The Softs Report

The Soft Spot(49)

Robin Rosenberg — 2012-02-03T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

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

This is an on year in Brazil’s on/off Coffee growing cycle. Forecast’s calling for record Brazilian Coffee production this growing season sent Coffee prices into a power dive that took prices down near 25 percent over the last five months. Brazilian Coffee growers have become the latest participant in the hold back the beans game. They also believe Coffee prices will be higher as the third quarter of 2012 rolls around. I certainly hope so for their sake.

Estimates are that Brazil’s piece of the global Coffee market will drop from 40 to 35 percent as Brazilian growers withhold Coffee supplies and ask for higher prices. At this point in time they are asking for a 15 percent premium to New York Coffee futures. Central American Coffee is selling at a discount to the board; very strange indeed.

According to Brazil’s Coffee Exporters Council (CECAFE) the country’s Coffee exports were 2.56 million 60 kilo bags (132 lbs) in December. Last year the figure was 3.13 million bags. I’m hearing that a similar decrease in exports took place in January. We will have to wait until the official tally is released to get the exact number.

Brazil’s government crop forecaster Conab describes the Brazilian Coffee market as firm and providing support for new highs over the short to medium term. Expectations are that Brazilian Coffee growers will produce 49 to 52.3 million 60 kilo bags this year. Eclipsing the prior record crop of 48.5 million bags harvested in 2002. Brazil now supplies near 40 percent of the worlds Coffee. Keep in mind that this number includes domestic consumption which continues to increase. Final production numbers will not be available until October.

The largest retail Coffee chain in India is Café Coffee Day (think Starbucks). At this time the company has 595 cafes spread over 100 cities in India, one in Vienna, Austria and two in Karachi, Pakistan. The company is planning a massive expansion. By March the company wants to increase it’s presence to 950 cafes; 50 of them to be located outside of India. To reach this goal means opening more than one café per day!? And now for the rest of the story. In a joint venture with India’s Tata, Starbucks has announced it will be opening 50 outlets in India. Tata is India’s premier conglomerate and owner of the Eight O Clock brand of Coffee in the U.S. It also owns Jaguar and Land Rover. This is bullish in the long run. Time to get out the boxing gloves!

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 on Friday, March 3rd: At this time the week’s trading range was 219.65-210.95, the last print is 216.50. The stochastic has flashed a sell signal. At 38.43 the RSI is a bit lower than last week’s reading of 38.81. The M.A.C.D. histogram reads -0.21 and is lower than last week’s indication of -0.26. The market reached the bottom Bollinger band and rallied back to the weeks opening level. This is a reversal pattern and leads me to believe the market remains caught up in a trading range. A move up to the top of the range will likely follow. A weekly close at or above 221.25 in March coffee will turn the weekly trend up.

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

COCOA

Forty Year Trading Range: $4.44 to $53.79 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

The hot, dry Harmattan winds and lack of new moisture have Ivory Coast Cocoa farmers on the ropes. The majority of Ivory Coast’s Cocoa growing areas experienced lack of rain and extremely hot weather last week. This seasons long lived Harmattan winds have definitely worn out their welcome.

These unfavorable weather conditions have put a damper on Ivory Coast Cocoa production. Cocoa output will certainly fall as the country enters the final stage of the main harvest. Not only will the main crop be affected, the mid crop will be adversely affected as well. The pro-longed drought has caused many Cocoa trees to lose their leaves.

In the major western growing area of Soubre, farmers are concerned that the lack of rain will reduce the size of the Cocoa beans. This will make it very difficult to find export quality beans. There are very few pods on the Cocoa trees; in fact some have none at all. Mid crop harvest will begin later than usual. The trees will have to regenerate their leaves first. The strength of the “La Nina” event in the equatorial Pacific Ocean is ebbing. Larger than normal West African Cocoa crops are generally the norm during “La Nina” events. Use last season’s record production as an example.

This should have everyone watching the commitments of trader’s reports closely. All of those new long positions added a few weeks ago had a story behind them. Those privileged characters either knew there were problems with Ivory Coast Cocoa production or were tipped off by someone that did. This should create support beneath the market. At this point view sharp setbacks as buying opportunities.

Weekly technical indications for Friday, March 3rd: At this time the week’s trading range was 23.59-22.70 the last print is 22.19. The stochastic is in buy mode. RSI at 40.05 is lower than last week’s reading of 45.60. The M.A.C.D. histogram at 32.99 is higher than last week’s indication of 25.70. This week’s trade took place both above and below the 9 bar moving average. The market is finishing out the week below the average. A weekly close at or below 23.52 in March cocoa futures will turn the weekly trend down.

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

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)

Oh well - Groundhog Punxsutawney Phil saw his shadow Thursday. According to folklore this calls for six more weeks of winter. That won’t stop the National Cotton Council from releasing U.S. Cotton planting intentions for 2012 next Friday. More than a few traders are expecting a decrease in Cotton acreage in comparison to last year. Crops offering higher profitability like corn and soybeans are expected to be planted in cotton’s place. World ending stocks are again expected to rise during the 2012-2013 marketing year as production out paces demand. They could rise to a lofty 12.9 million tonnes.

According to the International Cotton Advisory Committee world Cotton prices have steadied near $1.00 per pound after moving lower for nearly ten months. The Chinese government has purchased large amounts of Cotton from both foreign and domestic sources and demand for Cotton has improved slightly. Projections are for world economic growth to slow near 12 percent in 2012. World Cotton mill use is expected to drop 3 percent to 23.7 million tonnes in 2011-2012. I believe the global economy is improving and expect Cotton mill use to improve as well.

During the first quarter of the year the U.S. competes with Cotton crops of the Southern Hemisphere. As is generally the case their Cotton output is priced lower than the U.S. old crop supply. It’s not unusual to see U.S. Cotton futures come under pressure during late winter through early spring. When this harvest pressure subsides Cotton prices are driven by the U.S.

Weekly technical indications for Friday, March 3rd: At this time the week’s trading range was 96.30-92.69, the last print is 95.47. The stochastic is in buy mode. RSI at 47.35 is a smidgen lower than last week’s reading of 47.52. The M.A.C.D. histogram at 1.33 is just a bit higher than last week’s indication of 1.24. The market appears to be finishing off the week nearly unchanged. This week’s bar hints a reversal to the upside is near. There is a good chance that an assault on the double top is in the cards. A weekly close at or above 98.19 in March Cotton will turn the weekly trend up.

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

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

Mother Nature is at it again. Australia is experiencing heavy summer rains across it’s east coast. Week long saturating rains have rivers in the area near flood stage. Heavy rains and flooding are expected to continue over the next few weeks. Australia’s Bureau of Meteorology has issued flood warnings for large areas of Queensland and New South Wales. ABARES, the government’s commodities forecaster reports that the rains have affected sugarcane and could adversely affect yields down the road. According to Thailand’s Office of Cane and Sugar Board, production declined 1.9 percent to 4.57 million tonnes during the first 78 days of the 2011-2012 crushing season. Of interest is the fact that the country’s crushing season began two weeks earlier than last year.

U.S. Sugar beet farmers reap profits year after year. Is this a miracle? No, it’s because they have one of best government price support programs in existence. And they full well know it. These federal price supports go back decades and serve no other purpose than to stuff the pockets of Sugar beet farmers with cash. These farmers as a group are known as American Crystal Sugar. Close to one half million acres of Sugar beets are planted across North Dakota and Minnesota each year, producing near 15 percent of the U.S. Sugar supply.

American Crystal Sugar is one of the country’s most powerful lobbying groups. They dole out cash to politicians like it’s going out of style. This serves to guarantee tariffs on imports and price supports that allow U.S. Sugar beet farmers to profit, even if their activities drive domestic Sugar prices higher than the global market. The National Confectioners Association has fought tooth and nail against the Sugar program with no success. This program benefits no one other than Sugar beet farmers and greedy D.C. politicians. It’s time for the program to disappear. Americans pay at least $1 billion more for Sugar yearly than they would in an open market!

Expected large crops from Brazil and India have the Sugar market under pressure this week. A break back to the lower boundary of the prior trading range is in the cards.

Weekly technical indications for Friday, March 3rd: At this time the week’s trading range is 24.38-23.41, the last print is 23.64. The stochastic remains in buy mode. RSI at 45.15 is lower than last week’s reading of 47.65. The M.A.C.D. histogram at 0.06 is higher than last week’s reading of 0.05. This week’s trade took place both above and below the 9 bar moving average. The market is finishing out the week below the average. A weekly close at or above 25.17 in March Sugar will turn the weekly trend up.

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

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

The Soft Spot(48)

Robin Rosenberg — 2012-01-27T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

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

Philippine Coffee farmers have been unable to produce enough Coffee to satisfy domestic demand. The Philippine Coffee Board is attempting to get the country’s Coffee farmers to produce more. The country imports near 45,000 tonnes of Coffee annually. The goal is to plant 8 million seedlings as soon as possible. This would do much to improve the Coffee supply over the next few years. The Board plans to go from region to region promoting Coffee farming.

