STAT Communications Ag Market News

The Soft Spot(2)

CHICAGO - Jul 16/10 - SNS -- Following is the orange juice, cotton and coffee comment from PFGBEST Research.


By Robin Rosenberg

The Soft Spot

The Reuters Jeffries CCI is pressing against the top side of the trading range it has resided in since January of 2010. The possibility of a breakout to the upside looms on the horizon. In general the softs are showing signs of strength. Both Coffee and Cocoa are quite strong and Sugar is prices are firm. Cotton is having a tough time holding due to the weakness in the world's economies and softening export demand. What's in the cards for the softs? Let's move in, take closer look and sort things out.


Coffee 07/16/2010

Life Time Trading Range 41.50 Cents - $337.50 per Pound

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

Short term supply tightness in Southeast Asia is providing temporary support to ICE and Liffe Coffee futures. Bountiful harvests are expected from the world's largest Coffee producers and should provide enough Coffee to meet demand for some time. A shortage of deliverable Coffee stocks created a rip roaring short squeeze in June. At present, the deliverable Coffee stocks situation in both ICE and Liffe Coffee contracts are under control.

Will harvest bring the large production expected? Could the persistent dry weather in Vietnam and Colombia negatively affect their Coffee crops? We will just have to wait a few more months to find out. I will inform you as additional information becomes available.

Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.

Weekly Technical Indications: This week's action took Coffee up to the upper band of the Bollinger study. The stochastic remains in sell mode, up high and between you and I, needs time to readjust from the huge up move at the end of June. The R.S.I. stands at 71.69 and higher than last week's reading of 69.25. The M.A.C.D. histogram stands at 4.81 and .12 higher than last week's indication of 4.69. Still backing and filling, the Coffee market is position itself for what I believe will be more upside.

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


Cocoa 07/16/2010

Life Time Trading Range $444 ' $5379 per Tonne

Trades on The ICE 3 AM ' 1 PM CDT

Liffe (London) and ICE exchange stocks continue to decline. The second quarter 2010 European Cocoa grind numbers released Wednesday totaled 328,704 tonnes. An increase of 12.7 percent on the year and the largest gain since the third quarter of 2000! The German second quarter 2010 Cocoa grind increased 11 percent according to the Association of the German Confectionary Industry. A surprise to say the least, this news powered ICE Cocoa futures to nine week highs. There is a great amount of concern regarding supply over the short term. Liffe Cocoa futures have become contangoed. This means the lead contract is trading at a higher price than the further out contracts. This type of market configuration exists when present demand outstrips supply. Cocoa is exhibiting quite a bullish picture at this time.

It appears that deliveries against the Liffe July Cocoa contract are going to be gigantic. Today, Thursday is expiration for the July contract. As of Tuesday there were close to 27,000 contracts remaining open. A delivery cycle of this magnitude would basically wipe out ALL deliverable exchange stocks! Not only that, it will be the largest delivery cycle in eight years. Arrivals of Cocoa at Brazilian ports for export have been lower than the same time last year. The possibility of a short squeeze and supply tightness are providing underlying support to the Cocoa market. I would be looking for opportunities on the long side.

Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.

Weekly Technical Indications: After testing the 9 bar moving average and the center band of the Bollinger study, Cocoa rallied through the 50 bar moving average and presently sits just below the top band of the Bollinger study. Whew, this is bullish market action if I ever did see it! The stochastic remains in sell mode but won't require a lot of upside before issuing a buy signal. The R.S.I. stands at a bullish 56.29 and higher than last week's reading of 49.51.The M.A.C.D. histogram stands at 25.33, a good deal higher than last week's indication of 10.25. My read on this is bullish.

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


Cotton 07/16/2010

Life Time Trading Range $26.84 ' $117.20 per Pound

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

Although a shade higher on the week as I write this, Cotton has dug in its heels and is seemingly content to trade in the .7800 area. This week's USDA's Crop Progress report indicated improvement in the Cotton crops overall condition through this last Sunday. A contact of mine that resides in West Texas tells me the Cotton crop is in wonderful condition. It is evident from the latest Commitments of Traders report that trend following funds continue to liquidate long positions. The Cotton market, presently in a downtrend, could entice the trend following funds to reverse their long position to short. The excellent condition of the Cotton crop and continual fund selling are pressuring Cotton prices. So far this season we have what looks to be a sizable crop in the making. If world weather conditions remain conducive to Cotton development, the sheer size of the world crop could see Cotton prices break to the .6000 area.

The Federal Reserve's latest F.O.M.C. minutes confirm that Fed officials remain cautious regarding U.S. economic prospects. The Federal Reserve has given its growth forecast a haircut saying that the U.S. economy will grow by between 3 percent and 3.5 percent in 2010. That's only 0.2 percentage points lower than the Fed's previous prediction, but lower just the same. Economic reports of late point to a slowing of growth in the U.S. economy. They indicate weakness in job creation; disappointing retail sales and a weak Empire State survey. I'd bet there are more negative reports to follow. Cotton demand via exports had been the driving force behind high Cotton prices. U.S. Upland Cotton sales for the week ending July 8, 2010 were 107,600 bales for delivery in 2009-10. This was down nine percent from the previous week and 30 percent below the prior four week average. To reach the USDA export projection for the 2010-11 season, 186,100 bales need to be exported weekly. The export figures this week were disappointing.

Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.

Weekly Technical Indications: Cotton, up modestly has again failed to move above the 9 bar moving average and the center band of the Bollinger study for the second week in a row. The stochastic remains in sell mode. The R.S.I. stands at a bullish 52.56, a good deal lower than last week's indication of 56.29. The M.A.C.D. histogram stands at -1.0002, minutely lower than last week's -1.07 reading. The technical indications for Cotton are bearish.

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


Sugar 07/16/2010

Life Time Trading Range 2.30 Cents ' 66.00 Cents per Pound

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

The way I see it the Sugar market has regained a firm foothold. There is much going on in the world of Sugar. The majority of it is on the Demand side. So much so that an upward revision of India's expected Sugar crop to 25.5 million tonnes from last year's 18.7 didn't affect the market one iota! The Philippines has plans to import 150,000 tonnes of Sugar and Bangladesh has indicated it will be importing 50,000 tonnes as well. Demand at this time is overpowering the expectations of a large crop this growing season.

An increase in Indian Sugar demand and a possible supply shortage in Thailand are doing their part to support Sugar at this price level. The sharp rise in energy prices and improvement in the world's economies are supportive to Sugar prices as well. A senior Indian Sugar industry executive has said that despite expectations of new local supplies exceeding demand, India may not export Sugar as the mills must build up their stocks. This is contrary to what we have heard of late. There are still many vessels lined up at Brazilian ports waiting to be loaded with Sugar. Concern is that after shipping activity returns to normal Sugar prices could take a tumble.

Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.

Weekly Technical Indications: This week's market action saw Sugar trade above the center band of the Bollinger study. In fact the high and low are both above it. This is very important as it's the first time since February that this has occurred. The stochastic is in buy mode, but up high near 90. This is not of great concern but needs to be monitored closely. The R.S.I. is higher and stands at 48.01 versus last week's reading of 43.62. Again Improved, the M.A.C.D. histogram stands at +.62 versus +.50 last week. Technically, Sugar exhibits an assortment of bullish technical indications.

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

PFGBEST Research Team

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



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