PFGBEST Futures Training Division

The Soft Spot(61)

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. CDT

How would you like some hot Coffee? A truck hauling 38,000 pounds of unroasted Coffee beans from Mexico was stolen near Los Angeles this week. Will the crook hold back the Coffee for higher prices? It seems like everyone else does.

Coffee companies are reaping the benefits of falling Coffee prices. They have been able to provide better products to consumers while maintaining the same or even larger profit margins. Growers on the other hand are up in arms. Small Coffee growers may no longer be able to afford farming.

This week Ice U.S. Arabica Coffee futures traded at their lowest level in eighteen months. Coffee prices have already retreated near 23 percent in 2012. The oncoming Brazilian Coffee harvest is expected to be huge. Favorable weather throughout this growing season is said to be the reason behind it. Coffee farming is becoming modernized and mechanized. Coffee farmers are becoming educated in the treatment of disease and the eradication of insect pests. We will have to wait for the new supply to enter the distribution network. Keep in mind this could very well be a sell the rumor buy the fact situation.

Brazil’s Coffee farmers had been playing hide the Coffee in order to boost prices. With the new harvest on the horizon they are now selling their remaining supply before the new harvest begins. In 2002 Brazil produced a record Coffee crop of 48.5 million 60 kilo bags. Last month CONAB, the Brazilian agricultural forecasting agency said it expected Brazil’s Arabica Coffee crop to reach a new record of 52.3 million 60 kilo bags.

Vietnam has exported 760,000 tonnes of Coffee in 2011-2012. That’s up from 740,000 tonnes during the same time period last crop year. The country’s General Statistics office had expected March exports of 190,000 tonnes. Actual exports were 187,073 tonnes. Lower than February’s exports, but an increase of 16 percent over March of last year.

Jacu bird Coffee – what? The Jacu Bird is a South American native. It just loves eating the ripest bright red Coffee cherries. Now comes the interesting way in which Jacu bird Coffee is processed. The birds cannot digest the Coffee beans within the cherries. So, when the cherry passes through the bird’s digestive tract out come the beans. These little piles of beans are collected by the Coffee farms, washed and packaged for our pleasure. People that have enjoyed this Coffee say it is a very pleasing cup of smooth, well balanced Brazilian Coffee. Crappuccino anyone?

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, April 20th: At this time the week’s trading range is 181.35-173.90, the last print is 177.80. The stochastic remains in buy mode. RSI at 24.95 is lower than last week’s indication of 25.83. The M.A.C.D. histogram at -2.54 is higher than last week’s indication of -3.03. On a day to day basis Coffee appears to have bottomed. View pull backs to support as buying opportunities. A weekly close at or above 181.00 in July 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. CDT

Arrivals of Cocoa at Ivory Coast ports for export are running 18,000 tonnes above last year at this time. Lest we forget, political unrest had the countries Cocoa industry up for grabs last year. A five percent drop in Cocoa purchases by the Ghanaian government has signaled that Ghana’s supply of main crop of Cocoa is running out. Cameroon’s National Cocoa and Coffee Board (NCCB) reports Cocoa exports fell 12 percent by the end of March when compared to this time last season. Long lasting bone dry weather and mass caterpillar attacks are to blame. The drop had been expected.

This is a quiet time for Cocoa. Major growers are winding down their harvest activities as the main harvest’s come to a close. Commercial interests are uneasy. They are concerned about near term supply. This likely led to the large mid-week drawdown of ICE certified Cocoa stocks. Mid crop harvests will soon begin in West Africa. There is much handwringing by Cocoa farmers. More than a few Cocoa farmers are concerned that the dry weather took a toll on the mid crop. They do not like what they see. The condition of their Cocoa trees and constant threat of dryness has them forecasting lighter than expected mid crop production. Recent rains over many West African production areas have improved the condition of the mid crop Cocoa pods.

1^st quarter North American Cocoa grindings were down 4.04 percent. The trade was looking for 4 percent higher to 5.5 percent lower. Cocoa grindings are an indicator of demand. Keep in mind this covers the previous quarter and is not a strong indicator of future demand.

It was 1918; the Great War had just begun. Chocolate was to become a permanent addition to the soldier’s daily rations. Caley’s, an English candy company was chosen to manufacture what they christened “Caley’s Marching Chocolate”. It was lovingly referred to as “Marcho” by the British troops. One can purchase that same Marching Chocolate today.

Weekly technical indications for Friday, April 20th: At this time the week’s trading range is 22.93-21.62 the last print is 22.16. The stochastic remains in sell mode. RSI at 43.06 is higher than last week’s indication of 41.98. The M.A.C.D. histogram at 6.6 is lower than last week’s indication of 8.01. Cocoa appears to have bottomed. This week’s price action pierced the 9 bar moving average and center Bollinger band. It now sits just below them. A weekly close at or below 20.44 in July cocoa 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. CDT (Next Day)

The fact that China has completed re-stocking it’s state reserves has created downside pressure on Cotton prices. The USDA is calling for a decrease in world Cotton consumption of 6.8 million bales. Many analysts do not believe this figure will be anywhere near the USDA’s presumption. In addition expected ending stocks following the 2011-2012 growing season have been adjusted upwards to 66.07 million bales. The adjustment was made to compensate for errors discovered in India’s Cotton production data. That’s equal to 61.3 percent of annual usage or one heck of a lot of Cotton swabs.

Massive global ending stocks and light demand have created a bearish fundamental environment for Cotton. Lower prices will cause farmers to plant less Cotton than was forecast by March’s prospective plantings report. Drought in the Southwest continues and is spreading. Mother Nature’s stance on this is unknown. Questionable growing conditions and less planting could put a floor under this market.

This is the earliest spring in a long, long time. It’s really nice for a change, isn’t it? Well, it’s nice for insects too. They will produce at least one additional generation this year. Their numbers increase with each generation. The number one insect pest of Cotton is the tarnished plant bug. This all boils down to more spraying of insecticide and cost more to produce Cotton. Since insect pests are a problem for all farmers, other crops will also become more expensive to grow. If it costs more to raise it’s going to cost everyone up and down the supply chain more.

When you have to look up to see down there is a very good chance the big break is over. The psycho babbling and anxiety attacks are contrarian in nature and indicate that a bottom may be in place. Based on this I’d expect some strength to develop in Cotton. Long term resistance peers down from above at 91.21 and 98.85. Remember, this is all speculative on my part and I could certainly be wrong.

Weekly technical indications for Friday, April 20th: At this time the week’s trading range is 92.25-86.55, the last print is 90.29. The stochastic remains in sell mode. RSI at 45.18 is higher than last week’s indication of 44.46. The M.A.C.D. histogram at -0.06 is higher than last week’s reading of -0.18. The market traded above the 9 bar moving average and center Bollinger band. This week Cotton painted a key reversal to the upside on the weekly chart. Treat breaks to support as buying opportunities. A weekly close at or above 90.80 in July 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. CDT

This is the longest running bear market in Sugar since 2007. Recent price action points to extremely large production from the world’s major Sugar producers. In fact I’ve heard this season’s global crop will create a glut of ten million tonnes. That’s about equal to one year of U.S. consumption. There is concern that the following growing season will produce another glut. The last time this occurred Sugar prices were at a much lower level. In 1985 Sugar reached a low of 2.63. Yes, 2.63 cents per pound.

Dryness in Brazilian Sugar growing areas could bring an early start to harvest. Government officials expect Brazilian Sugar output to reach 602.2 million tonnes this marketing year. The country’s center south region generally accounts for 90 percent of that production. Production there is expected to be six percent higher than last season. According to the USDA Brazil produces near 54 percent of global Sugar exports.