According to a recent report from the International Coffee Organization, India’s Coffee production is expected to rise near 7 percent to 5.4 million sixty kilo bags in the 2011-2012 marketing season. Planning Commission Deputy Chairman Montek Singh Ahluwalia has said that India’s economy is forecast to expand by 8 percent over the next few years. The rising income of the Indian people will give 500 million citizens enough disposable income in 20 years to buy things like Coffee. Twenty years!?

Kenya’s state run Coffee Board expects Coffee output to rise 6 percent to 54,000 tonnes this marketing year. The Kenyan marketing year runs from October through September. This week’s Kenyan Coffee auction saw prices for benchmark AA grade Coffee rise to $526 per 50 kilo bag from $442 last week. Trade volume was higher as well. Kenya is a small producer when compared with other growers. Kenyan Coffee beans are famous for their high quality and always in high demand. Many Coffee roasters blend Kenyan beans with those of other countries. This is more or less like adding octane booster to your cars gas tank.

Weekly technical indications on Friday, January 27th: At this time the week’s trading range was 225.00-216.80, the last print is 218.50. The stochastic remains in buy mode, but has flattened out. This indicates a loss of momentum to the upside. At 39.37 the RSI is lower than last week’s reading of 42.55. The M.A.C.D. histogram reads -0.19 and is a bit higher than last week’s indication of -0.26. The market remained below the 9 bar moving average all week. A weekly close at or below 223.85 in March coffee will turn the weekly trend down.

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

COCOA

Forty Year Trading Range: $4.44 to $53.79 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

We witnessed one heck of a short covering rally in Cocoa early this week. Futures rallied five percent on Tuesday alone. Two weeks ago I wrote there had been a huge jump in long positions as indicated by the C.F.T.C. commitments of trader’s data. It now appears the counter parties to those longs (the shorts) have begun covering their positions. If traders holding sizable short positions decide to cover there is no telling how high this market could go. Who is going to sell to them? Conversely, keep in mind that this market had been trading in a tight range for seven weeks. Many times range bound markets break out, falls back and trades down to the bottom of the range. A lot of traders call this a “fake out breakout”.

Central Cameroon is reporting an infestation of capsid bugs. Capsid bugs (think leaf-hoppers) are sap sucking insects that feed on the tips of newly emerged plant shoots. Immature Cocoa trees are one of their favorite foods. The insect does very well in dry weather conditions like those present in Cameroon now. This must be checked before spreading any further. A worsening of the capsid infestation will cut Cocoa output considerably and increase the possibility of spreading to other West African growing areas. The majority of the world’s Cocoa supply is at risk and farmers cannot wait for the government to act. Cameroon’s National Organization of Cocoa and Coffee Producers is holding meetings with Cocoa unions to devise a collective means of eradicating the problem. The quality and quantity of Cameroon’s mid crop Cocoa harvest is at risk.

Enjoyed in a multitude of ways, an excess of three million tonnes of Cocoa are consumed annually. Preferences vary and each country prefers unique flavors for both candies and desserts. Examples are French chocolate truffles, German chocolate cake and Swiss Cocoa. Name brand chocolates are also made from distinctive blends. A Hershey bar made for U.S. consumption tastes unlike one made for distribution in France.

Weekly technical indications for Friday, January 27th: At this time the week’s trading range was 24.80-22.44 the last print is 23.96. The stochastic is in buy mode. RSI at 45.26 is higher than last week’s reading of 39.45. The M.A.C.D. histogram at 24.71 is much improved over last week’s indication of -2.82. The majority of this week’s trade took place above the 9 bar moving average. A weekly close at or below 22.56 in March cocoa futures will turn the weekly trend down.

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

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)

Cotton continues to correct following 15 month lows made in December. As has been usual of late Chinese demand produced much of the strength. In 2011, China’s Cotton imports were up near 3.36 million tonnes or 19 percent when compared to a year ago. For the third month running USDA has cut it’s 2011 U.S. production estimate. The January figure was 15.67 million bales. The agency also cut world Cotton production to 122.84 million bales from 123.42 in December.

So, do we chalk this latest rally up to China and cuts in production? Are we witnessing our favorite economic indicator in action? Or is this just a bounce to alleviate the markets extremely oversold condition. Equity prices have certainly improved and Europe seems to have gotten it’s act together. I’m going to give credit to the macro picture.

So far this week the upside action in Cotton has stalled. As I write, the week’s high is exactly the same as last week. Yes, technically a perfect double top. My experience indicates that back to back double tops are not as reliable as those with a handful of bars between them. Some traders refer to them as tweezer tops. If there were a few weeks of trade between the tops I’d pay very more attention to them. Keep your eyes open and listen to the market.

Weekly technical indications for Friday, January 27th: At this time the week’s trading range was 99.47-94.59, the last print is 95.59. The stochastic is in buy mode. RSI at 47.5 is lower than last week’s reading of 51.16. The M.A.C.D. histogram at 1.24 is higher than last week’s indication of 1.05. After posting a weekly double top the week’s action was decidedly down. A weekly close at or below 97.86 in March Cotton will turn the weekly trend down.

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

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

According to a Reuters poll of 17 analysts the global Sugar surplus is forecast to fall 50 percent by years end. They expect the global surplus to be 7.97 million tonnes in 2011-2012 and will drop to 3.2 million tonnes in 2012-2013. The previous poll taken last July indicated the surplus in 2011-2012 would be 7.3 million tonnes. The consensus has become more bearish. Good weather and firm prices for Sugar have boosted plantings and large harvests are expected from Thailand and India as well.

The key questions for 2012 are: Will Brazilian sugar output recover from it’s recent setback? How much of the Brazilian Sugar crop will be diverted to ethanol production? Will India’s exports pick up or is the world’s surplus supply of Sugar just overbearing? In my opinion the surplus must be resolved before any meaningful upside price action comes in to play.

Brazil’s improving economy has put many more vehicles on the road. The country imported a record amount of ethanol from the U.S. in 2011. Why? Brazil must use Sugar to produce ethanol and Sugar output has not been up to par. The U.S. uses corn or biomass. Of which we have plenty.

Brazilian output fell last year due to weather and elderly sugarcane stock far beyond prime production years. Meaningful improvement in output will not take place until new sugarcane is planted. It will take at least two years for new plants to produce a Sugar crop. If “La Nina” brings extreme dryness to the country’s centre-south region the crop will be negatively affected. On the flip side, if “La Nina” were to reverse and become “El Nino“ torrential rains will lessen the sugar content of the cane. Not good!

The Indian government is about to remove controls from it’s Sugar market. That’s no guarantee that India’s Sugar exports will improve. We need to see demand improve initially. India’s Sugar exporters will not allow low prices to stand in their way. They will make the market and force prices lower to stimulate buying.

Weekly technical indications for Friday, January 27th: At this time the week’s trading range is 25.21-24.16, the last print is 24.25. The stochastic remains in buy mode. RSI at 47.83 is lower than last week’s reading of 50.89. The M.A.C.D. histogram at 0.06 is higher than last week’s reading of -0.01. After trading above the center Bollinger band the market turned decidedly lower and is now just above the 9 bar moving average. A weekly close at or below 24.81 in March Sugar will turn the weekly trend down.

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

The Soft Spot(47)

Robin Rosenberg — 2012-01-20T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

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

The International Coffee Organization estimates world coffee output for 2011-12 will reach 134.2 million 60-kilogram bags. India, the world’s fourth largest coffee exporter may become a net importer within the next five years. Domestic coffee drinking has been increasing by leaps and bounds as it grows in popularity.

According to the Vietnam Coffee and Cocoa Association, Vietnamese coffee output is estimated to be 17.5 million 60 kilo bags this season. Vietnamese coffee farmers may sell only one third of their coffee crop prior to the start of the Tet Lunar New Year holiday. They are attempting to raise prices until work resumes following the celebrations. Usually they sell 50 percent of their inventory by the start of the holiday.

The Indonesia Coffee Exporters and Industries Association (AEKI)) predicts that Indonesian coffee exports will rise 14.3 percent to 400,000 tonnes this year. Weather over the next two months or so has a huge impact on the country’s harvest and exports. can make or break the coffee crop. The country is Southeast Asia’s largest economy. Presently the country’s coffee prediction falls behind Brazil and Vietnam. Indonesia has it’s sights set becoming the world’s number two coffee producer within five years.

Coming as a complete surprise, coffee production in Colombia fell to a 35 year low after Mother Nature provided too much rain, disease and little sunshine throughout the growing season. When compared to the 2010-2011 coffee production of 8.92 million 60 kilo bags the 2011-2012 harvest tumbled 12 percent to 7.81 million bags. This was the smallest Colombian crop since 1976. Colombia’s 2011-2012 coffee exports fell 1.2 percent to 7.73 million bags from 7.82 million exported in 2010-2011.

An official at one of Colombia’s leading brokerages exclaimed “We’re actually below 8 million? And 8 million is disastrous.” Back in November the head of the Growers Federation said farmers would have a “very hard” time increasing production this year if adverse weather persists. He certainly hit it on the head. I hope Juan Valdez isn’t out of a job!

