COFFEE
Forty Year Trading Range: $41.50 to $337.50 per lb.Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST
In the twelve month period ending January 2012 the International Coffee Organization reports that global exports of Arabica Coffee reached 65.96 million 60 kilo bags compared to 66.18 million last year. Robusta Coffee exports totaled 37.53 million bags compared to 31.98. This small jump in production will do little to alleviate the world’s ever increasing demand for Coffee.
Expectations are that Brazil, the world’s largest Coffee grower will harvest 55.7 million bags in 2012-2013. Up from the 48 million bags produced in 2011-2012.Brazil’s Coffee harvest should get underway in July. , Volcafe, one of the world’s largest Coffee merchants estimates there is more Coffee in storage than originally thought. They have increased their original Brazilian crop estimate by 1 million to 48 million bags. One bag of beans weighs 60 kilos. (132 pounds) Global Coffee demand will exceed supply by 7 million bags in 2011-2012. The market may experience a surplus of 2 million bags in 2012-2013.
Output from Honduras, Central America’s largest producer, is expected to improve by 21 percent to 5.1 million bags in 2011-2012. Colombia, the world’s second largest producer of Arabica coffee is struggling to produce 7 million bags in 2011-2012. Output in 2012-2013 is expected to rise by 500,000 bags. Mild, washed Arabica Coffee beans are generally grown in Latin and South America.
So, we have a small increase in supply coming our way. Will the market be able to provide enough Coffee to satisfy the world’s growing population of Coffee drinkers? We will just have to listen to the market. I’m sure if we listen well the market will tell us.
Weekly technical indications on Friday, March 2nd:At this time the week’s trading range is 207.35-201.30, the last print is 203.40. The stochastic remains in sell mode. RSI at 32.39 is lower than last week’s indication of 32.47. The M.A.C.D. histogram reads -2.09 and is lower than last week’s indication of -1.90. There has not been much in the way of price action this week. In fact it appears that May Coffee will close out the week near unchanged from the previous two. ZZZZZZZZZZZZZZZZZZZZZZZZ ! A weekly close at or below 204.40 in May coffee will turn the weekly trend down.
COCOA
Forty Year Trading Range: $4.44 to $53.79 per tonneTrades on the ICE from 3:00 a.m. to 1:00 p.m. CST
The Ivory Coast’s main Cocoa harvest is nearing the finish line. As expected, arrivals at Ivory Coast ports for export are lower than a year ago. Lower by 10 percent, the decrease in Cocoa bean arrivals is expected to continue through harvest’s end. Concern is also mounting that mid crop output will be nowhere near what was expected. These situations have Ivory Coast cash prices on the rise. Score another one for Mother Nature.
Surely you’ve heard that the way to a person’s heart is through their stomach. They say the reason we like chocolate so much is it makes us feel loved. Cocoa is one of the most complex and satisfying foods on this earth. Did you know that there are 300 recognized chemical compounds in Cocoa? Cocoa contains a large quantity of magnesium. Medical studies have proven magnesium possesses calming qualities.
How can we insure that our beloved Cocoa is always available to us? There are more than 2 million West African Cocoa farmers. They produce near 70 percent of the world’s Cocoa supply. They must have the ability to take care of their families. It is imperative that young people become educated in the ways of Cocoa farming. Production levels must be increased to make Cocoa farming an economically feasible occupation that provides them with a good living. If not they will leave the farm and go elsewhere to earn their livelihoods.
Feed the Future is the United State’s global hunger and food security initiative. Feed the Future’s Africa Cocoa Initiative (ACI) will leverage $11 million invested by principal partners to help insure the sustainability of West Africa’s Cocoa crop. These partners include include The World Cocoa Foundation, the Sustainable Trade Initiative, ADM Cocoa, Barry Callebaut, Blommer Chocolate Company, Cargill, Continaf BV, Ferrero, Guittard Chocolate Company, The Hershey Company, Kraft Foods, Lindt & Sprungli, Mars, Nestle and Olam International Ltd. Just typing these names has me jonesing for a chocolate bar!
Weekly technical indications for Friday, March 2nd: At this time the week’s trading range is 24.54-23.01 the last print is 23.37. The stochastic remains in buy mode. RSI at 44.95 is lower than last week’s reading of 45.61. The M.A.C.D. histogram at 52.07 is higher than last week’s indication of 50.98. Cocoa continues to trade in a tight sideways range. There are no directional opportunities at this time. A weekly close at or below 21.91 in May cocoa will turn the weekly trend down.
