PFGBEST Softs Comment

CHICAGO - Nov 4/09 - SNS -- Following is the orange juice, cotton and coffee comment from PFGBEST Research.

The Soft Spot

10/30/2009 TRADE RECOMMENDATIONS 2nd UPDATE

Stopped out of Long Dec Coffee from 13400 at 13600.

Bill Gordon   Senior Technical Analyst   312 563 8280   800 935 6493

bgordon@pfgbest.com

10/30/2009   TRADE RECOMMENDATIONS UPDATE

Long Dec Coffee at 13400.   Move stop up to 13600.

Bill Gordon   Senior Technical Analyst 312 563 8280 800 935 6493

bgordon@pfgbest.com

The Soft Spot  

Robin's Rant  

This week I will be emphasizing technical situations that presently exist in coffee, cocoa, sugar and cotton. Generally I concentrate on fundamentals but I believe there are issues evolving on the technical side that merit discussion here. I hope you find them useful. If you would like clarification of any of the information appearing here please feel free to contact me.

Coffee 10/29/2009

Life Time Trading Range 41.50 Cents  - $337.50 per Pound

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

Coffee is coming off last week's high of 145.40 piercing the 143.62 area which is the 61.8% Fibonacci retracement of the break in price that occurred during the massive deleveraging of 2008 ' 2009. This also happened the week of June 5, 2009 but failed to rally beyond the 61.8% Fibonacci level. It is not unusual these days to see a market take out a previous top by a few points only to fail. My theory regarding this type of market action is that the large traders know that many stops will be placed above the old top. They just press the market a bit higher to take to sell into them. Presently prices have retreated to 132.95 leaving in its trail what looks to be a double top. If it is lower prices could be in the cards. It will be very interesting to watch coffee's behavior as the recent low rests just below my proprietary moving average which is situated at 133.17! As appoint of information I use weekly charts for my analysis.

Coffee has broken down in price as the U.S. dollar edges higher. The up move in the U.S. Dollar has caused speculative longs to become increasingly edgy. They have been covering some of their long positions. The commercial interests, both buyers and sellers seem to be on the sidelines as many traders await the results of Brazils flowering season. A good flowering season could bring a bumper crop next harvest. Columbian growers have lowered their target for next year's harvest. Drier weather resulting from the El Nino will invariably overtake the area. On the other hand there is concern that a sale of 200.000 tonnes of coffee made by Vietnamese coffee exporter has not yet purchased the coffee from producers!

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

Cocoa 10/29/2009

Life Time Trading Range $444 ' $5379 per Tonne

Trades on The ICE 3 AM ' 1 PM CDT

Cocoa is a market with strong bullish underpinnings. However, over the past two weeks it has put in highs of 3412 and 3405. Just above the high of 3385 made the week of July 4, 2009. If cocoa were to move lower from these levels it would produce a wide double top. This alone would point to lower prices but there is more to this. I'm sure you would agree that 3400 is higher than 2800. Well, the slow stochastic was at 91.08 with cocoa prices at 2800 and is now at 90.94 with cocoa prices at 3300! A 600 point rally and the stochastic moved LOWER! This is called bearish divergence and basically indicates that the market is not as strong as the price action alone would lead one to believe!

The upside action in the U.S. dollar as well as weakness in global equity markets has served to muffle the 'irrational exuberance' that had been present in the cocoa market up to now. The amount of cocoa being delivered to Ivory Coast ports is over 75% greater than this time last year. This is leading traders to believe that the crop is quite a bit larger than expected. This along with soft U.S. consumer confidence data earlier this week could serve to cap cocoa prices for the time being.  

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

Sugar 10/29/2009

Life Time Trading Range 2.30 Cents ' 66.00 Cents per Pound

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

Sugar has been trading in a sideways trading range in excess of two months. The boundaries of this range are 24.85 on the high side and 20.68 on the low side. This sideways action has contributed to a weakening of relative strength as well and multiple buy and sell signals by the slow stochastic. In other words it has been a very choppy market that is difficult to get a handle on. One very important facet of this market is that it is below my proprietary moving average. The above points to a possible downside breakout.

Sugar has also been affected by the rally in the U.S. dollar and the weakness in world equity markets. If the commodity funds decide that the inflationary period is ending sugar bulls will probably begin selling, making a run for the exit doors all at once. This could make for one ugly break to the downside. On the flip side the government of India has decided to allow sugar importers to import another 1,000,000 tons of white sugar as some are nearing their quota. This is good news for the market. All things considered underlying demand in the sugar market is good.  

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

Cotton  10/29/2009

Life Time Trading Range $26.84 ' $117.20 per Pound

Trades on The ICE 8 PM ' 1:30 PM CDT (Next Day)

It has taken a bit less than a year for cotton to add 30% to its value. From 37.00 to 68.00 is a mighty good climb for the soft fluffy! Cotton however is another soft commodity that has stalled at the 61.8% area of the massive deleveraging of 2008 ' 2009. It is pushing up against the top band of the Bollinger setup which generally indicates an overbought market. A move to the downside should bring in buyers if the macroeconomic picture remains bright.

Now, cotton being domestic in origin benefitted immensely from U.D dollar weakness. A 9.00 rally in the first two weeks of October took the market from 60.59 to 69.49. What we have here is a double edged sword. In order for our Chinese exports to be strong, the U.S. economy must also be showing strength. We buy the highest amount of finished goods from China manufactured with U. S. cotton! So if we don't buy finished goods they will not buy our cotton! Makes sense no? Since mid month the cotton market has been a choppy affair. The slowness of the harvest combined with continuing wet weather in the Mississippi delta has been providing a good amount of support to this market.

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

Good Trading!

Robin Rosenberg  (800)611-6974

rrosenberg@pfgbest.com

PFGBEST Research Team

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

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