Weekly technical indications on Friday, January 20th: At this time the week’s trading range was 229.25-221.15, the last print is 226.40. The stochastic remains in buy mode. At 43.28 the RSI is higher than last week’s reading of 42.46. The M.A.C.D. histogram reads -0.18 and higher than last week’s indication of -0.91. This weeks trading pierced the 9 bar moving average above, but has yet to close above it. This market is struggling to put on a bullish face. A weekly close at or below 220.35 in March coffee will turn the weekly trend down.

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

COCOA

Forty Year Trading Range: $4.44 to $53.79 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

When compared to the same time last year arrivals of cocoa at Ivory Coast ports for export were down 4 percent through January 15^th. Exporters estimate this year’s arrivals at 763,000 tonnes. Last year the figure was 793,772 tonnes. The reasons for this are twofold. Farmers failed to properly treat plantations that developed disease and unusually dry weather. I had written arrivals would be down when the last of the prior season’s crop had been delivered. Don’t expect any improvement in this situation. The decline in arrivals will continue as there are no more pods on cocoa trees left to pick!

Cocoa farmers have had to deal with extremely dry weather that has so far lasted for two months. This is highly unusual during a La Nina event. La Nina events generally provide better than normal rainfall in West Africa’s cocoa growing areas. As a rule cocoa production increases as well. According to farmers and exporters, the 2011-2012 main crop will fall short of the record production forecast earlier this season.

According to Cameroon’s National Cocoa and Coffee Board (NCCB) the country exported 131,989 tonnes of cocoa during the the August through December time frame. That’s down near 11 percent from the 148,973 tonnes exported a year earlier. Cameroon produced a record crop of 240,000 tonnes in 2010-2011. The NCCB does not understand why exports have been falling off. It could be that farmers are holding back supply while awaiting higher prices. Poor weather has brought a drop in production as well.

Cameroons Cocoa Development Authority (SODECAO) contends that the country’s cocoa production will reach 250,000 tonnes in the 2011-2012 growing season primarily due to the cultivation of disease resistant cocoa varieties. Why do producing countries always over do it when it comes to forecasting output?

Weekly technical indications for Friday, January 20th: At this time the week’s trading range was 23.50-22.00 the last print is 23.22. The stochastic is in buy mode. RSI at 41.95 is higher than last week’s reading of 39.74. The M.A.C.D. histogram at -1.51 is much improved over last week’s indication of -24.50. For the second week running this market has rallied above the 9 bar moving average and held. This market is telling us that things have taken a positive turn. Keep close watch on this market; it wants to rally. A weekly close at or below 21.72 in March cocoa futures will turn the weekly trend down.

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

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)

Cotton futures have rallied near 18 percent from their December lows. This has the bull camp concerned that short term demand will drop off as the Lunar New Year begins and China takes a vacation. The Chinese year 4710 will begin on Monday Jan. 23rd 2012 and lasts fifteen days.

Improving economic news from the U.S. and China and less negative economic news from Europe were the drivers behind cottons recent rally. With U.S. and Chinese cotton planting intensions 10 percent lower than last year the real concern is the tremendous old crop supply. The short term demand picture will become quite important during the Lunar New Year.

I’ve written in the past that I don’t understand how crop estimates are calculated. There are just so many unknowns involved. Perhaps it’s done purposely to motivate farmers, but it certainly confuses the issue.

India’s Cotton Advisory Board (CAB) is meeting next week. Talk is that it will cut it’s prior cotton output estimate by one million bales. CAB is comprised of the Union textile commissioner and it’s membership includes trade and industry representatives. India’s cotton growing area amounts to 12.1 million hectares this growing season. A senior official of CAB has stated that overall yield should be less than last year’s level of 475 kilos per hectare due to adverse weather conditions that negatively affected some northern and central cotton growing areas.

Lower than normal arrivals of cotton from the growing areas has been a concern. Only 60 percent of the cotton crop has made it to market. January’s arrivals have been running near 200,000 bales daily. This is a low number for early January and indicates that late crop cotton was affected by climatic events. Only 35 percent of India’s cotton is under irrigation.

Demand from China continues to support cotton prices. The country’s December cotton imports rose 71 percent year on year to 790,000 tonnes. Expectations are that China will soon issue an import quota for an additional1.1 million tonnes.

Weekly technical indications for Friday, January 20th: At this time the week’s trading range was 99.47-95.67, the last print is 98.12. The stochastic is in buy mode. RSI at 50.59 is higher than last week’s reading of 47.23. The M.A.C.D. histogram at 1.01 is higher than last week’s indication of 0.43. This is the first week that the market has closed above the center Bollinger band. I reiterate, expect surprises to be on the upside. A weekly close at or below 95.41 in March Cotton will turn the weekly trend down.

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

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

Higher crushing volume in major sugar growing areas increased India’s sugar output 19 percent from the October 1^st start of the marketing year when compared to the same period last season. India’s sugar mills have requested that the government increase allowable exports and loosen it’s controls over supplies. Food Minister, K.V. Thomas has said that India’s Food Ministry will soon discuss the easing of controls over the countries sugar supply. Sugar is one of the most tightly regulated food sectors in India.

According to sugar industry executives and an official at the Office of Cane and Sugar board, sugar mills in Thailand have ramped up processing to avoid possible rain delays in the coming months. State owned Thai Cane & Sugar Corporation sold 31,333 tonnes of sugar to international trading firms in a tender on Tuesday.

With ever increasing Brazilian demand for U.S. ethanol there is a good chance that Brazil’s sugar crop will play a much greater role in the countries energy policy and a lesser one in the world’s sugar market. This should place firm support under the market and bring a large amount of investor based funds into the sugar market. There nothing an investor likes more that a defined floor in a market. Futures are risky, but some situations can take the sting out of positioning oneself.

After falling 27 percent in 2011 sugar traders believe that the biggest glut since 2001 will abate in the next harvest and ending the largest decline in a decade. Expectations for a surplus in supply are turning to concern regarding supply. Here is an interesting tidbit. Trend following traders have been long anywhere from 50,000 to 140,000 contracts over the last three years. Per January 10^th’s Commitments of Traders report they are now net short 4,821 contracts. The small amount leads me to believe they are wrong.

Weekly technical indications for Friday, January 20th: At this time the week’s trading range is 24.98-23.52, the last print is 24.94. The stochastic has flashed a buy signal. RSI at 51.11 is 45.59. The M.A.C.D. histogram at -0.009 is higher than last week’s reading of -0.18. This market is looking good. Keep close watch on the techs, they tell the story.A weekly close at or above 24.36 in March Sugar will turn the weekly trend up.

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

The Soft Spot(46)

Robin Rosenberg — 2012-01-13T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

Speculators have increased their net long positions in agricultural commodities on a massive scale. The latest Commitments of Trader’s data confirm they have increased their long exposure by 25 percent across the board. Improvement in U.S. economic growth generally leads to higher raw materials prices. At this point in time prospects for further improvement in the U.S. economy are quite good.

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

Speculative long positions in coffee increased 50 percent based on the latest COT report. Coffee provides more bang for the buck than most commodities. When it comes to risk-on investment coffee is a favorite. When the winds of speculation are blowing from the bull side major players will be onboard and long.

According to Brazil’s official crop forecaster CONAB, the country’s 2012 coffee crop is likely to be a record. The dry weather in Colombia is great news for the flowering of next season’s main crop. The country’s coffee production has not been able meet the 2007-2008 production of 12.5 million bags. Rains have slashed the country’s coffee output for three seasons in a row. Colombia is the world’s second largest producer of arabica coffee. According to ICAFE, the Costa Rican Coffee Institute the strong winds that were threatening the Costa Rican coffee crop have weakened considerably and caused little or no damage. Costa Rica’s coffee farmers are quite relieved.

Gas from coffee? No, not that kind of gas! It’s now possible to produce synthetic gas (syngas) from coffee processing plant waste. The syngas will be used for the production of electricity and heat or be converted to biofuel. In addition, researchers at the University of Missouri have developed an efficient way to extract oil from used coffee grounds. According to the research team, coffee grounds contain 10 – 18 percent oil by weight. Previously they ran into problems drying the grounds. They contain 70 percent water. The research team has engineered an extraction method that does not require drying the biomass. Can you imagine? We certainly have no shortage of used coffee grounds.

Weekly technical indications on Friday, January 13th: At this time the week’s trading range was 238.50-217.60, the last print is 234.80. The stochastic remains in buy mode. At 47.63 the RSI is higher than last week’s reading of 40.30. The M.A.C.D. histogram reads -0.23, higher than last week’s indication of -1.54. Trading well above the 9 bar moving average the market reached the center Bollinger band and is now trading between them. A weekly close at or below 215.65 in March coffee will turn the weekly trend down.