Thailand is the world’s second largest exporter of Sugar. The country’s Cane and Sugar Board expects exports to reach an all time record this season. India is expecting a bumper Sugar crop – AGAIN! This will be the third growing season the country has produced a surplus. From October 1^st through April 15^th the country produced 24.63 million tonnes of Sugar. Up 13.3 percent when compared to the same time period last season.

Expectations are that India’s Sugar production this growing season will reach 25 to 25.5 million tonnes. Domestic consumption runs near 22 million tonnes. India’s food Minister K.V. Thomas has said, “we are not against releasing some more Sugar for export.” India has already approved three million tonnes under the open general license scheme during the 2011-2012 marketing year. Open general license (OGL) is just another way of saying unrestricted. The final one million tonnes of approved Sugar exports have yet to be distributed. A ministers panel will meet April 25^th to design the method that will be used to determine the quantity of Sugar each mill can export. The food ministry will consider and likely approve additional exports as well.

Weekly technical indications for Friday, April 20th: At this time the week’s trading range is 22.92-21.65, the last print is 21.73. The stochastic remains in sell mode. RSI at 45.10 is lower than last week’s reading of 45.34. The M.A.C.D. histogram at -0.05 is higher than last week’s reading of – 0.19. This week the market painted a key reversal to the upside on the weekly chart. A weekly close at or above 22.99 in July 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(59)

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. CDT

Could both large and small speculators be misreading the Coffee markets? Of course they could. The situation now brewing could vaporize their account balances in short order. Arabica Coffee has declined in price nearly 40 percent since last May. Robusta Coffee has increased about 15 percent this year. Word is that many traders are buying Robusta and selling Arabica Coffees on a spread basis en masse.

ICE U.S. Coffee futures are of the Arabica variety. Brazil is the world’s number one producer of Arabica Coffee. This coming season will be an “ON” season in Brazil’s on/off Coffee crop cycle. Traders don’t want to be long Arabica Coffee heading into what should be a banner growing year. NYSE Euronext (London) Coffee futures are of the Robusta variety. Vietnam is the world’s number one producer of Robusta Coffee. Last year’s Vietnamese crop was a good one, leaving farmers flush with cash. They can well afford to hold on to their Coffee in an attempt to raise prices.

Brazil’s harvest begins in July. Arabica Coffee stockpiles are nearing critical levels with speculators massively short Arabica Coffee futures. Any supply tightness will likely get shorts to begin unwinding positions. If the market takes out resistance levels above more shorts will run for the exit. Vietnamese Coffee farmers will not hold back their Coffee forever. Indonesian Robusta Coffee will begin to enter the supply lines this month. Vietnamese Coffee farmers will release Coffee from their stockpiles in earnest. This will create downside pressure on Robusta prices and cause those holding long positions to liquidate.

It’s just too obvious. When a market gives off obvious vibes it’s time to dig deeper.

Weekly technical indications on Thursday, April 5th: At this time the week’s trading range is 190.45-178.70, the last print is 183.25. The stochastic remains in sell mode, albeit barely. RSI at 28.27 is higher than last week’s indication of 27.43. The M.A.C.D. histogram at 3.33 is higher than last week’s indication of -4.07. Would you believe this week’s high and low took place in one trading session? A weekly range of near 12.00 points all in one trading session! This market is about to turn up. View pull backs to support as buying opportunities. A weekly close at or below 179.25 in May 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. CDT

The International Cocoa Organization has kept it’s global Cocoa production forecast at four million tonnes. However, it lowered it’s forecast for the Ivory Coast and Ghana by a bit more than 250,000 tonnes. The hot dry weather over the past few months took it’s toll on West African Cocoa production. Expectations are that other growing areas will take up the slack i.e. Brazil.

Barry Callebaut, the world’s largest chocolate products manufacturer expects Cocoa prices to trade within a band of £1,400 to £1,600 ($2236-$2555) for the next few months. These people have been extremely accurate in the past. There is plenty of Cocoa supply available due to the bumper crop of 2010-2011. There are good prospects for Ivory Coast mid-crop production as well.

When it comes to the subject of Cocoa prices Dutch bank ABN Amro is optimistic. Predicting global Cocoa production to decline 8.7 percent to 3.88 million tonnes in 2011-2012, their expectations are that Cocoa prices will average $2500 a tonne through 2012. This points to a supply deficit that will support Cocoa prices.

Many times I’ve written that we cannot trust what users and producers say. In the case of banks and publicly owned companies it’s quite the opposite. The banks grant credit lines to the growers. Banks as you know are generally quite thorough when it comes to lending. Public Companies have to answer to share holders. We can give credibility to what they have to say.

Weekly technical indications for Thursday, April 5th: At this time the week’s trading range is 22.74-20.60 the last print is 20.80. The stochastic remains in sell mode. RSI at 37.68 is lower than last week’s indication of 41.96. The M.A.C.D. histogram at 13.53 is lower than last week’s indication of 30.37. The trend remains down. A weekly close at or above 22.70 in May cocoa 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. CDT (Next Day)

China shielded it’s mills from high Cotton prices for two years. This depleted the country’s Cotton reserves. To rebuild those reserves China purchased 14.4 million bales of it’s domestic Cotton production and imported 4.5 million bales. According to The China Cotton Association replenishment of those reserves has now been completed.

The Cotton industry is concerned this program will create uncertainty in the Cotton market for some time to come, perhaps even years. China’s Cotton reserves will account for two thirds of the increase in world Cotton stocks following 2011-2012. The International Cotton Advisory Committee has voiced concern that China’s Cotton stockpile will create long term risk to global Cotton prices. The stockpiling did a great job of supporting domestic and international Cotton prices in 2011-2012. Will China’s imports drop off following this growing season? If so, look out below. Remember China is the world’s largest consumer of Cotton.

If the 2012-2013 crop is subpar, anticipate another bull run in Cotton. Don’t expect China to release theirs. Perhaps a small amount as a token gesture, but that’s likely it. If Northern Hemisphere Cotton production this season reaches bumper crop proportions the Chinese cotton in storage could negatively affect prices. I believe we should treat the stockpile as if it didn’t exist. Prior to lending support to their Cotton industry there was a stockpile of Cotton in China as well – or was there? After all, the business climate must improve before Cotton consumption does.

Net Upland sales for the week of March 29^th, 2012 were 392,200 running bales for the 2011/2012 marketing year. Up 19 percent from the previous week and up 15 percent from the prior 4-week average. A marketing year record!

Weekly technical indications for Thursday, April 5th: At this time the week’s trading range is 93.80-88.92, the last print is 89.15. The stochastic remains in sell mode. RSI at 43.82 is lower than last week’s indication of 49.52. The M.A.C.D. histogram at -0.01 is higher than last week’s reading of -0.05. The market is above the 9 bar moving average and center Bollinger band. This market appears to be readying itself for a substantial move. A weekly close at or below 92.82 in May 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. CDT

The majority of Brazil’s growing areas received less than half their normal rainfall this past growing season. In response to the unusually light rainfall Macquarie bank has forecast higher Sugar prices through 2012. Higher prices could continue in 2013-2014 as well. Peak production for Sugarcane runs from eight to twelve years. Much of Brazil’s Sugarcane stock has aged well beyond that. This elderly cane should be replaced A.S.A.P.

Macquarie cut it’s estimate for Brazil’s key Center South Sugar output by 20 million tonnes to 500 million tonnes. Inadequate rainfall has caused irreparable damage to Sugarcane in portions of Parana and Mato Grosso do Sul states. The dry weather arrived at a time crucial for sucrose development. Crop forecasting can be a useful tool but Mother Nature always holds the trump card. Sometimes she just doesn’t play it.

