PFGBEST Softs Comment

CHICAGO - Oct 5/09 - SNS -- Following is the orange juice, cotton and coffee comment from PFGBEST Research.

The Softs Spot

For those of you that are new readers of 'The Soft Spot' I'd like to introduce you to a very useful analytical tool. The Reuters Continuous Commodity Index (CCI) traded on The ICE. The Reuters Continuous Commodity Index (CCI), formerly the CRB, was one of the first and best known commodity indexes. The CCI is among the broadest commodity indexes. It currently tracks 17 commodity futures in a publicly traded index. The CCI Softs sub-sector, Cocoa, Coffee, Orange Juice, and Sugar ##035;11 account for 23% of the CCI Index. For three weeks the CCI index has been stalled at the 38.2% Fibonacci retracement level of the break that occurred during the massive deleveraging of 2008 ' 2009.

(Note: The CCI is a thinly traded market, I recommend it be used for research purposes only)  

Coffee 10/02/2009 Settlement 129.60  +1.90

Trades on THE ICE 2:30 AM ' 1 PM CDT

Life Time Trading Range 41.50 Cents  - $337.50 per Pound

October marks the start of the new marketing year for coffee. Current supply deficits are no longer the major focus of market participants. The Columbian harvest will soon be underway, followed by the Vietnamese and Indonesian. The rains in Brazil have let up for now and cease to hamper the harvest. Traders are awaiting news of the degree of crop damage caused by the recent typhoon in Vietnam. Another typhoon, stronger than the last is due this weekend. It is not yet known how the earthquake in the key port of Padang will affect shipping of product.

Price differentials have tightened on mild coffee and traders are contemplating next year's crop. Traders are also awaiting news of the Brazilian coffee flowering season that is about to begin. Good weather now could very well bring a bumper crop next harvest. Also being watched closely are the coffee price supporting activities of the Brazilian government.

Choppy trading has dominated the market this week. A lack of commercial buying interest is working in tandem with Brazilian producer selling (hedging). These factors are presently limiting higher prices.

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

Cocoa 10/02/2009 Settlement 3000  -83

Trades on THE ICE 3 AM ' 1 PM CDT

Life Time Trading Range $444 ' $5379 per Ton

Lower equities prices, possible bottoming action in the U.S. dollar and doubts regarding economic recovery seem to have capped the upside for the time being. It seemed for a while this week that the fundamentals had been pushed aside. Cocoa, gold, energy and an assortment of other commodities were linked together as if an inflation hedge. New contract highs in London cocoa and a weaker U.S. dollar led cocoa higher earlier in the week only to fail today at major daily support in the 3070 area. The key reversal last week must be respected.

Strong cash cocoa prices are still being supported by the belief that a smaller crop from the Ivory Coast is almost a certainty. However, Weather reports reveal that improved weather over the last week has made growing conditions better there. We must keep a keen eye on the Indonesian crop as they have adjusted their crop estimate up by 100,000 tonnes. If this comes to pass the Ivorian crop deficit will be somewhat offset.

Cocoa futures have been up ' down ' and all around this trading week. The key reversal of last week has so far proven itself to be valid. London cocoa is presently below the critical 2000 level as I write this. (10/02/09 11:23 CDT). Cocoa traders take this as a bearish development.

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

Sugar 10/02/2009 Settlement 23.78  +1.61

Trades on THE ICE 2:30 AM ' 1 PM CDT

Life Time Trading Range 2.30 Cents ' 66.00 Cents per Pound

The sugar market made a run to the upside reaching 25.43 early in the week only to fail and fall back to 23.68. There are presently concerns related to Index funds cutting back on their holdings this month. (The CFTC has ordered them to do so). Rainy weather in Brazil, which had been hampering harvest, has relented. A drier forecast into next week should allow for more normalized harvest activity. The market is still above the 9 bar moving average. A weekly close below this average will, in my opinion turn the tone of the market decidedly bearish.

Brazilian output could possibly be in excess of what was expected. That would be music to the commercials ears. Indonesia has cancelled it's plans to import 50,000 tonnes of raw sugar more than likely due to damage at the port of Padang.

There were 16,000 deliveries of The Ice October sugar contract. Fundamentals lean to the bullish side. I don't believe it will take much in the way of bullish news to bring the bullish camp back and move the market higher again.

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

Orange Juice  10/02/2009 Settlement 93.10  +2.20

Trades on THE ICE 7 AM ' 1 PM CDT

Life Time Trading Range $37.40 ' $209.50 per Pound

With next Fridays USDA crop report on the horizon the Orange Juice market had a very quiet trading week. 9400 was the high and 9025 the low. A range of 375 points does not offer much in the way of opportunity. I believe that we will see more of the same next week while awaiting the report.

There are no hurricanes threatening the crop. Existing inventory is drawing down at a slower pace than last year. This is more than likely due to the state of the economy. Winter brings on more demand as people want to believe a jolt of vitamin C will lessen their chances of catching a cold.

Don't attempt to create your own opportunity. Getting caught up in a choppy market can be hazardous to ones trading account.

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

Robin Rosenberg

rrosenberg@pfgbest.com  

(800)611-6974

PFGBEST Research Team

Phone: 800-361-6855 or 319-553-2181

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