COTTON
Forty Year Trading Range: $26.84 to $227.00 per lb.Trades on the ICE from 8:00 p.m. to 1:30 p.m. CST (Next Day)
China’s National Development and Reform Commission has announced it will increase in the price it pays farmers 3 percent for 2012-2013 production. That brings the buying price to 20,400 Yuan ($3,240) per tonne. That’s near $1.45 a pound and quite a bit more than U.S. Cotton growers can expect to receive. China’s State Cotton reserves are in need of replenishment and what better way to accomplish it than with increased domestic production. China is the world’s number one consumer and importer of Cotton. Of interest is the fact that USDA attaches had reported just hours prior to the announcement that China would be sticking to it’s 2011-2012 rate of 19,800 Yuan per tonne. Very funny Beijing!
A series of surveys released forecast lower Cotton sowings in China this coming growing season. The results of a farm survey taken last week by China’s Cotton Research Institute at the China Academy of Agriculture Science forecast a 6.1% decrease to 4.85 million hectares. The China Cotton Association forecast a 10.5 percent decline and the country’s National Cotton Monitoring network forecast an 8.2 percent decline. Far too many farmers were hurt financially when the market broke from it’s post U.S. Civil War high in 2011. I recall seeing a pic of a small time Chinese Cotton farmer with a tonne of Cotton in his house. He was holding out for higher prices. Ai Yi Yi !
On your marks, get set – U.S. Cotton farmers are ready to sow. The Cotton market continues to be pressured by Southern Hemisphere production. The problem is farmers will plant less Cotton worldwide if Cotton’s price doesn’t firm up. Some day down the road this will cause supply to tighten. Cotton prices will then move higher and farmers will plant Cotton from fencepost to fencepost. Caught between a rock and a hard place, the Cotton market needs a bullish market moving event badly.
U.S. Cotton exports for the week ending February 23rd, 2012 of the 2011-2012 marketing year were 76,200 running bales. Down 57 percent from the previous week, but up noticeably from the prior 4 week average.
Weekly technical indications for Friday, March 2nd: At this time the week’s trading range is 92.74-89.31, the last print is 89.31. The stochastic remains in sell mode. RSI at 41.21 is lower than last week’s indication of 42.22. The M.A.C.D. histogram at 0.04 is lower than last week’s reading of 0.43. The market rallied above the 9 bar moving average, but was beaten back by selling. At this time it’s trading between the 9 bar moving average and lower Bollinger band. I view rallies to resistance as selling opportunities. A weekly close at or above 91.26 in May 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. CST
With harvest set to begin in April the USDA attaché in Brazil is expecting Brazil’s center-south region to produce 490 million tonnes of Sugar this season. That’s 12 percent less Sugar than was produced during the 2011-2012 growing season. Near 90 percent of the country’s Sugar is grown in the center-south region. Countrywide production is expected to fall by 6.8 percent or 35.75 tonnes. Extremely dry weather from April through August of 2010 and May of 2011 took it’s toll on the growing stock. Cane should be replaced every five or six years. I find it hard to believe that Brazil’s Sugar producers would allow their growing areas to deteriorate like this. Even with new Sugarcane plants in place it will take a few years for Sugar production to recover. I wonder what they are thinking. Is there something happening we don’t know about? You can bet there is!
Just the thought of seaweed brings visions of ocean going critters that I’d much rather view at a public aquarium or that slimy thing that wrapped around my leg last time I swam in the ocean. When Bio Architecture Lab thinks seaweed it smells ethanol. A new type of energy company, BAL intends to use designer bacteria and a low cost method for harvesting seaweed to produce ethanol. Developing economies worldwide are demanding more ethanol. Until now the majority of ethanol has been refined from food stocks. This could free up Sugar that would normally be used for ethanol production.
Seaweed is fast growing and Sugar rich. It does not compete with other crops for land, nor does it require fresh water. BAL’s chief science officer has said “Sugar is the next generation crude oil – it can be used for fuels and chemicals”. The company’s breakthrough is all about finding the way to unlock the Sugars in seaweed. If this can be done on a large scale we will have more Sugar and other food crops available to feed the world’s ever expanding population. The designer bacterium is a strain of Escherichia coli bacterium that is able to break down the Sugars in brown seaweed to produce ethanol. It has been demonstrated that this process can break down near 80 percent of the Sugar content in seaweed. This new research has been published by the peer reviewed journal “Science”.
Weekly technical indications for Friday, March 2nd: At this time the week’s trading range is 25.81-24.45, the last print is 24.82. The stochastic remains in buy mode. RSI at 54.15 is lower than last week’s reading of 57.20. The M.A.C.D. histogram at 0.26 is microscopically higher than last week’s reading of 0.23. The market is once again finishing out the week between the center and upper Bollinger bands. Continue to treat dips as buying opportunities. A weekly close at or below 25.13 in May Sugar will turn the weekly trend down.