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

COCOA

Forty Year Trading Range: $4.44 to $53.79 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

Cocoa was one of few commodities that saw speculators increase their net short positions. Spec’s added 224 short contracts bringing the total to 9,694. Unlike many farm commodities, La Nina events tend to produce larger West African cocoa crops. Interestingly the majority of Ivory Coast’s cocoa belt has begun a second ten day period of no rain. The dry Harmattan wind could interfere with the crops development and curb output.

Cocoa prices in Ivory Coast’s cocoa growing areas have been rising ever so slightly. Concern is that there will not be enough cocoa in the near future. Cocoa arrivals at Ivorian ports for export have been falling sharply and are expected to continue falling in the weeks ahead. Not long ago I wrote that arrivals would fall in 2012 as the overhanging supply of cocoa from last season became depleted. Arrivals in February will tell the story.

The Ivory Coast’s main cocoa harvest comes to an end in March. Earlier if cocoa supplies dry up. Quality beans fit for export have become difficult to come by. Cocoa buyers are concerned they won’t be able to meet their contractual obligations. This has created tightness in supply and should push cocoa futures higher.

Has cocoa made it’s low? Fourth quarter cocoa grind figures are due to be released over the next couple of weeks. They could very well show an increase in demand is taking place in Europe and North America. The preceding information certainly leans towards the bull side of things. Not being one to join the crowd (the shorts) I will take to the sidelines and await opportunity.

Weekly technical indications for Friday, January 13th: At this time the week’s trading range was 23.88-20.23, the last print is 22.70. The stochastic is in buy mode. RSI at 40.10 is higher than last week’s reading of 28.17. The M.A.C.D. histogram at -23.86 is higher than last week’s reading of -50.59. The week’s trading activity rallied the market beyond the 9 bar moving average. A weekly close at or above 21.56 in March cocoa futures will turn the weekly trend up.

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

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)

Have you noticed how strong cotton has been lately. My favorite leading economic indicator is telling us that the economic situation is improving. Long positions in cotton rose the most since April of 2009. Speculators added 8,303 contracts. This brings their total longs to14,986.

Substitution of other crops for cotton this growing season could see U.S. cotton acreage fall near 12 percent. China is expected to move 15 to18 million bales into it’s strategic reserves. Cotton placed into China’s reserves is not in play. It’s like someone took half your marbles and hid them from you. The marbles still exist but you can’t get to them. As economic conditions continue to improve demand will increase. And when it does there will be a rebuilding of inventories. These factors could create tightness in supply and support higher cotton prices.

U.S. cotton exports have been healthy. Be it only for one reason, China. China’s buying has kept U.S. cotton exports ahead of the curve this marketing year. If it were not for Chinese imports there would have been extreme hardship for U.S. cotton exporters.

U.S. cotton exports for the week ending January 5^th, 2012 were 92,800 running bales.

Weekly technical indications for Friday, January 13th: At this time the week’s trading range was 96.48-91.85, the last print is 95.86. The stochastic remains in buy mode. RSI at 46.36 is lower than last week’s reading of 47.68. The M.A.C.D. histogram at -0.37 is lower than last week’s indication of -0.1. The majority of this week’s trade took place above the 9 bar moving average and reached the center Bollinger band. I continue to expect surprises to be on the upside. A weekly close at or below 91.74 in March Cotton will turn the weekly trend down.

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

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

This shouldn’t come as any surprise. China is considering the purchase of two million tonnes of sugar. The government would purchase one million tonnes; the Guangzi Autonomous region would buy 600,000 tonnes and other authorities would purchase the balance of 400,000 tonnes. An alternate plan is being discussed that would place a price limit on the purchase but no limit to the amount of sugar that could be imported. Consider this if you will. China produces near 12 million tonnes of sugar each year. The country’s usage is near 14 million tonnes. Sugar imports make up the difference. China is re-inventing the wheel.

The USDA has put a group of its scientists to work helping sugar beet producers in the U.S. increase their yields, protect their crops from disease and increase their profitability. A large part of their work is focused on beet necrotic yellow vein virus (BNYVV). The virus causes a disease called rhizomania that depletes the sugar content of the beets after harvest. There is one dominant gene in sugar beet that protects the plant from rhizomania, but many strains of the virus have overcome this genetic resistance. Hopefully the scientists develop a sugar beet variety that stands up to this menace.

Though the world’s sugar supply is more than ample many traders are thinking in terms of increased demand. Increasing demand for motor fuel in Brazil could place more demand on the country’s sugar supply, diverting more sugar to ethanol production.

Did you ever wonder why sugar costs up to twice as much in the U.S. than it does elsewhere? The U.S. produces a large quantity of sugar. In fact we produce more sugar than most of the other growers in the world. The problem is that our country’s climate is not really suited to produce sugar efficiently. This makes it a costly crop to produce. U.S. sugar producers have made use of political clout over the years to receive a host of benefits from our government. These include, but are not limited to import quotas, price supports (otherwise known as free puts), subsidies and high tariffs on imported sugar. If the market were left alone to function as a free market we would be paying much less for sugar. It’s not surprising that high fructose corn syrup is the chief sweetener used in our foods now is it?

Weekly technical indications for Friday, January 13th: At this time the week’s trading range is 33.85-22.82, the last print is 23.23. The stochastic has flashed a sell signal. RSI at 42.37 is a smidgen higher than last week’s indication of 42.59. The M.A.C.D. histogram at -0.23 is higher than last week’s reading of -0.31. Until this market is out of it’s trading range the technical indicators should be faded. In other words when the indicators improve, sell; when they deteriorate, buy. A weekly close at or above 23.96 in March Sugar will turn the weekly trend up.

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

The Soft Spot(45)

Robin Rosenberg — 2012-01-13T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

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

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

COCOA

Forty Year Trading Range: $4.44 to $53.79 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

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

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)

U.S. cotton exports for the week ending January 5^th, 2012 were 92,800 running bales.

Weekly technical indications for Friday, January 13th: At this time the week’s trading range was 102.42-101.60, the last print is 101.78. The stochastic remains in buy mode. RSI at 46.36 is lower than last week’s reading of 47.68. The M.A.C.D. histogram at -0.37 is lower than last week’s indication of -0.1. The majority of this week’s trade took place above the 9 bar moving average and reached the center Bollinger band. I continue to expect surprises to be on the upside. A weekly close at or below 91.74 in March Cotton will turn the weekly trend down.

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

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

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

The Soft Spot(44)

Robin Rosenberg — 2012-01-06T14:54:00Z

The Soft Spot

by Robin Rosenberg, PFGBEST

(800) 611-6974

RRosenberg@PFGBEST.com

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

The International Coffee Association forecasts world coffee production for 2011-2012 at 128.6 million 60 kilo bags. That’s a decrease of 3.4 percent from the 133.1 million bags produced during the 2010-2011 crop year. There is a great deal of concern that the world’s supply of coffee could become exceptionally tight and terribly expensive to boot. Extensive programs are being put in place worldwide to insure sustainability of it’s coffee crops.

Brazil’s domestic coffee consumption is poised to overtake the United States within just a few years. The take away is that the more coffee consumed by locals the less there is available for export. Increasing wealth is driving Brazilians to cappuccinos and espressos. This is just one example. Coffee drinking is on the rise in the majority of the worlds developing economies. That’s spelled A-s-i-a! There is only so much land available for coffee cultivation. Someday, be it sooner or later, you may have to make it through the day without those cups of java!

Weekly technical indications on Friday, January 6th: At this time the week’s trading range was 229.15-217.55, the last print is 219.90. The stochastic is in buy mode. At 39.57 the RSI is lower than last week’s reading of 42.46. The M.A.C.D. histogram reads -1.68, a bit higher than last week’s indication of -1.85. Again the week’s high pierced the 9 bar moving average, but fell back and is now trading below it. A weekly close at or below 214.80 in March coffee will turn the weekly trend down.

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

COCOA

Forty Year Trading Range: $4.44 to $53.79 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

West Africa’s record breaking 2010-2011 cocoa crop produced a large supply surplus. Yet another record breaking crop is expected following the 2011-2012 harvest. There is plenty of cocoa supply for now. But the not too distant future could bring extreme tightness to the world’s cocoa supply.

World cocoa supply is more than ample at this time, but what does the future hold? Chinese chocolate lovers consume just 3 grams per year. Add one chocolate bar to their yearly intake and the world’s cocoa supply would swing from one of plentiful supply to one of huge deficit. Forget about lower chocolate prices.

Asian tastes are becoming progressively more westernized. It wouldn’t surprise me to see cocoa prices move higher in 2012. Quite a few governments have put sustainability programs to work. Many of these programs are supported financially by the cocoa industry. Hopefully it’s not too late. Are $10.00 chocolate bars in our future?

Weekly technical indications for Friday, January 6th: At this time the week’s trading range was 21.79-20.03, the last print is 20.47. The stochastic is in buy mode. RSI at 28.56 is a bit lower than last week’s reading of 29.95. The M.A.C.D. histogram at -49.26 is higher than last week’s reading of -55.36. The week’s trading activity was again between the 9 bar moving average and lower Bollinger band. A weekly close at or below 20.31 in March cocoa futures will turn the weekly trend down.