New Sugarcane is produced by cutting mature cane stalks into seed cane sticks (setts) about 40 centimeters in length. The setts are placed in a furrow with fertilizer and covered with soil. Germination takes anywhere from 10 to 21 days depending on the temperature and moisture content of the soil. New shoots grow from buds that form on the joints of the setts. The shoots break out of the buds and reach for the sky. So now when someone says “you trade Sugar? I’ll bet you don’t even know how Sugar is grown”. You can just say, “how much do you want to bet?”

Now for the latest regarding the hijacked Iranian Sugar ship. According to the Iranian Navy it took 48 hours of intense fighting to regain control of the ship and its precious cargo of Sugar. The pirates were arrested; the ship was unharmed.

Weekly technical indications for Thursday, April 5th: At this time the week’s trading range is 24.78-24.15, the last print is 24.60. The stochastic remains in sell mode. RSI at 51.69 is lower than last week’s reading of 52.25. The M.A.C.D. histogram is nearly unchanged at 0.2. The market is range bound and very choppy. A weekly close at or below 23.98 in May 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(58)

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. CDT

The international Coffee Association had forecast Brazil’s Coffee crop to be fifty million bags. Trade sources say the crop will be quite a bit larger. Rain is forecast over Brazil’s major Coffee production areas for the next few days. This will strengthen the shorts resolve. No matter how large the crop turns out to be we have been conditioned to believe this Brazilian harvest will have the world swimming in Coffee. Not to worry, these things have a way of working themselves out.

Recently Vietnamese Coffee officials forecast the country’s March exports would reach 3.17 million 60 kilo bags. Much higher than the 2.1 million bags they had forecast earlier in the month. If they made an error in their calculations so be it. However, if we were purposely misled it should not come as a surprise.

The world’s second largest producer of Arabica beans could produce a smaller crop than it did last year. Again this season the crop was hit with heavy rains. According to Colombia’s National Federation of Coffee Growers the crop will be somewhere in the neighborhood of 7.5 to 7.8 million 60 kilo bags. Last season Colombia’s Coffee production was 7.81 million bags, the smallest since 1976.

With a lack of fresh fundamental news, the unwinding of positions has taken center stage this week. The end of a quarter oftentimes brings unusual market behavior. Tuesday’s sharp rally was likely fueled when a large short position was offset. The rally offered an excellent level for those long from the 180.00 area to take profits. Traders covering positions makes for a fast moving, range bound market.

Weekly technical indications on Friday, March 30th: At this time the week’s trading range is 187.85-175.90, the last print is 179.30. The stochastic remains in sell mode. RSI at 24.50 is higher than last week’s indication of 24.02. The M.A.C.D. histogram at -4.29 is higher than last week’s indication of -4.45. A weekly close at or above 179.05 in May 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. CDT

The International Cocoa Organization has forecast a 71,000 tonne supply deficit following the 2011-2012 marketing year. Extremely unfavorable weather conditions and caterpillar infestations are the root cause. This is the fourth deficit in the last six seasons. In addition Governments have cut or discontinued fuel subsidies. The high price of fuel calls for subsidies, not their discontinuance! Just what are these people thinking?

Demand for Cocoa when measured by grindings is expected to increase 2 percent. Africa is expected to consume 10 percent more Cocoa. Having returned to normalcy following last year’s civil war, the Ivory Coast’s domestic Cocoa demand will return to normal levels. Production of Cocoa in West Africa is expected to drop 8 percent. Well below last season’s record high production of 4 million tonnes. West Africa’s weather was a far cry from the near perfect weather in the 2010-2011 season. This season’s weather was much closer to reality.

Two of Nigeria’s parched southwest states have received heavy rains. Cocoa farmers there had been very concerned that hot, dry weather would negatively affect their coming mid crop production. The Mid crop harvest has begun in the country’s southeastern Cross River state.

The intricacies of smuggling Cocoa between the Ivory Coast and Ghana. This is how it all goes down. Far from official border crossings trucks move Cocoa to the border area. Motorbikes carrying three 60 kilo bags speed off to navigate the bush on narrow dirt tracks. Upon arrival in Ghana the Cocoa is re-bagged and marked produce of Ghana. Benefitting from better handling, crop spraying and fertilization, Ghana constantly reminds us that their Cocoa is better than that of the Ivory Coast. Ivorian farmers of course disagree. They say they can grow Cocoa that is exactly the same Ghanaian Cocoa. These countries share borders and soil of similar characteristics. In all honesty there should not be much difference between Cocoa produced in the Ivory Coast and Ghana. My thoughts are that Ghana was first to establish proper management of it’s Cocoa industry and has been reminding us for years. It’s just that other countries are now catching up.

Weekly technical indications for Friday, March 30th: At this time the week’s trading range is 23.84-21.94 the last print is 22.28. The stochastic has issued a buy signal. RSI at 42.24 is lower than last week’s indication of 44.86. The M.A.C.D. histogram at 31.01 is lower than last week’s indication of 39.71. The market remains in a major down trend. A weekly close at or above 23.51 in May cocoa 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. CDT (Next Day)

Are tight Cotton supplies on the horizon? If that’s the case we could see a repeat of the rally that took Cotton prices to post Civil War highs. There is much discussion as to the accuracy of the USDA’s Indian Cotton balance sheet. After careful analysis of the country’s own data the findings show that the USDA is overestimating India’s 2011-2012 ending stocks by more than 5 million 480 pound bales. India’s government has said that their Cotton Advisory Board overestimated the amount of Cotton on hand at the end of last season due to larger exports.

At this time India’s Cotton stocks stand at 3.3 million 170 kilo bales. Quite a bit lower than USDA’s figure of 4.83 million. USDA should rework it’s balance sheet and alert the Cotton industry to this fact. From what I’m seeing and hearing business is picking up and many participants could be caught short inventory or futures. This situation is very much the same as the one that existed just prior to the last vicious bull campaign. The CFTC’s latest commitments of traders report indicated speculators have raised their short positions to three year highs. Don’t get caught with those Cotton khakis down!

Cotton merchants report that Cotton is flying out the door. What to do? What to Do? It’s the inventory cycle in action once again. Cotton prices are low and so are inventories. If demand continues to improve where will the Cotton come from? From higher prices that’s where! Spinning mills are sitting idle worldwide. As everyone attempts to refresh inventories and fulfill customer orders the price of Cotton will have nowhere to go but up.

Net Upland sales for the week of March 22^nd, 2012 were 152,800 running bales for the 2011/2012 marketing year. Down 22 percent from the previous week and down 2 percent from the prior 4-week average.

Weekly technical indications for Friday, March 30th: At this time the week’s trading range is 94.39-89.36, the last print is 92.60. The stochastic remains in sell mode. RSI at 48.27 is higher than last week’s indication of 43.21. The M.A.C.D. histogram at -0.11 is higher than last week’s reading of -0.45. The market is above the 9 bar moving average and center Bollinger band. A further probe to the upside appears to be in the making. A weekly close at or below 88.95 in May 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. CDT

With the focus on supply, the timing of wet weather over Brazil’s Sugar cane growing areas could not have been better. Or worse, if you are / were positioned on the long side. The country’s parched Sugar growing areas were desperately in need of moisture. This has the longs on the ropes. Many will liquidate their positions if downside pressure continues to move below levels of support. The market is no longer respecting the key reversal of the week before last. This bear trap has now reversed and is pursuing the bulls. Additional rain is forecast for the country’s center south region over the next few days. This should further improve the condition of the Sugar crop and increase downside pressure on Sugar prices. This market is no picnic. This type of price action leads me to believe that Sugar is bound and determined to continue to trade in a trendless range for now.

The latest commitments of traders report from the CFTC indicates that large and small speculators (non commercial) were net long 184,851 contracts. 40,745 of those positions were added the prior week! As illustrated by this week’s market action, the large increase in long positions created an overbought situation.

