Softs Report - Tuesday, Oct. 11

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Cotton

Cotton closed sharply higher yesterday on news that China would honor its WTO commitments for cotton import quotas. The news was bullish for a market that has been starved for demand news for a while.

Traders are worried about a global recession and demand in that recession. Production is very short. The harvest is appearing in the market, and the market is preparing for it with sideways to lower prices. Traders are still worried about demand moving forward due to recession fears and Chinese lockdowns, but they are also worried about total US production potential.

It is possible that the Chinese lockdowns will continue to hurt demand for imported cotton for the country, and that a weaker economy in the West will hurt demand from the rest of the world.


Overnight News

The Delta and Southeast will get mostly dry conditions and near to above normal temperatures. The Southeast will get some heavy rains from the hurricane on Friday and Saturday. Texas will experience scattered showers and near to above normal temperatures.

The USDA average price is now 89.09 ct/lb. ICE said that certified stocks are now 2,109 bales, from 2,109 bales yesterday. ICE added that 0 notices were posted against October contracts, and that total deliveries for the month are now 12 contracts.

Trends in Cotton are mixed. Support is at 84.80, 81.40, and 80.20 December, with resistance of 88.90, 90.10, and 90.30 December.


Frozen Concentrated Orange Juice (FCOJ)

FCOJ was lower yesterday as a major hurricane that moved onshore Florida last week left extensive damage, but this has already been factored into the prices. Some of the damaged fruit is being collected and sent to FCOJ processors, so supply is increasing and prices may move somewhat lower.

The weather remains generally good for production around the world for the next crop, but not for production areas in Florida that have been impacted in a big way by the storm. Brazil has been experiencing some rain and conditions mostly decent. More showers are in the forecast for the coming days.

Florida is expecting a large amount of damage to be reported, with many trees lost as well as fruit lost. Mexican areas are showing mixed trends, with dry weather in some northern areas but better weather moving to the south.


Overnight News

Florida should get scattered showers in the coming days. Temperatures will average near normal conditions. Brazil should get mostly dry conditions and near to above normal temperatures.

Trends in FCOJ charts are mixed. Support is at 185.00, 184.00, and 179.00 November, with resistance at 196.00, 202.00, and 204.00 November.


Coffee

New York and London closed a little lower yesterday in a quiet trading session on what appeared to be new speculative selling on ideas and reports of improving growing conditions in Brazil. Small offers in Arabica have been reported from Brazil. There is a threat for a third year of La Nina, which could negatively affect coffee production again next year, but so far the crop conditions are deemed well.

Some beneficial precipitation was reported in Brazil last week. More showers and rains are in the forecast in Brazilian coffee areas for this week. Vietnam has also been dry, and wire reports from there indicate that production losses are likely. The cash market remains strong for Arabica, and the demand for certified stocks from the exchange remains a price positive factor.


Overnight News

ICE certified stocks are unchanged today at 0.416 million bags. The ICO daily average price is now 191.62 ct/lb. Brazil will get scattered showers with near normal temperatures. Central America will get scattered showers, and so will Vietnam.

Trends in New York are mixed, with objectives of 206.00, 205.00, and 191.00 December. Support is at 214.00, 211.00, and 210.00 December, and resistance is at 222.00, 226.00, and 230.00 December. Trends in London are mixed to down, with objectives of 2120 and 2020 November. Support is at 2100, 2050, and 2010 November, and resistance is at 2170, 2190, and 2220 November.


Sugar and Crude Oil

New York closed a little lower and London closed higher yesterday in moderate volume trading. Crude oil was lower after a strong rally last week based on news reports that OPEC and Russia would institute a production cut to keep prices elevated. Ethanol demand should increase, and the pricing power of the mills may increase.

The Brazilian president has lowered the fuel taxes in Brazil, and this is squeezing the profit margins of mills. The mills could produce much more sugar over time due to these tax changes, but so far they have not produced enough to meet the demand. The London market had been looking for increased white sugar supplies. Indian white sugar exports have so far not been enough to meet the demand.


Overnight News

Brazil will get scattered showers. Temperatures should average near normal. India will get scattered showers in the east and near to below normal temperatures.

Trends in New York are up, with objectives of 1890 and 1970 March. Support is at 1830, 1810, and 1790 March, and resistance is at 1880, 1920, and 1940 March. Trends in London are up with no objectives. Support is at 548.00, 540.00, and 531.00 December, and resistance is at 563.00, 566.00, and 572.00 December.


Brazilian Sugar

Brazilian sugar mills in the country’s center-south region crushed less cane in the second half of September compared with a year earlier, as heavy rain in the area complicated harvesting work, according to industry group Unica. Center-south mills crushed 25.3 million metric tons of cane in the period, a decline of 29.7% from the same period a year earlier, Unica said on Tuesday.

They produced 1.7 million tons of sugar, down 27.3%, and made 1.4 billion liters of ethanol, a decline of 28.6%. The production mix for the second half of September was 45.4% sugar to 54.6% ethanol, compared with 43.8% sugar and 56.2% ethanol in the same period a year ago.

Heavy rain in São Paulo and other cane-growing states “hampered the progress of harvesting and mill operations, and was responsible for the decrease in registered production,” Unica said in its report.

In the period from April 1 through Sept. 30, mills in the region crushed 431.1 million tons of cane, down 7.9% from the same period a year earlier. Sugar production fell 9.9% to 26.3 million tons, and ethanol output declined 5.8% to 21.5 billion liters.

The production mix for the season through Sept. 30 was 45.5% sugar to 54.5% ethanol, compared with 45.9% sugar and 54.1% ethanol in the same period a year earlier.


Cocoa

New York and London closed lower yesterday, and prices might have formed at least a short-term top. Ideas of big production and uncertain demand are still around, but reports from Africa indicate that demand has improved lately. Reports indicate that buyers of Cocoa have enough coverage for now and can afford to wait for lower prices to develop. Supplies of Cocoa are as large as they will be now for the rest of the marketing year.

Reports of scattered showers along with very good soil moisture from those showers have been keeping production ideas alive in the Ivory Coast. Sentiments are still that good production is expected from West Africa for the year. The weather is good in West Africa, as well as in Southeast Asia.


Overnight News

Isolated showers are forecast for West Africa. Temperatures will be near normal. Malaysia and Indonesia should see scattered showers. Temperatures should average above normal. Brazil will get mostly dry conditions and near normal temperatures. ICE certified stocks are lower today at 5.617 million bags.

Trends in the charts in New York are mixed. Support is at 2350, 2320, and 2300 December, with resistance at 2420, 2430, and 2450 December. Trends in London are mixed, with objectives of 2060 December. Support is at 1970, 1940, and 1920 December, with resistance at 2030, 2060, and 2090 December.


More By This Author:

Grains Report - Monday, Oct. 10
Softs Report - Friday, Oct. 7
Grains Report - Wednesday, Oct. 5

Disclaimer: A Subsidiary of Price Holdings, Inc. – a Diversified Financial Services Firm. Member NIBA, NFA Past results are not necessarily indicative of future results. Investing in ...

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