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

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)

The Cotton market is in the midst of a perfect storm; large supply coupled with minimal demand. Cotton spinning mills are sitting idle; and cotton merchants doing a minute amount of business. The cotton industry is smarting as a whole.

China has initiated a price support program for the country’s cotton farmers. So far the China National Cotton Reserves Corporation has purchased 1.43 million tonnes of domestically grown cotton. The company’s storage facilities can hold 4.1 million tonnes of the soft and fluffy.

Cotton rallied to post Civil War highs in 2011. After which the market reversed and headed lower with a vengeance. The sovereign debt crises in Europe led to a worldwide economic slowdown and hobbled recovery. Unless the macroeconomic picture improves, cotton prices will likely hold steady in 2012.

Weather events could change the scenario in a heartbeat. As of now it appears that cotton will be pushed aside by more profitable crops in 2012. A sizable amount of acreage once devoted to cotton is expected to be planted with soybeans and corn. Raising cotton requires much more attention and strict insect and weed control. Overall, cotton is an expensive crop to grow.

Weekly technical indications for Friday, January 6th: At this time the week’s trading range was 96.48-91.85, the last print is 94.90. The stochastic is in buy mode. RSI at 46.53 is higher than last week’s reading of 42.46. The M.A.C.D. histogram at -0.17 is higher than last week’s indication of -0.79. The majority of this week’s trade took place above the 9 bar moving average. It’s been eight weeks since we’ve seen that. This week cotton rallied to just below the center Bollinger band. I continue to expect surprises to be on the upside. A weekly close at or below 88.00 in March Cotton will turn the weekly trend down.

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

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

Talk is that the world’s sugar surplus for 2011-2012 is expected fall 11 percent to 8.2 million tonnes. Presently there is more than enough sugar supply to satisfy demand. One thing to keep in mind is that lower sugar prices will divert additional Brazilian sugar to ethanol production. World ending stocks are expected to surge near 27 percent following this growing season.

China is “THE” major player in the sugar market. Sugar auctions had been held there to cool inflation and add to the available supply. The country has been importing sugar to replenish state reserves and meet demand. Expect China to be a strong buyer of sugar in 2012. Following this season’s harvest India became a net exporter of sugar. The food ministry has approved the export of one million tonnes of sugar thus far.

Sugar cane is exceptionally temperamental. Major rain in the world’s sugar growing areas is bad news for sugar. Too much rain and the sugar content in the cane drops precipitously. Also, much of the sugar cane is very old and beyond it’s prime production years. It is in need of replacement.

Weekly technical indications for Friday, January 6th: At this time the week’s trading range is 24.65-22.90, the last print is 23.35. The stochastic is in buy mode. RSI at 42.89 is higher than last week’s indication of 42.63. The M.A.C.D. histogram at -0.30 is higher than last week’s reading of -0.40. The market rallied sharply on Tuesday and traded to the week’s high on Wednesday. Sellers then arrived and drove the market to the bottom of it’s now seven week old trading range. A weekly close at or above 23.91 in March Sugar will turn the weekly trend up.

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

The Soft Spot(43)

Robin Rosenberg — 2011-12-30T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

rrosenberg@PFGBEST.com

COFFEE

Lifetime trading range $0.41.50 to $3.37.50 per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST

The major rally in coffee got underway in February 2010. From a low of 128.25 the market rallied to a high of 308.90 in April of 2011. A bull campaign that rallied the market 180.65 points. I had forecast that coffee would trade above 300.00 in 2011, and that it did. This was the first time coffee’s price exceeded the 300.00 level in 14 years. A glance at the long term coffee chart illustrates that coffee’s visits above the 300.00 price level are rare. When they do, the reversal to the downside is vicious and often the market gives up most, if not all of it’s gains.

After breaking to just below the fifty percent retracement level of 218.70 the market has stabilized and is holding above it. On a purely technical basis this mammoth bull market is just resting and far from over. I expect much higher coffee prices in the future. I wouldn’t be surprised if coffee exceeds the four dollar level within the next two years.

Coffee drinking continues to increase worldwide. Demand for coffee could easily outstrip supply as Asian tastes become increasingly westernized. The supply / demand situation is in balance at this time. This creates a hyper sensitive market environment. Events that negatively affect the coffee supply will cause a sharp move to the upside.

Weekly technical indications on Friday, December 30^th: At this time the week’s trading range was 229.30-218.35, the last print is 226.45. The stochastic has issued a buy signal. At 42.29 the RSI is higher than last week’s reading of 38.12. The M.A.C.D. histogram reads -1.87, higher than last week’s indication of -2.58. The week’s high pierced the 9 bar moving average, but broke back and is now trading below it. A weekly close at or above 221.90 in March coffee will turn the weekly trend up.

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

COCOA

Lifetime trading range: $444 to $5,379 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

Chutes and Ladders! The cocoa market offered something for everyone in 2011. The rally that began in the third quarter of 2010 continued through early 2011. After reaching a high of 37.75 in February the market collapsed. The longs ran for the hills and kept running until mid December when a low of 19.83 was reached

And then the fight started! In the Ivory Coast that is. In early December of 2010 president Laurent Gbagbo was defeated in his re-election bid by Alasanne Quattara. Gbagbo challenged the vote count, alleged fraud, and refused to step down. Following a short period of civil unrest he was arrested by the Republican Army of the Ivory Coast. In November he was extradited to The Hague. He will be the first head of state tried by the International Criminal Court.

A ban on cocoa exports put in place by president elect Quattara had the country’s cocoa industry up in arms. Originally planned as a one month event it stretched to three. The 2010-2011 Ivorian cocoa harvest was a record and it was sitting in storage. Ghana also produced a record crop and was able to fill in for supply being held up by the Ivory Coast export ban. When the export ban was lifted the supply of cocoa from West African growing areas inundated the market and drove cocoa prices down to their lows. I do believe this bear market has run it’s course. Remember, markets not only trend, they trade sideways as well.

Weekly technical indications for Friday, December 30th: At this time the week’s trading range was 22.45-20.73, the last print is 21.01. The stochastic is in buy mode. RSI at 29.78 is lower than last week’s reading of 32.54. The M.A.C.D. histogram at- 55.85 is higher than last week’s reading of -60.91. The week’s market action remained between the 9 bar moving average and lower Bollinger band. This was an inside week for cocoa. A weekly close at or below 20.39 in March cocoa futures will turn the weekly trend down.

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

COTTON

Lifetime 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)

In 2011 the market action in cotton provided both thrills and spills for traders. The first major event was the grand rush to the top of a rally that began in November of 2008. From a low of 36.70 cotton rallied to a new post Civil War high of 219.70. All I can say is WOW! I recall seeing a picture of a smalltime Chinese cotton farmer hoarding cotton in his home. He expected cotton prices to go much higher. Well, as is usually the case, that was the top. In mid December cotton put in what looks to be an important low of 84.35. The market is now trading in the low 90.00’s. There is plenty of supply and demand is minute.

First and foremost never forget cottons status as a leading economic indicator. Cotton will alert you in advance of an improving economic environment. How? Here is an example: You manufacture cotton mops and business has been terribly slow. Suddenly, orders begin to trickle in, but you don’t have enough cotton (or lumber) in inventory to manufacture them. After all, why buy raw product if there’s no business? You place an order for bulk cotton with your supplier. He tells you his business is improving and he must place an order to replenish his inventory. This demand causes cotton’s price to rise prior to the manufacture, distribution and final sale of product to the end user. It’s at that time the improved economic conditions make themselves known to the public. U.S. cotton exports for the week ending December 12^th, 2011 were 69,500 running bales.

Weekly technical indications for Friday, December 30th: At this time the week’s trading range was 92.09-87.24, the last print is 91.55. The stochastic has issued a buy signal. RSI at 42.13 is higher than last week’s reading of 35.78. The M.A.C.D. histogram at -0.81 is higher than last week’s indication of -1.22. This week the market traded above the 9 bar moving average. It’s been six weeks since that occurred. Expect surprises to be to the upside. This was cottons the first solid up week in more than two months. A weekly close at or below 83.00 in March Cotton will turn the weekly trend down.

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

SUGAR

Lifetime trading range: 2.30 cents to 66 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST

Last week’s positive market action has been slowly eroding away. Sugar has been locked up in a tight trading range for six weeks now. This type of trading activity is not uncommon leading up to and through the holiday period. The latest commitments of traders data indicates that non commercial and non reportable traders liquidated 4,552 longs. Index traders added 1,965 longs. If the bottom is in, each time the market rallies there are willing sellers waiting in the bushes. Importantly, many traders love a market that is trading in a tight range.

Sugar output in southeastern Brazil has been on the decline. This has created concern that the country’s ethanol supply could again become tight during the intra harvest period that runs from December to March. Last year Brazil announced a plan to increase the country’s ethanol storage capacity. The program went into effect on Tuesday. F.Y.I. Brazil is the world’s tenth largest energy consumer. In order to extend the current ethanol supply the blend may be cut from 25 to 18 percent.