India’s ministerial panel has decided to allow the unrestricted export of an additional 1 million tonnes of refined white Sugar. Export approvals now total 3 million tonnes and are in line with industry expectations. The world’s second largest Sugar producer had previously approved exports of 2 million tonnes. One million tonnes is not a big number, but it should help alleviate tightness in the period leading up to Brazil’s Sugar harvest.

According to Mexico’s Committee for the Sustainable Development of Sugarcane, Sugar production in Mexico stands at 3.17 million tonnes. That’s down 13 percent compared to the same time last season. This year Mexico will seek to privatize nine Sugar mills it had nationalized more than a decade ago.

It’s not often the Sugar industry makes headline news, so here it is. According to the North Atlantic Treaty Organization’s shipping center a ship loaded with Brazilian Sugar destined for Iran has been hijacked by pirates in the eastern Indian Ocean.

Weekly technical indications for Friday, March 30th: At this time the week’s trading range is 25.66-24.11, the last print is 24.55. The stochastic has issued a sell signal. RSI at 51.48 is lower than last week’s reading of 57.50. This market is extremely choppy and may be setting up for a sizable move. A weekly close at or below 24.12 in May 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(57)

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. CDT

Did you know that Coffee beans are actually the pit of a cherry like fruit? In Brazil Coffee is harvested by the stripping method. When 75 percent of the cherries have fully ripened and bright red in color they are stripped from the trees. They then fall to sheets placed on the ground. The sheets are lifted from the ground and the contents tossed into the air. Much like separating wheat from chaff. This way plant and other debris are blown away by the wind, leaving just the Coffee cherries. The cherries are then placed in 60 liter green baskets. Coffee producers use this method to calculate production and determine wages. From every 100 kilos picked there will be 12 to 20 kilos of export ready Coffee produced.

Brazil’s Coffee harvest is scheduled to begin in May. The expected bumper crop could cause production problems in the future. Lower Coffee prices equal less income for the Coffee farmer. This leaves less money to be spent on supplies and the replacement of growing stock past it’s prime. It takes nearly five years for a Coffee tree to mature and produce fruit. This will bring lower production in the future and lower production will bring higher prices. Who knows what the weather will bring.

The expected large supply has pressured Coffee prices to levels not seen since October of 2010. An interesting twist is that ICE exchange Coffee stocks have been decreasing since the first week of March. They had been rising since early November. Someone sees value at this price level.

Recent rains have certainly helped bring up the moisture levels in Brazil’s major Coffee growing areas. If dry conditions were to return it could put a good sized dent in Brazil’s production. Market participants are expecting a global surplus of one to two million bags following the 2012-2013 marketing year. Rainfall remains below normal and forecasts call for more of the same. One well known bank expects the surplus will amount to less than one million bags. Not enough to rebuild stocks that were depleted by a 3.1 million tonne deficit last season. Demand is continuing to expand in Coffee producing countries as well. Be very careful trading the short side of Coffee at this time. This could be one heck of a bear trap!

Weekly technical indications on Friday, March 23rd: At this time the week’s trading range is 188.45-174.45, the last print is 175.80. The stochastic remains in sell mode. RSI at 23.92 is lower than last week’s indication of 25.10. The M.A.C.D. histogram at -4.49 is lower than last week’s indication of -4.08. Riding the lower Bollinger band the market continued to move lower this week. A weekly close at or above 182.80 in May 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. CDT

Brazil’s Bahia state is expecting it’s largest mid crop in seven years. According to the Commercial Association of Bahia, output should exceed1.3 million 60 kilo bags. Mid crop harvest takes place from May to September. Strange as it may seem the state produces a larger amount of Cocoa during mid crop than during the main crop. Main crop is expected to reach 950,000 60 kilo bags.

Record Cocoa output is expected from the country’s Para state as well. Estimates call for production of 550,000 to 600,000 bags, a bumper crop for sure. Where is all this Cocoa coming from? Trees on newer Cocoa plantations have finally reached maturity and have begun to produce. It’s been quite some time since we’ve heard much about Brazil’s Cocoa crop.

Last week I touched on the subject of Cocoa smuggling between the Ivory Coast and neighboring Ghana. It’s estimated that between 75,000 and 100,000 tonnes of Cocoa crossed the border in 2010-2011. There are of course no official records.

Ghana’s Cocoa is of higher quality than that produced by the Ivory Coast. Ghana’s Cocoa Board (Cocobod) is extremely diligent when it comes to effective quality control and monitoring in an attempt to counter smuggling. Ghana purchases Cocoa from the farmer then buyers purchase the Cocoa from the Ghanaian government. Ghana has been increasing the price paid Cocoa farmers on a yearly basis. The price has risen to $2133 per tonne from $1600 per tonne in 2009-2010. The country’s Cocoa output in 2011-2012 is forecast to be equal to the record harvest of one million tonnes in 2010-2011. Favorable weather, government support and improved farming practices have allowed Ghana’s Cocoa industry to flourish.

Weekly technical indications for Friday, March 23rd: At this time the week’s trading range is 24.16-22.42 the last print is 23.00. The stochastic remains in buy mode, but the buy signal has weakened. RSI at 44.54 is higher than last week’s reading of 42.68. The M.A.C.D. histogram at 39.07 is lower than last week’s indication of 44.59. This week the market rallied above the center Bollinger band and 9 bar average. It then reversed and is now trading below them. A weekly close at or above 23.38 in May cocoa 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. CDT (Next Day)

The USDA has predicted a 6.1 percent increase in Cotton production this year and a 5.2 percent drop in demand. According to the International Cotton Advisory Committee (ICAC) the ratio of supply to usage will reach 60 percent following this coming growing season. The ratio has not been that high since 1999.

China consumes near 40 percent of the worlds Cotton. The USDA expects Chinese Cotton imports to reach 18.5 million bales this season. The largest quantity imported in six years and 54 percent more than last year. China is replenishing it’s state reserves. By July those reserves could account for as much as 25 percent of the global Cotton stockpile. If China owns 25 percent of the worlds Cotton supply the stocks to usage number loses it’s meaning. In essence that Cotton has been removed from the marketplace.

India partially lifted a ban on exports earlier this month. The country has already shipped 9.5 million 170 kilo bales this season. That’s more than the 8.4 million bale surplus forecast by the government. Farmers will plant less Cotton this season due to lower prices and curbs on exports. The agriculture ministry is expecting a 6 percent decline in acreage planted with Cotton.

This could all lead to eventual tightness in the available Cotton supply. The 2012 Cotton market should prove to be interesting. We haven’t even considered the largest unknown – Mother Nature! Things are not as clear cut as they appear on the surface. After all, are they ever?

U.S. Cotton exports for the week ending March 15th, 2012 for the 2011-2012 marketing year were 197,000 running bales. Down 18 percent from the previous week, but up 30 percent from the prior four week average.

Weekly technical indications for Friday, March 23rd: At this time the week’s trading range is 90.50-87.43, the last print is 87.80. The stochastic remains in sell mode. RSI at 43.68 is higher than last week’s indication of 39.04. The M.A.C.D. histogram at -0.43 is lower than last week’s reading of -0.52. The market is respecting resistance offered at the 9 bar moving average. A weekly close at or above 88.24 in May 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. CDT

The International Sugar organization has cut it’s forecast for China’s Sugar production by 1.13 million tonnes to 11.5 million tonnes for the 2011-2012 growing season. Adverse weather throughout the growing and harvesting periods caused an unexpected 8 percent decline in Sugar output for the first four months of the season.

China has the finest state run commodity reserve program in the world. It appears that it may not reach it’s goal of 12 million tonnes this growing season. We all know what happens when China doesn’t reach agricultural goals; it raids the world’s pantry. China’s Sugar imports for January and February reached 235,932 tonnes. Up nearly 700 percent compared to the same time last year. At this pace China will overtake the E.U. and U.S. as the world’s largest Sugar importer.

