts are cutting back on their forecasts for the Ivory Coast this season, as the crop could see a much larger decline than the 10% that the International Cocoa Organization (ICCO) is currently projecting.

To gain access to the full report, with trade strategies, please sign-in or sign-up for your free trial.

Cotton: Traders Seem Hopeful for Better News Later This Week

by Terry Roggensack on February 7, 2012

The more positive tilt to the global economy and further short-covering plus the outlook for smaller planted area for the coming season are factors which have supported the recent uptrend. However, the market does not seem to have the fundamentals for much in the way of follow-through to the upside without help from outside market forces. The Australia flooding situation is expected to peak today along many key river spots and the region looks drier over the next few weeks. Industry experts believe that the crop could still be near a record high of 5 million bales as compared with last year’s record harvest of near 4 million bales. Australia is the third largest exporter of cotton and news that only 5% of the irrigated cotton had reached maturity may be seen as negative. China futures closed higher overnight which is a positive development as the market consolidated the 1.5% surge from yesterday. With a stronger US economy, traders see improving consumer confidence and better retail sales in apparel and home furnishings and this has helped support better investor interest in cotton. The COT reports as of January 31st showed Non-Commercial traders were net long 29,289 contracts, a decrease of 5,107 contracts for the week. The selling trend is seen as a short-term bearish force. The USDA supply/Demand update will be out on Thursday and there have been revisions lower in global demand in recent reports and bulls are hoping for some stability or even improvements in global demand. Traders also look ahead for the annual planting survey from the National Cotton Council on Friday.

TODAY’S GUIDANCE: Australia still looks for a record size crop this season and the flooding appears to have peaked. Traders seem hopeful for better news later this week but living up to this expectation may be difficult.

TODAY’S MARKET IDEAS: Close-in resistance for March cotton comes in at 96.88 with support at 95.28. A move out of this range may point to next direction. Keep 91.91 and 90.13 as next downside objectives.

← Older posts

Free Trial

The Hightower Report