The sugar market certainly provided numerous trading opportunities in 2011. The rally that began in May 2010 ran from 13.00 to a high of 36.08 in February 2011. A rally of 23.08 and a 31 year high. A gain of 23.08 and a! Turning lower, front month sugar futures put in a low of 20.40 in early May; a decline of 15.68. The market then rallied to a high of 31.85 in August followed by a decline to 22.71. Examine the tops and bottoms on the weekly continuation chart. They were very short lived. We call these “V” tops and “V” bottoms and they are quite rare; especially back to back. Markets generally whip about violently when putting in a top or bottom. 2011’s sugar market will be remembered as a trader’s market.

Weekly technical indications for Friday, December 30th: At this time the week’s trading range is 24.00-22.81, the last print is 23.14. The stochastic is in buy mode. RSI at 42.01 is lower than last week’s indication of 43.73. The M.A.C.D. histogram at -0.41 is higher than last week’s reading of -0.48. The week’s high was above the 9 bar moving average for the first time in seven weeks. But sellers promptly arrived and drove the market to it’s weekly low. The market continues to be range bound. A weekly close at or below 23.32 in March Sugar will turn the weekly trend down.

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

The Soft Spot(42)

Robin Rosenberg — 2011-12-23T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

rrosenberg@PFGBEST.com

COFFEE

Lifetime trading range $0.41.50 to $3.37.50 per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST

Conab, Brazil’s government crop forecasting agency released data estimating the country’s coffee output in 2011 reached near 43.48 million 60 kilo bags. Conab’s September forecast was 43.15 million bags. 2011’s coffee output was 75 percent arabica and 25 percent robusta coffees. 2011 was an off year for Brazil’s on /off coffee crop cycle. Untimely dry weather during the usually wet months of January and February negatively affected the crop and kept it from reaching full potential. In 2010, an on year for Brazilian coffee production, output reached 48.09 million 60 kilo bags.

There are six months to go before Brazil’s on cycle coffee harvest begins. An overview of the present situation leads me to believe that coffee prices will rise over the coming months. Recent price breaks were the result of speculators taking profits and the gloomy macroeconomic situation. Coffee producers may now take control of the coffee market. They are holding their ground and continue to offer product at high prices. Producers can take their time marketing their product and they are doing just that. Take it or leave it. If you don’t buy my coffee someone else will.

The USDA’s latest forecast indicates global coffee supply and demand will be just about balanced in the 2011-2012 crop year. Production is pegged at 133.8 million 60 kilo bags, consumption at 133.86 million. The forecast for lower production means demand will outstrip supply by a small margin. Stay on your toes. Any interruption in the supply chain will have coffee prices moving higher. How much higher? I would look to the resistance offered by Fibonacci retracement levels.

Weekly technical indications on Friday, December 23rd: At this time the week’s trading range was 224.05-212.35, the last print is 222.25.The stochastic is in sell mode, but close to issuing a buy signal. At 39.64 the RSI is higher than last week’s reading of 35.25. The M.A.C.D. histogram reads -2.4 and is higher than last week’s indication of -2.63. The week’s market action took place directly between the 9 bar moving average and the center Bollinger band. These technicals are neutral with a bullish tilt. A weekly close at or above 219.85 in March coffee will turn the weekly trend up.

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

COCOA

Lifetime trading range: $444 to $5,379 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

Private weather forecasters are calling for extremely dry weather in Ivory Coast’s cocoa growing areas. Some traders have projected a significant decline in production. All the talk about another record Ivorian crop this growing season can be thrown out the window. You can’t count the chickens until they hatch! Gaining 13 percent on last season, port arrivals continue to be strong. We need to keep close tabs on arrivals. They contain a sizable amount of last seasons carry over. Soon the arrivals will contain cocoa beans that are all from this season’s harvest.

La Nina has regained her strength and is already wreaking havoc. The weather phenomenon produced extremely heavy rains in Indonesia. A substantial amount of the countries cocoa crop has been destroyed. An Indonesian research organization said this season’s crop could be down as much as 23 percent compared to last.

Cocoa has is behaving as if a bottom is in place. At this time on Wednesday, March cocoa appears ready to exceed the high put in place last week following the release of a bullish report. The crowd still believes that cocoa is heading lower. I disagree. If the majority of traders are bearish I want to be long. Contrary opinion is the trader’s best friend.

Weekly technical indications for Friday, December 23rd: At this time the week’s trading range was 22.53-20.65, the last print is 22.10. RSI at 32.12 is higher than last week’s reading of 26.17. The M.A.C.D. histogram at -61.62 is higher than last week’s reading of -70.73. These technicals are bullish. This week’s trading activity took place between the 9 bar moving average and the lower Bollinger band. A weekly close at or above 21.34 in March cocoa futures will turn the weekly trend up.

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

COTTON

Lifetime 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)

Speculative investors remain extremely risk averse. The macroeconomic situation is showing very little in the way of improvement. Thin pre holiday trade has taken over. March cotton futures are holding just above the lower Bollinger band. Last week the market spiked below the lower Bollinger band and closed below it. Thus far this week the market has remained above it. This is a subtle hint that March cotton futures may have bottomed. Index funds will need to buy near 11,000 contracts in January. My question is who is going to sell it to them?

The world’s largest importer and consumer of cotton will be planting less cotton next growing season. The China National Cotton Reserves Corporation surveyed cotton farmers in 15 of the countries provinces. After all was said and done it appears the decline will reach 8.2 percent. When cotton prices were high China’s cotton farmers were hoarding it. Now that prices have sunk they won’t plant as much. What a beautiful example of contrary opinion at work. The lemmings are all bearish. Open interest has been rising this month. We could have one heck of a fireworks display if this market continues to hold above last week’s lows.

Pakistan’s cotton prices have fallen near 42 percent since the country’s financial year began on July 1^st. Needless to say; Pakistan’s cotton growers are feeling the pain. Pakistan’s state run Trading Corporation is considering the purchase of one million bales. Growers would like to sell somewhat more. Last time the government trading arm purchased cotton from growers was in 2005. The total amount purchased at that time was 1.6 million bales.

U.S. cotton exports for the week ending December 12^th, 2011 were 69,500 running bales.

Weekly technical indications for Friday, December 23rd: At this time the week’s trading range was 88.14-85.90, the last print is 87.25. The stochastic is in sell mode. RSI at 35.79 is higher than last week’s reading of 34.30. The M.A.C.D. histogram at

-1.22 is little changed from last week’s indication of -1.17. This week’s market action took place just above the lower Bollinger band. The technicals are neutral, but keep a close watch on them. Something is brewing and I believe there will be surprises to the upside. A weekly close at or above 86.98 in March Cotton will turn the weekly trend up.

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

SUGAR

Lifetime trading range: 2.30 cents to 66 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST

March sugar futures have been trading in a tight range for five weeks now. And there is very little in the way news specific to sugar. Even though thin pre holiday trading has taken over there is a glimmer of hope for the bulls amongst us. Citing typhoon damage the Philippines has lowered its sugar crop estimate by 7 percent to 2.24 million tonnes. This is 6 percent lower than last season’s output. Australia’s sugar harvest ended with a thud. Sugar output was a paltry 27.9 million tonnes due to poor yield. This is one of the smallest harvests on record. Last season’s output was even less at 27.5 million tonnes.

China’s November sugar imports were 418,392 tonnes. Over the past eleven months China has imported 2,424 million tonnes. That’s up 47.7 percent compared to the same time frame last year. China’s sugar supply deficit is expected to be near2 million tonnes this season. State reserves need re-stocking as well. Are the Chinese be executing another well thought out trading strategy? They are certainly buying sugar on the cheap.

The information above leads me to believe we have seen the lows in sugar for now. Is history about to repeat itself? Standard Chartered bank expects sugar to outperform, despite the possibility of a supply surplus. The surplus will do little to boost end of season stocks. They have not recovered since the drawdown that followed two consecutive poor harvests in India. Remember, sugar exited the 2008-2009 crisis with relatively high returns.

Weekly technical indications for Friday, December 23rd: At this time the week’s trading range is 23.70-22.78, the last print is 23.61. The stochastic is in buy mode. RSI at 43.87 is higher than last week’s indication of 41.25. The M.A.C.D. histogram at -0.47 is higher than last week’s reading of -0.57. The week’s trading activity took place just below the 9 bar moving average. The technicals remain positive. Sugar appears to be preparing for a move to the upside. A weekly close at or above 23.53 in March Sugar will turn the weekly trend up.

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

The Soft Spot(41)

Robin Rosenberg — 2011-12-16T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

rrosenberg@PFGBEST.com

COFFEE

Lifetime trading range $0.41.50 to $3.37.50 per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST

Based on research by the International Coffee Association, world coffee production for 2011-2012 should reach 128.6 million 60 kilo bags. A decrease of 3.4 percent from the 133.1 million bags produced during the 2010-2011 crop year. The decrease was due to adverse weather in several major exporting countries. The dollar value of coffee exports for the 2011 calendar year will reach $23.5 billion. This is an increase of near 41 percent over 2010.