This is the second year in a row that weather conditions are negatively affecting the Brazilian Sugar crop. Drought in South America will cost it’s Sugar plantations dearly. Thoughts are that Brazil’s Sugar mills will produce near 6 percent less than had been forecast. The country’s main growing areas have received only 50 percent of normal rainfall since February began. This is the time of year Sugar growth and sucrose development are generally at their zenith. No rain equals no growth. This is an incredibly troubling time for Brazil’s Sugar Industry.

About half of Brazil’s motor vehicles are powered by flex fuel engines. They can run on either 100 percent ethanol or gasoline. The common blend is E-20 or 20 percent ethanol / 80 percent gasoline. However, the country’s subpar Sugar output has caused ethanol’s price to exceed gasoline. We are now paying dearly for fuel in the U.S. I don’t expect it should be different anywhere else. Brazil’s problem is that this is occurring during a rapid expansion of the country’s economy. Demand for fuel is steadily increasing. Not a pretty picture at all.

Weekly technical indications for Friday, March 23rd: At this time the week’s trading range is 26.20-25.21, the last print is 26.06. The stochastic remains in buy mode. RSI at 59.31 is higher than last week’s reading of 56.49. The market is respecting last week’s key reversal to the upside. A weekly close at or below 24.22 in May 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(56)

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. CDT

Now is not the time I’d be scanning this market for selling opportunities. May Coffee has retraced near 75 percent of it’s rally from 137.30 to 315.25; 75 percent is 67.97. Sure, there will be selling opportunities, but by all means use stops. I would not like to awaken one morning and find out Coffee opened eight dollars higher at 2.00 AM CDT!

A Coffee industry executive was visiting a missionary friend in the heart of the Amazon rain forest. He entered a banana leaf tent and was greeted by a tribesman covered in red body paint. The tribesman asked if he would like a cup of Coffee. This was a surprising offer from a member of a rain forest tribe. Coffee had never been a traditional drink. If a tribesman whose possessions are a hammock and a pan for cooking has a thermos for his Coffee there is no doubt that Coffee consumption will continue to grow.

I’m sure you can tell where I’m going with this. Coffee growers of the world had better get their acts together. There is a sea change taking place. It’s quiet and below the radar. Coffee prices have but one direction to move over the long haul and that’s higher – much higher.

Recent estimates for Brazil’s Coffee crop range from 52 to 54 million bags. This is higher than government forecasts but on the low end of Brazilian Coffee industry expectations. The operator of Sao Paulo based Coffee roaster Cafes Bom Retiro Ltda. expects Brazil to become the world’s largest consumer of the bean in two to three years.

Global Coffee production in 2012-2013 is expected to climb to record levels. Belfast based CoffeeNetwork expects global Coffee production to reach 146 million bags. That’s 8.1 percent above the estimated 135 million bags expected in 2011-2012.

Weekly technical indications on Friday, March 16th: My thoughts that an important low may have been struck last week was wrong. At this time the week’s trading range is 186.50-181.05, the last print is 185.90. The stochastic is in sell mode and below 25. RSI at 26.16 is lower than last week’s indication of 26.25. The M.A.C.D. histogram reads -3.83 and is lower than last week’s indication of -3.35. A weekly close at or above 186.50 in May 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. CDT

The market has found underlying support at this level. This year Ivory Coast mid crop Cocoa production is expected to be 140,000 tonnes less than last year. Recent favorable weather has brightened prospects for the Ivory Coast’s mid crop. However, the unusually hot weather over the preceding few months has stressed the Cocoa trees. This will no doubt negatively affect the quality and quantity of the country’s mid crop.

In late January I wrote that capsid bugs were threatening Cocoa output in Cameroon. It has taken until now to distribute the necessary chemicals and insecticides. Cocoa farmers have begun to apply the insecticide that will eradicate the pests. A Capsid bug pierces the plants outer skin and sinks it’s long proboscis deep inside to get at the sap. Hundreds, perhaps thousands of Cameroonian Cocoa trees have been killed by these vampires of the plant world. In excess of 2000 trees were killed by dry weather and capsid bugs last season.

Unlike the sob stories of other West African growers, Ghana’s Cocoa crop will rival last year’s one million tonne production. This is due to good weather and improved farming techniques. Ghana, the world’s second largest producer of Cocoa was the first West African nation to establish a sustainability program for it’s Cocoa industry. We are now witnessing results. Now here is the kicker. Cocoa farmers in both Ivory Coast and Ghana have said that tonnes of beans are being smuggled to Ghana this season due to the higher prices paid for Cocoa in Ghana. One has to wonder how much of Ghana’s Cocoa is contraband.

Weekly technical indications for Friday, March 16th: At this time the week’s trading range is 24.26-21.69 the last print is 22.10. The stochastic remains in buy mode. RSI at 41.33 is lower than last week’s reading of 47.91. The M.A.C.D. histogram at 42.53 is lower than last week’s indication of 55.01. The market is trading between the center and lower Bollinger bands. A weekly close at or below 23.52 in May cocoa 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. CDT (Next Day)

India’s government has partially rolled back restrictions on Cotton exports. This latest twist in this never ending saga allows for Cotton exports under open general license. No new registration certificates will be issued. Registration certificates issued prior to the ban must be revalidated before actual exportation takes place.

According to one high profile Cotton industry executive the impact of the government’s decision on the industry is going to be very bad. The decision to ban exports was based on fundamental reasons and it has been partially lifted for emotional and political reasons”. Another said, “We must realize that we are a Cotton surplus country and our surplus needs to be exported. The government justified the export ban by saying that India needs to protect Cotton supplies for it’s own Cotton mills.

The ban on Cotton exports is flawed and short sighted. China called it irresponsible. What good can come from holding back Cotton when there is a large surplus? If the shoe were on the other foot I’m certain there would be much moaning and groaning. Buyers are by no means tripping over each other to purchase Cotton.

The USDA reports that U.S. exports stand at 104.5 percent this marketing year. The five year average at this time of year stands is 81.5 percent. It’s not that business is good overall. China imported the majority to fill state reserves. World ending stocks for 2011-2012 now stand at 62.32 million bales. That’s up from 60.77 in February. U.S. Cotton exports for the week ending March 8th, 2012 for the 2011-2012 marketing year were 239,900 running bales. Up noticeably from the previous week and the prior four week average.

Weekly technical indications for Friday, March 16th: At this time the week’s trading range is 89.16-87.01, the last print is 87.56. The stochastic remains in sell mode. RSI at 39.54 is lower than last week’s indication of 41.03. The M.A.C.D. histogram at -0.51 is lower than last week’s reading of -0.28. A weekly close at or above 88.69 in May 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. CDT

Having just begun, talk is the Brazilian harvest is going well. Now we will begin to see just how badly Brazil’s Sugar cane was affected by the weather. So, harvest has just begun and the shorts are swinging for the fences. This seems to happen at the start of every harvest. Just keep this in mind; it’s not over until it’s over.

Commercial interests are likely jawboning the market lower so they can buy. All I’ve heard for weeks is how terrible Brazil’s Sugar production will be. If that’s the case, breaks to support should be viewed as buying opportunities. Remember how excited everyone was when it was reported in early January that funds were buying large amounts of Sugar contracts. Commercial interests pay out a ton of money to analysts for private forecasts. Some actually visit the growing areas themselves. Those are strong hands and they won’t budge unless there is a reason.

The latest CFTC commitments of traders report showed non-commercial traders covered 10,137 long contracts. That brought the total to 149,010 long contracts. If weakness continues there will be more unwinding of long positions. Often times it’s healthy for a market to lose some open interest. When the market finally decides to make a move the majority of traders have no positions. So what does that mean? As they all pile in they move the market further and faster. They add fuel to the already burning fire.

