Is cotton entering a bull market?

January 12, 2018 09:57 AM

 General Comments:
  Futures were lower in New York and near unchanged in London yesterday.  Speculators were said to be the best sellers in New York and appear to be adding to short positions. Ideas of big production potential for Brazil, Honduras, and Vietnam are around and are the major topics of conversation. The cash market seemed mostly quiet due to the recent price weakness, but traders say that a lot of coffee is being sold and moved out of Honduras. Bid and offer spread in the rest of Central America appears to be wide. Ideas are that Vietnam also has a lot of coffee to sell, but farmers are holding back and hoping for stronger prices leading into the Tet holiday. 

Internal prices in Vietnam remain at high levels compared to London, and the Price spread has helped keep London in a sideways range. There is plenty of rain in some áreas of Brazil this week, and producers in much of Minas Gerais expect good crops  There are reports of short crops in parts of Central America and some areas in South America due to the lack of farmer investment from the low prices, but Honduras has production and has been selling as much as possible, and ideas of bigger crops this year in Honduras and Vietnam are offsetting reports of smaller crops in the rest of Central America and Colombia. 

Overnight News:  Certified stocks are higher today and are about 2.005 million bags. The ICO composite price is now 114.31 ct/lb.  Brazil will get light showers each day with best amounts and coverage expected over the weekend. Temperatures should be near to above normal. Colombia should get isolated showers. Central America and southern Mexico should get isolated showers or dry conditions. Temperatures should average near to above normal. 

Chart Trends:  Trends in New York are mixed to down with objectives of 121.00 and 116.00 March.  Support is at 122.00, 120.00, and 118.00 March, and resistance is at 126.00, 138.00 and 130.00 March.  Trends in London are mixed.   Support is at 1700, 1670, and 1650 March, and resistance is at 1740, 1760, and 1770 March.

General Comments:  Futures were lower in both New York and London again yesterday and trends are down on the daily charts for both markets. Speculators were the best sellers on ideas that the upside potential in prices was limited and that supplies of Sugar into the world market are ample. Production surplus estimates for the year range from about 4.0 million tons to above 10.4 million tons. Much of the support has come3 from the recent rally in energy prices. The crude oil market is firm and could help keep sugar prices high if more cane gets diverted into ethanol production.  But, the market still anticipates that there will be plenty of sugar to meet any demand.

Overnight News:   Brazil should feature light showers each day. Temperatures should be near to above normal 

Chart Trends: Trends in New York are down with objectives of 1410, 1370, and 1260 March. Support is at 1390, 1360, and 1350 March, and resistance is at 1450, 1480, and 1500 March. Trends in London are down with objectives of 367.00 March.  Support is at 367.00, 365.00, and 361.00 March, and resistance is at 383.00, 385.00, and 392.00 March.



 General Comments: 
Futures closed lower and prices are back near the middle of the trading range.  New York still appears to be putting a bottom together. London could also be in the process of completing a bottom.  The West African main harvest has started to wind down and focus is shifting to the next round of grind data and the weather for the West African mid crop. Ideas are that Cocoa demand from grinders can be strong this quarter due to the weaker prices.

The market is also on alert for the Harmattan winds that can suck moisture from the soil and trees and really hurt bean quality and production.  These winds have not developed as of yet, but could at any time. Arrivals in West Africa remain behind year ago levels when they were expected to be above year-ago levels. Prices are weak overall due to the ongoing harvest but have found some good buying interest at current levels as some are now viewing the market as cheap.  World supply ideas remain high. 

Overnight News:  Mostly dry conditions are expected in West Africa.  Temperatures will average above normal.  Malaysia and Indonesia should see frequent showers. Temperatures should average above normal.  Brazil will get dry conditions and near to above normal temperatures. ICE certified stocks are higher today at 3.607 million bags.   

Chart Trends:  Trends in New York are mixed. Support is at 1900, 1870, and 1850 March, with resistance at 1960, 2000, and 2030 March. Trends in London are mixed. Support is at 1370, 1330, and 1320 March, with resistance at 1450, 1460, and 1500 March.


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About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.