The USDA estimates that Indonesia’s coffee output this marketing year will drop 20 percent to 7.5 million 60 kilo bags. This is due to above normal rainfall which negatively affected development of the coffee cherries and impeded harvesting activity.

Arabica coffee output in Cameroon for the just ended 2010-2011 season was 2,577 metric tonnes, down from the 3,423 tonne output of the previous season. Guatemala’s coffee output will most certainly fall. This seasons harvest was marred by an unusually long lived overcast condition and heavy rain. The weather assisted in spreading a deadly fungal disease over large areas of the country’s coffee growing areas. An official estimate of the damage has yet to be released.

It’s time we gather our thoughts and analyze the present situation as it pertains to coffee. It’s plain as day that demand for coffee is increasing steadily if not alarmingly. If a weather event were to negatively affect coffee output, coffee prices will move higher. Some agronomists have said that a small change in temperature could create an environment that is inhospitable to coffee trees. If climate change raises or lowers temperatures in coffee growing areas coffee prices will move higher. So, though the coffee futures market appears to be in a steep downtrend, the situation is questionable. It won’t take much to turn coffee prices up. But in the mean time the trend remains down.

Sara Lee Corporation has agreed to purchase Dutch coffee café store operator CoffeeCompany. This is the latest deal signed by the consumer products company with the aim of strengthening it’s coffee business. Sara Lee plans to split in two sometime in the first half of 2012. One company will be an International coffee and tea business. The other will be a North American company that will distribute house wares and food products.

Weekly technical indications on Friday, December 16th: At this time the week’s trading range was 227.60-216.55, the last print is 218.00.The stochastic remains in sell mode. This was the first week out of five that the market did not trade above the 9 bar moving average. At 36.05 the RSI is lower than last week’s reading of 4005. The M.A.C.D. histogram reads -2.44 and is lower than last week’s indication of -1.86. Barring unforeseen developments March coffee appears to be on it’s way to 207.00. These technicals are bearish. A weekly close at or above 230.90 in March coffee will turn the weekly trend up.

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

COCOA

Lifetime trading range: $444 to $5,379 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CST

Everyone likes a surprise, right? Cocoa bears got one heck of a surprise Monday morning. And I don’t believe any of them were elated. Cocoa rallied near two hundred points in a very short (no pun intended) time. When I saw that all I could think of was the shorts. What were they thinking at that time? A small trader could be mortally wounded by a move like that. After reaching a few of my sources I found that one of the world’s largest cocoa trading firms had released a very bullish report. Let’s examine the important aspects of that report.

The majority of traders believe the market as balanced at this time. Olam, one of the world’s four largest cocoa traders warned of a cocoa deficit following the 2011-2012 West African harvest. The head of Olam’s cocoa division expects 2011-2012 production to fall near 100,000 tonnes short of grindings. He explained that the deficit could very well widen as exports to date have included the carryover from last season. A dramatic drop in arrivals is expected from January 2012 onwards. Insight from Olam is thoroughly welcomed. This type of information could create a bottom in the market. At this point there is still a plenty of cocoa available. I will be keeping a close eye on this situation. During a long term bear market it doesn’t take much to spook the shorts. When bullish information originates from a large concern like Olam it scares the dickens out of them. It’s unusual to get the story straight from the horse’s mouth. It could very well be true. Would you be surprised if Olam was long cocoa? Good answer, neither would I!

Cocoa farmers in some West African nations have been holding back cocoa from the market awaiting higher prices. Some farmers in southwest Nigeria have large cocoa stocks on hand and have begun to sell their cocoa beans on a small scale. They don’t want to be holding the bag if the bottom falls out. Other farmers continue to hold back supply as well. In fact, thousands of cocoa farmers in Cameroon’s Center Region are refusing to sell cocoa at these price levels. This is an extremely dangerous tact. I fear for their well being. Ghana is locked in an ongoing dispute with shippers and shipping lines over port charges. Needless to say this has halted shipments of cocoa from the world’s second largest producer of cocoa.

Would you believe ten dollars for a chocolate bar? In Asia, western tastes are increasing. Currently the Chinese chocolate lover consumes just 3 grams per year. If they were to increase their chocolate consumption by one bar per year we would have a tremendous shortage of cocoa on our hands. Close to twenty years ago cocoa was trading near $10.00. I said that when the Chinese people taste chocolate cocoa prices will go to twenty cents. Guess I was a bit off the mark. Cocoa reached highs of just over 36.00 in early 2011. In the 1970’s cocoa traded as high as $53.79. Remember, history repeats itself; especially in the world of commodities!

Weekly technical indications for Friday, December 16th: At this time the week’s trading range was 36.10-33.36, the last print is 33.41. The stochastic has flashed a buy signal. This week the market broke below the lower Bollinger band, but gathered strength and rallied back above it. Markets do not hang around the lower Bollinger band for long. RSI at 56.50 is more than double last week’s reading of 24.24. The M.A.C.D. histogram at -61.82 is higher than last week’s reading of -65.88. These technicals are bullish. This week’s whopper of a rally was propelled by a report issued by a third party with an obvious conflict of interest. Keep very close watch on this market. A weekly close at or above 22.39 in March cocoa futures will turn the weekly trend up.

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

COTTON

Lifetime 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)

U.S. cotton exports have been booming. This early surge in U.S. cotton exports can be chalked up to Chinese government purchases. In November alone the China imported 378,200 tonnes of cotton. That equals an increase of 199.6 percent year over year. Year to date China’s cotton imports stand at 2.57 million tonnes, up 8.4 percent on the year. This cotton is being purchased to replenish the country’s depleted reserves.

China has been stockpiling cotton to protect it’s cotton farmers and support local cotton prices. The China National Cotton Reserves Corporation has purchased 1.43 million tonnes of it’s domestic harvest so far. The corporation has the capacity to store 4.1 million tonnes. China expects it’s cotton output to reach near 7.5 million tonnes this season.

Cotton futures fell to 16 month lows this week. Many believe there is no end in sight. March cotton futures could reach major support at 80.00 before this bear market gives up the ghost. Nothing goes down forever, or up for that matter. It’s late in the game to enter short positions in cotton. If you do so watch short term charts for signs the market is turning up. By all means use stops for protection. In fact purchasing enough puts to cover your exposure would be ideal.

World ending stocks are expected to surge near 27 percent this season. There is concern among traders that Europe’s sickly economic situation could spread to other countries and lessen demand for cotton even further. And to top it off – It’s raining in Texas!

Cotton exports for the week ending December 8^th, 2011 were 55,800 running bales.

Weekly technical indications for Friday, December 16th: At this time the week’s trading range was 90.45-84.35, the last print is 87.21. The stochastic is close to issuing a buy signal. RSI at 35.03 is lower than last week’s reading of 37.82. The M.A.C.D. histogram at -1.1 is a bit lower than last week’s indication of -0.89. This week the market spiked below the lower Bollinger band then rallied back above it. The technicals are again neutral this week. A weekly close at or below 89.14 in March Cotton will turn the weekly trend down.

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

SUGAR

Lifetime trading range: 2.30 cents to 66 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CST

The world’s sugar surplus in 2011-2012 will likely fall 11 percent to 8.2 million tonnes. Previously the estimate stood at 9.2 million tonnes, but increased uptake from Asia is expected to offset increased production. According to the International Sugar Organization, has said that sugar production in the next marketing year may meet global usage. This should aid in relieving concerns regarding oversupply that put a damper on prices this year.

Brazil seems to be in a better position to supply sugar on a short term basis than it had been a year ago. Sugar stocks are at levels close to last year. Russian demand will decline as a result of it’s large sugar beet crop this growing season. According to the national association of sugar producers, Ukrtsukor, Ukraine produced 122.26 million tonnes of sugar from this year’s beet harvest. That’s 48 percent higher than the same time last year. Local Russian sugar prices may rise though. The quality of their sugar beet crop is not up to par. Their sugar content is below what had been expected.

A high ranking Brazilian sugar industry official has said that If Sugar prices fall below 20-22 U.S. cents per pound Brazilian sugar mills would likely increase ethanol production relative to sugar. Ageing cane and poor weather took a toll on the Brazilian sugar crop. Brazilian cane industry group (Unica) reported sugar output in the country’s center south region fell to 500,000 tonnes in the second half of November. The center south provides 90 percent of Brazil’s sugar output. Sugar crushing volume was down near 50 percent on the year.

Raw sugar prices have declined 26 percent this year on reduced demand. However, demand for sugar in India was revised upwards to 34.51 tonnes from 23.9 million tonnes. India has issued permits to export 22,000 tonnes of sugar. These are the first permits issued for the 1 million tonnes of sugar exports approved by the food ministry.