Examine a weekly May Sugar chart. Use candlesticks if you are able. Notice that there are many spikes to the low end of the bars, but the market closes out the week on the high side of the bar. Spikes to the downside indicate that buying is coming in when the market moves lower. Conversely, spikes to the upside would indicate the opposite. As long as 22.43 holds the trend remains up.

Weekly technical indications for Friday, March 16th: At this time the week’s trading range is 25.68-23.23, the last print is 25.50. The stochastic remains in buy mode. RSI at 56.87 is higher than last week’s reading of 47.68. The M.A.C.D. histogram at 0.27 is minutely higher than last week’s reading of 0.20. The weekly high was made on Monday, the low on Friday. The market put in a key reversal to the upside this week! A weekly close at or above 25.04 in May 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(55)

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

It’s quite possible that an important low was struck this week. Weakness in the Brazilian real and lower Robusta Coffee prices sent May coffee futures as low as 185.10 and its lowest level since December of 2010. Bloomberg surveyed seven exporters, two traders and a roaster for their thoughts on the size of the Indonesian Coffee harvest. The median result calls for an Indonesian harvest of 10 million 60 kilo bags of Robusta Coffee for 2011-2012. This is a 20 percent increase above last season and according to U.S. government statistics it would be Indonesia’s largest output since 2009. Robusta coffee is favored for cappuccinos and espressos. Indonesia’s harvest is scheduled to begin the end of April.

Volcafe reports that Vietnam is just about the world’s only supplier of Robusta Coffee for the next couple of months. India, Uganda, Indonesia, Ivory Coast and Brazil will be exporting additional supply come April and May. The Increasing output of Robusta harvests contrasts with the anticipated supply deficit of our favorite Arabica variety. The deficit is a direct result of the damage caused to Central American plantations by the heaviest rains in 20 years. Climate change has negatively affected Coffee crops worldwide. Heavy rains and drought have left their fingerprints in almost every growing area. I am not a meteorologist, but don’t expect these freakish weather patterns to stop anytime soon.

Vietnamese Coffee farmers have sold near 55 percent of their 2011-2012 Coffee crop. Expectations are the country will produce a bit more than 22 million 60 kilo bags. That’s up 2 million bags from the 2010-2011 season. These farmers are the holdback kings. The rally in Robusta Coffee seems to be directly related to their activities.

Connoisseurs rank Jamaica’s Coffee the finest the world has to offer. And they pay upwards of $40 per pound for it. The cool climate of the Blue Mountains doubles the growing period from five to about ten months. This allows sugars to develop in the beans. This is what gives Jamaican Coffee it’s smooth nutty flavor and intriguing aftertaste.

Weekly technical indications on Friday, March 9th: At this time the week’s trading range is 202.50-185.10, the last print is 188.50. Watch this week’s low like a hawk. It has the makings of a major low. The stochastic remains in sell mode. RSI at 26.91 is lower than last week’s indication of 31.74. The M.A.C.D. histogram reads -3.17 and is lower than last week’s indication of -2.21. A weekly close at or above 201.60 in May 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

Ivory Coast’s main Cocoa harvest runs from October through March. The smaller mid crop is normally harvested from April through September. Supply concerns from West Africa continue to take center stage. The International Cocoa Organization forecast a global supply deficit of just 71,000 tonnes. I highly doubt the accuracy of this number. More than a few industry participants are concerned the extremely dry conditions over the past several months will cause a much larger supply deficit than expected. Not only that, the mid crop harvest could begin a month later than normal. Recent rains may have alleviated that situation somewhat.

Talk is that Ivory Coast Cocoa exports topped last season by 120,000 tonnes. Additional negative macroeconomic news broke May Cocoa to new three week lows on Monday. Arrivals at ports for export reached over 1 million tonnes in the last week, but are still behind last year at this time. The slowdown in West African supply should serve to support the market. There is a very good chance this will delay the mid crop harvest as well. A large number of speculators remain short May Cocoa futures. They will provide fuel to rally the market if supply deficits were to grow larger and world economic conditions continue to improve.

There is a scarcity of export grade Cocoa beans in Nigeria, but the price of graded Cocoa beans from the country’s southwest main crop is holding steady. It seems that demand has stepped into the ring and added support to the marketplace. According to trade body officials the Nigerian mid crop is scheduled to begin in April.

Weekly technical indications for Friday, March 9th: At this time the week’s trading range is 24.04-22.60 the last print is 23.70. The stochastic remains in buy mode. RSI at 46.44 is higher than last week’s reading of 44.85. The M.A.C.D. histogram at 52.13 is higher than last week’s indication of 51.86. The market is trading just above the 9 bar moving average and the lower Bollinger band. Next week is key. The market appears ready to move quickly in either direction. A weekly close at or below 23.10 in May cocoa 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)

India’s farm minister has objected to the Cotton export ban put in place by the government Monday. He believes it to be detrimental to the nation’s farmers. A ministerial panel will convene this Friday to thoroughly review the situation.

Lower Cotton prices will not provide apparel companies the boost that their investors are looking for. Changes in commodity prices take quite some time to reach clothing manufacturers and retailers. Price decreases should reach them during the second half of 2012. According to Levi Strauss, Cotton accounts for 20 to 40 percent of what it costs to put a pair of jeans together.

With Cotton prices sharply lower than a year ago, planting in Northern Hemisphere growing areas has begun. Lower Cotton prices will have farmers planting competing crops. Raising Cotton is an intensive undertaking. It is expensive to grow and requires a farmers attention more often than do corn or soybeans.

According to the international Cotton Advisory Committee, the world’s Cotton growing area is expected to shrink 4 percent to 34.5 million hectares. Based on average yields, production should decline 5 percent to 25.7 million tonnes in 2012-2013. The lower yield breaks the pattern of back to back increases in 2010-2011 and 2011-2012. This is all fine and dandy, but until Mother Nature works her magic I will hold my tongue. We’ve all seen what weather can do to the finest of forecasts. On the other hand Cotton mill use is expected to increase 4 percent to 24.3 million tonnes in 2012 -2013 due to improving economic growth and lower Cotton prices. Perfect weather and improved macroeconomic conditions. What are the odds on both taking place? Production will again exceed consumption causing ending stocks to increase once again.

U.S. Cotton exports for the week ending March 1st, 2012 for the 2011-2012 marketing year were 113,300 running bales. 49 percent higher than the previous week and 16 percent higher than the previous four week average.

Weekly technical indications for Friday, March 9th: At this time the week’s trading range is 94.24-88.25, the last print is 88.60. The stochastic remains in sell mode. RSI at 40.69 is higher than last week’s indication of 40.06. The M.A.C.D. histogram at -0.29 is lower than last week’s reading of -0.02. After running up to 94.24 the market fell like a stone to 88.25. Now trading near the weekly lows. It appears that a near unchanged week is shaping up. Cocoa has made lower lows for four weeks running. Not a pretty picture for the bulls. A weekly close at or above 91.60 in May 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

Mexico’s unusually dry weather cut into it’s Sugar production. The latest forecast calls for a Sugar crop of 5.1 million tonnes. Domestic use of Sugar in Mexico reached near 4 million tonnes in 2011. Mexico is the largest exporter of Sugar to the U.S. Last year the country exported 1.5 million tonnes of Sugar to the U.S. That’s more than 50 percent of total U.S. Sugar imports. This year Mexico will need to import additional Sugar and Central American Sugar producers will be supplying it.

Until recently, Mexico waited until supply tightness set in to authorize imports. This caused highly volatile domestic Sugar prices. The government has now put a program in place where quotas are setup in advance of shortages. Having problems meeting domestic demand for Sugar, a quota of 150,000 tonnes was approved last October. Needless to say that was quickly filled. Another quota for 250,000 tonnes is expected at anytime. Hopes are that this approach will smooth out price volatility.

Top Sugar growers in Central America are set to assist in providing fill in supply for Mexico’s drought damaged Sugar cane fields. Hope is this will assist in keeping Sugar prices stable near term. Until we have a better understanding of Brazil’s 2011-2012 Sugar production the marketplace will continues to wring it’s hands anxiously.

Guatemala is Central America’s number one Sugar producer. Expectations are that output will reach 2.4 million tonnes of Sugar by the finish of the 2011-2012 growing season. That is up near 12 percent from the prior season and a bit more than forecast. The increase in productivity is due to Good weather and improved crop husbandry.

El Salvador is Central Americas number two Sugar producer. Production is expected to be somewhere between 600,000 and 625,000 tonnes. That’s up from 564,000 in 2010-2011. The Salvadoran Sugar Association reports that Sugar yield per hectare increased near 13 percent from the same time last year.

Mexico imports 10 percent of it’s Sugar from Nicaragua. Nicaragua’s Sugar production is expected to reach 607,800 tonnes. Up from 550,000 tonnes last season and higher than what had been initially forecast. According to Nicaragua’s National Committee of Sugar Producers, this growing season has been a lot better than expected.

Weekly technical indications for Friday, March 9th: At this time the week’s trading range is 25.10-23.55, the last print is 23.63. The stochastic remains in buy mode. RSI at 47.51 is lower than last week’s reading of 55.47. The M.A.C.D. histogram at 0.20 is microscopically lower than last week’s reading of 0.27. The weekly high was made on Monday, the low on Friday. The lower Bollinger band offers support at 23.05 and at this time it appears the market is headed there. The formation on the weekly bar chart remains bearish. A weekly close at or above 26.33 in May 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(54)

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

In the twelve month period ending January 2012 the International Coffee Organization reports that global exports of Arabica Coffee reached 65.96 million 60 kilo bags compared to 66.18 million last year. Robusta Coffee exports totaled 37.53 million bags compared to 31.98. This small jump in production will do little to alleviate the world’s ever increasing demand for Coffee.

Expectations are that Brazil, the world’s largest Coffee grower will harvest 55.7 million bags in 2012-2013. Up from the 48 million bags produced in 2011-2012.Brazil’s Coffee harvest should get underway in July. , Volcafe, one of the world’s largest Coffee merchants estimates there is more Coffee in storage than originally thought. They have increased their original Brazilian crop estimate by 1 million to 48 million bags. One bag of beans weighs 60 kilos. (132 pounds) Global Coffee demand will exceed supply by 7 million bags in 2011-2012. The market may experience a surplus of 2 million bags in 2012-2013.

Output from Honduras, Central America’s largest producer, is expected to improve by 21 percent to 5.1 million bags in 2011-2012. Colombia, the world’s second largest producer of Arabica coffee is struggling to produce 7 million bags in 2011-2012. Output in 2012-2013 is expected to rise by 500,000 bags. Mild, washed Arabica Coffee beans are generally grown in Latin and South America.

So, we have a small increase in supply coming our way. Will the market be able to provide enough Coffee to satisfy the world’s growing population of Coffee drinkers? We will just have to listen to the market. I’m sure if we listen well the market will tell us.

Weekly technical indications on Friday, March 2nd: At this time the week’s trading range is 207.35-201.30, the last print is 203.40. The stochastic remains in sell mode. RSI at 32.39 is lower than last week’s indication of 32.47. The M.A.C.D. histogram reads -2.09 and is lower than last week’s indication of -1.90. There has not been much in the way of price action this week. In fact it appears that May Coffee will close out the week near unchanged from the previous two. ZZZZZZZZZZZZZZZZZZZZZZZZ ! A weekly close at or below 204.40 in May 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

The Ivory Coast’s main Cocoa harvest is nearing the finish line. As expected, arrivals at Ivory Coast ports for export are lower than a year ago. Lower by 10 percent, the decrease in Cocoa bean arrivals is expected to continue through harvest’s end. Concern is also mounting that mid crop output will be nowhere near what was expected. These situations have Ivory Coast cash prices on the rise. Score another one for Mother Nature.

Surely you’ve heard that the way to a person’s heart is through their stomach. They say the reason we like chocolate so much is it makes us feel loved. Cocoa is one of the most complex and satisfying foods on this earth. Did you know that there are 300 recognized chemical compounds in Cocoa? Cocoa contains a large quantity of magnesium. Medical studies have proven magnesium possesses calming qualities.

How can we insure that our beloved Cocoa is always available to us? There are more than 2 million West African Cocoa farmers. They produce near 70 percent of the world’s Cocoa supply. They must have the ability to take care of their families. It is imperative that young people become educated in the ways of Cocoa farming. Production levels must be increased to make Cocoa farming an economically feasible occupation that provides them with a good living. If not they will leave the farm and go elsewhere to earn their livelihoods.

Feed the Future is the United State’s global hunger and food security initiative. Feed the Future’s Africa Cocoa Initiative (ACI) will leverage $11 million invested by principal partners to help insure the sustainability of West Africa’s Cocoa crop. These partners include include The World Cocoa Foundation, the Sustainable Trade Initiative, ADM Cocoa, Barry Callebaut, Blommer Chocolate Company, Cargill, Continaf BV, Ferrero, Guittard Chocolate Company, The Hershey Company, Kraft Foods, Lindt & Sprungli, Mars, Nestle and Olam International Ltd. Just typing these names has me jonesing for a chocolate bar!

Weekly technical indications for Friday, March 2nd: At this time the week’s trading range is 24.54-23.01 the last print is 23.37. The stochastic remains in buy mode. RSI at 44.95 is lower than last week’s reading of 45.61. The M.A.C.D. histogram at 52.07 is higher than last week’s indication of 50.98. Cocoa continues to trade in a tight sideways range. There are no directional opportunities at this time. A weekly close at or below 21.91 in May cocoa 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)

China’s National Development and Reform Commission has announced it will increase in the price it pays farmers 3 percent for 2012-2013 production. That brings the buying price to 20,400 Yuan ($3,240) per tonne. That’s near $1.45 a pound and quite a bit more than U.S. Cotton growers can expect to receive. China’s State Cotton reserves are in need of replenishment and what better way to accomplish it than with increased domestic production. China is the world’s number one consumer and importer of Cotton. Of interest is the fact that USDA attaches had reported just hours prior to the announcement that China would be sticking to it’s 2011-2012 rate of 19,800 Yuan per tonne. Very funny Beijing!

A series of surveys released forecast lower Cotton sowings in China this coming growing season. The results of a farm survey taken last week by China’s Cotton Research Institute at the China Academy of Agriculture Science forecast a 6.1% decrease to 4.85 million hectares. The China Cotton Association forecast a 10.5 percent decline and the country’s National Cotton Monitoring network forecast an 8.2 percent decline. Far too many farmers were hurt financially when the market broke from it’s post U.S. Civil War high in 2011. I recall seeing a pic of a small time Chinese Cotton farmer with a tonne of Cotton in his house. He was holding out for higher prices. Ai Yi Yi !

On your marks, get set – U.S. Cotton farmers are ready to sow. The Cotton market continues to be pressured by Southern Hemisphere production. The problem is farmers will plant less Cotton worldwide if Cotton’s price doesn’t firm up. Some day down the road this will cause supply to tighten. Cotton prices will then move higher and farmers will plant Cotton from fencepost to fencepost. Caught between a rock and a hard place, the Cotton market needs a bullish market moving event badly.

U.S. Cotton exports for the week ending February 23^rd, 2012 of the 2011-2012 marketing year were 76,200 running bales. Down 57 percent from the previous week, but up noticeably from the prior 4 week average.