Weekly technical indications for Friday, December 16th: At this time the week’s trading range is 23.89-22.62, the last print is 22.94. The stochastic has flashed a buy signal. RSI at 40.79 is lower than last week’s reading of 42.34. The M.A.C.D. histogram at -0.58 is again basically unchanged from last week’s reading of -0.59. An argument could be made for what appears to be a double bottom using this week’s low of 22.62 and the low of 22.71 the week of November 12^th. Major resistance waits above at the 9 bar moving average of 24.17. The technicals are positive. A weekly close at or above 23.91 in March Sugar will turn the weekly trend up.

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

The Soft Spot(40)

Robin Rosenberg — 2011-12-09T14:54:00Z

by Robin Rosenberg, PFGBEST

(800) 611-6974

rrosenberg@PFGBEST.com

COFFEE

Lifetime trading range $0.41.50 to $3.37.50 per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m. CDT

Domestic demand for Brazil’s coffee has reached a fever pitch. Local coffee prices have ratcheted sharply higher. Record demand from local roasters is the cause. Brazilian roasters generally purchase low quality arabica and robusta varieties. Local prices are 40 percent higher than they were a year ago.

The Brazilian association of Coffee industries expects domestic coffee usage to increase by 3.5 percent this year. Last year, Brazil’s domestic demand was a record 19.1 million 60 kilo bags. According to Rabobank International, Brazil has a good chance of overtaking the U.S. as the world’s largest coffee consumer in five years. Hard to believe isn’t it? The crop forecasting agency of the Brazilian agriculture ministry expects the country to produce 43.1 million bags of coffee this growing season. Of that, exports may total 25 million bags. This makes me glad I’m a diet cola drinker!

Now let’s examine the situation as it pertains to India. India is the world’s sixth largest coffee producer. At present the country exports close to 80 percent of it’s production. The three largest buyers of India’s coffee are Germany, Italy and Russia. Jawaid Akhtar, chairman of India’s Coffee Board expects that exports will fall 15 percent in 2011-2012.

Why is that? Domestic demand, that’s why! India’s domestic coffee usage has been rising close to 6 percent annually. Mr. Akhtar expects India’s 2011-2012 coffee exports to be in the neighborhood of 240,000 to 250,000 tonnes. What does this all mean to us? We will experience higher coffee prices in the future. More than likely we will experience the highest coffee prices in history.

Kraft Foods has begun shipping it’s premium Gevalia coffee to retailers. This put’s the company back in the folds of the fast growing premium coffee business. The company had been in a strategic partnership with Starbucks, whose consumer coffee business grew from 50 to 500 million dollars under Kraft’s management. Howard Schultz the C.E.O. of Starbucks is a tough man to please!

Weekly technical indications on Friday, December 9^th: At this time the week’s trading range was 238.95-226.75, the last print is 229.40.The stochastic has flashed a sell signal. The market pierced the 9 bar moving average, but was unable to hold. At 40.71 the RSI is lower than last week’s reading of 41.77. The M.A.C.D. histogram reads -1.74 and a bit higher than last week’s indication of -1.83. The market appears it will close out this week little changed from last. These technicals are bearish. A weekly close at or above 233.70 in March coffee will turn the weekly trend up.

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

COCOA

Lifetime trading range: $444 to $5,379 per tonne

Trades on the ICE from 3:00 a.m. to 1:00 p.m. CDT

Cocoa prices have fallen more than 20 percent over the last month. The market put in three year lows this week. The overhang of supply from last season’s record West African harvest and expectations that another record crop is on the way has cocoa in a five star bear market. From what I understand user’s needs are well covered. The Ivory Coast has exported 5 percent more cocoa at this time than was the case one year ago. Nobody is willing to stick their neck out and buy in front of his slow moving freight train to the downside.

There continues to be much concern regarding the economic state of the countries that make up the Eurozone. A few of them are large users of cocoa in normal times. Now that everything seems to be up for grabs there is fear that sales of chocolate will suffer. We will soon find out if that’s the case with the holiday shopping season in full swing. If you are looking for that special gift you may want to check out the Omanhene chocolate company. The company’s products are made Ghana using the highest quality Ghanaian cocoa available.

Cocoa was thought to be of divine origin by the Mayan and later Aztec civilizations. The scientific name for the cocoa tree is Theobroma cacao. Theobroma is Greek for food of the G-ds and cacoa is derived from the Mayan word Ka’kau. But then again isn’t everything thought to be of divine origin?

My take on this is that cocoa is now heading for the 18.00 handle. The last time the market visited that price level was in early 2008. I had mentioned 22.00 as an objective a number of times. Hopefully some of my readers took advantage of that as the market was trading in the low 30.00’s at that time.

Ivory Coast president Alassane Quattara has introduced reforms that will greatly benefit the countries cocoa farmers. According to Mamadou Coulibaly, the country’s minister of agriculture Ivorian cocoa farmers will be receiving 50 to 60 percent of the world cocoa price for their cocoa rather that the 35 percent they now receive. Well, that is certainly a step in the right direction. Let’s chalk one up for sustainability. This will most certainly result in increased cocoa production.

Weekly technical indications for Friday, December 9^th: At this time the week’s trading range was 22.49-20.78, the last print is 21.24. The stochastic remains in sell mode. This week’s trading saw this market hugging the lower Bollinger band. RSI at 25.30 is lower than last week’s reading of 27.42. The M.A.C.D. histogram at -61.82 is lower than last week’s reading of -48.47. The technicals remain bearish. How low can it go? A weekly close at or above 24.10 in March cocoa futures will turn the weekly trend up.

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

COTTON

Lifetime trading range: $26.84 to $227.00 per lb.

Trades on the ICE from 8:00 p.m. to 1:30 p.m. CDT (Next Day)

U.S. cotton exports have averaged 518,000 running bales over the past five weeks. That’s more than 94 percent of the USDA’s expectations for this marketing year. Normally at this time of year the figure would be closer to 57 percent. The five year average stands at 56.9 percent.

World cotton experts are lowering their estimates for next season’s cotton production. Cotton prices have plummeted and farmers will be substituting other crops in it’s place. This is the first time in three years that cotton is less attractive than alternate crops.

Expectations are that the amount of acreage planted with cotton will decline by 8 percent in 2012-2013 to 33.3 million hectares. Production will be reduced 6 percent to 25.1 million tonnes. The exceptions are Australia, the United States and Uzbekistan. F.Y.I. 1 hectare equals 2.47 acres.

If the world cotton crop was to decrease and the macroeconomic picture improves, cotton prices will have nowhere to go but higher. As a leading economic indicator the Cotton market will let us know in advance. Stay vigilant!

U.S. cotton exports for the week ending December 1^st, 2011 were 225,200 running bales. They were up 48 percent from the previous week and 59 percent from the prior 4-week average. The primary destination? Why China of course!

Weekly technical indications for Friday, December 9^th: At this time the week’s trading range was 93.93-90.58, the last print is 90.63. The stochastic remains in sell mode. RSI at 38.00 is lower than last week’s reading of 39.09. The M.A.C.D. histogram at -0.88 is lower than last week’s indication of -0.80. This week the market did not pierce the lower Bollinger band as it did in the previous two. The technicals have taken on a neutral stance. A weekly close at or below 89.27 in March Cotton will turn the weekly trend down.

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

SUGAR

Lifetime trading range: 2.30 cents to 66 cents per lb.

Trades on the ICE from 2:30 a.m. to 1:00 p.m.

AHAA! Last week I wrote that China had been actively poking about the cash market, but had not done any buying. Just their presence was enough to alert me that something was about to happen. This week China purchased 100,000 tonnes of raw sugar from Thailand. China expects to produce 12 million tonnes of sugar this season. The country’s sugar consumption is 14 million tonnes. 100,000 tonnes is just a drop in the bucket. Expect China to be buying a lot more sugar in the future.

One dealer said that China bought more than 100,000 tonnes. That wouldn’t surprise me in the least. You’ve read it here before; large traders do not tell the truth. When you get down to it why should they? China is the largest trader on the face of the earth. It produces near 9 percent of the world’s sugar. The country imported near 337,000 tonnes of sugar in October. That’s 34 percent more than in September.

This week sugar traded up to a level not reached since mid November. Keep in mind that the Chinese buying has to cover more than consumption. Remember last year when China was auctioning sugar from it’s reserves? That will need to be replaced as well. This should awaken activity in the cash market as other buyers are keenly aware that a Chinese buying spree could send sugar prices higher. In my opinion very few will know the Chinese are buying until after the transactions take place. That’s just the way large traders like it. There is still far too much sugar available to become bullish.

India’s Sugar mills can now rejoice. The government has given formal approval to export the 1 million tonnes of sugar that had been approved by a ministerial panel last month. China is a next door neighbor!

Weekly technical indications for Friday, December 9^th: At this time the week’s trading range is 24.25-22.99, the last print is 23.69. The stochastic remains is about to flash a buy signal. RSI at 43.49 is higher than last week’s indication of 42.50. The M.A.C.D. histogram at -0.57 is basically unchanged from last week’s reading of -0.59. This is the second back to back week that the market failed to reach the lower Bollinger band. The technicals are somewhat positive. A weekly close at or above 23.96 in March Sugar will turn the weekly trend up.

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