Weekly technical indications for Friday, March 2nd: At this time the week’s trading range is 92.74-89.31, the last print is 89.31. The stochastic remains in sell mode. RSI at 41.21 is lower than last week’s indication of 42.22. The M.A.C.D. histogram at 0.04 is lower than last week’s reading of 0.43. The market rallied above the 9 bar moving average, but was beaten back by selling. At this time it’s trading between the 9 bar moving average and lower Bollinger band. I view rallies to resistance as selling opportunities. A weekly close at or above 91.26 in May 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

With harvest set to begin in April the USDA attaché in Brazil is expecting Brazil’s center-south region to produce 490 million tonnes of Sugar this season. That’s 12 percent less Sugar than was produced during the 2011-2012 growing season. Near 90 percent of the country’s Sugar is grown in the center-south region. Countrywide production is expected to fall by 6.8 percent or 35.75 tonnes. Extremely dry weather from April through August of 2010 and May of 2011 took it’s toll on the growing stock. Cane should be replaced every five or six years. I find it hard to believe that Brazil’s Sugar producers would allow their growing areas to deteriorate like this. Even with new Sugarcane plants in place it will take a few years for Sugar production to recover. I wonder what they are thinking. Is there something happening we don’t know about? You can bet there is!

Just the thought of seaweed brings visions of ocean going critters that I’d much rather view at a public aquarium or that slimy thing that wrapped around my leg last time I swam in the ocean. When Bio Architecture Lab thinks seaweed it smells ethanol. A new type of energy company, BAL intends to use designer bacteria and a low cost method for harvesting seaweed to produce ethanol. Developing economies worldwide are demanding more ethanol. Until now the majority of ethanol has been refined from food stocks. This could free up Sugar that would normally be used for ethanol production.

Seaweed is fast growing and Sugar rich. It does not compete with other crops for land, nor does it require fresh water. BAL’s chief science officer has said “Sugar is the next generation crude oil – it can be used for fuels and chemicals”. The company’s breakthrough is all about finding the way to unlock the Sugars in seaweed. If this can be done on a large scale we will have more Sugar and other food crops available to feed the world’s ever expanding population. The designer bacterium is a strain of Escherichia coli bacterium that is able to break down the Sugars in brown seaweed to produce ethanol. It has been demonstrated that this process can break down near 80 percent of the Sugar content in seaweed. This new research has been published by the peer reviewed journal “Science”.

Weekly technical indications for Friday, March 2nd: At this time the week’s trading range is 25.81-24.45, the last print is 24.82. The stochastic remains in buy mode. RSI at 54.15 is lower than last week’s reading of 57.20. The M.A.C.D. histogram at 0.26 is microscopically higher than last week’s reading of 0.23. The market is once again finishing out the week between the center and upper Bollinger bands. Continue to treat dips as buying opportunities. A weekly close at or below 25.13 in May 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(53)

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)

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(52)

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

Note: Beginning this week technicals are based on May futures contracts.

As of now the Greek debt situation seems to be under control, but that’s a story in and of itself. Brazil’s Carnival has come to an end and activity in the country’s Coffee industry is picking up. Brazilian Coffee production is expected to be huge. We will have to wait it out to get the complete picture. European Coffee stocks were down near 6 percent in December. Can we take this to mean European demand is increasing? Perhaps, but the jury is still out. There is not much in the way of fresh Coffee news this week so please bear with me.

According to the Ethiopian Coffee Exporters’ Association, the country’s Coffee exports are expected to rise near 7 percent this year. Ethiopia is the largest exporter of arabica Coffee in Africa. Exports are expected to be 150,000 tonnes to July 7^th. Shipments in the first half of the marketing year were down 35,000 tonnes from last year due to an extended rainy season. Sales of Ethiopian Coffee contribute near one-third of the country’s foreign currency income.

What is the natural home of the arabica Coffee tree? Ethiopia is. The tree can still be found in the wild growing in highland forests. Ethiopia also leads the African continent in domestic consumption. Near 12 million Ethiopians earn their livelihood working in the country’s Coffee industry.

The name Coffee is said to be a derivation of “Kaffa”. And Kaffa is the name of an Ethiopian province. It is said that more than 1,000 years ago a goat herder in Kaffa noticed his goats acting more energetic than normal after eating some red berries, He picked a few from the young trees and ate them himself. He enjoyed the flavor and the uplifting effect that came on a bit later. Today finds those same berries being used to create the world’s second favorite non alcoholic beverage. Tea is number one.

Weekly technical indications on Friday, February 24th: At this time the week’s trading range was 206.75-200.40, the last print is 203.80. The stochastic remains in sell mode. RSI at 32.63 is higher than last week’s indication of 31.46. The M.A.C.D. histogram reads -1.88 and is lower than last week’s indication of -1.35. The market traded on both sides of the lower Bollinger band this week. A weekly close at or above 203.10 in May 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

Olam International C.E.O. Sonny Verghese expects a 100,000+ tonne supply deficit following the 2011-2012 crop year. Olam is one of world’s largest food processors and traders.

Dry conditions in the Ivory Coast means recently harvested Cocoa beans will be small and lacking in quality. According to a Nigerian Cocoa body official, midcrop Cocoa in Nigeria’s southeastern Cross River state has been blessed with normal heavy precipitation. This will help in the development of the 2011-2012 mid crop. If all goes as planned mid crop Cocoa will be harvested from April through August.

A report issued by Goldman Sachs anticipates that West African Cocoa output will be decent in 2011-2012, but production will be lower than had been expected. In order to calculate this, an analysis of arrivals at ports for export is required. If those numbers are skewed for one reason or another the report would be of no use. Goldman Sachs has access to reliable sources of information. The investment bank continues to expect Cocoa’s price to be $24.50 a tonne for three to twelve months in the future.

The recent strength in Cocoa’s price was due to better than anticipated economic growth and strong Harmattan winds that threatened to negatively affect output. My take on this is the rally was corrective in nature.

Over the long term Ivory Coast production remains key. The aging of the country’s orchards and poor condition of it’s infrastructure need to be addressed – NOW! These facts along with the country’s ongoing political instability have not allowed the country’s Cocoa production efforts to reach full capacity.

Weekly technical indications for Friday, February 24th: At this time the week’s trading range was 24.67-23.07 the last print is 23.68. The stochastic remains in buy mode. RSI at 46.02 is higher than last week’s reading of 45.16. The M.A.C.D. histogram at 51.76 is higher than last week’s indication of 44.47. A weekly close at or below 21.86 in May cocoa will turn the weekly trend down. The technicals are improving, but the market is not. It appears that Cocoa’s price action will remain a range trading affair. May Cocoa topped out at 36.09 and broke to 20.05. Bulls do not want May Cocoa to trade below 20.05.

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)

This marketing year U.S. Cotton exports reached 101 percent of the USDA’s projection; the majority exported to China. It appears that China’s Cotton shopping spree is nearing an end. China’s Cotton imports for January were 326,444 tonnes. That’s a 16 percent decrease from a year ago. Slowing U.S. Cotton exports are a major concern.

Last year Cotton prices reached post Civil War highs in early April. Exactly the time of year farmers decide what crops they will be planting. With Cotton making new highs day after day how could they help themselves? I can just hear what they were thinking. We’ll plant Cotton, lots and lots of Cotton; and that’s just what they did.

High Cotton prices also decrease demand. The Cotton industry is faced with a perfect storm. In a nutshell U.S. Cotton producers are between a rock and a hard place. Private crop estimates released last week call for global ending stocks to Global carryover stocks are expected to increase to 8.9 million bales in 2012-2013. The Cotton market appears to have all the necessary ingredients to move lower. However, government weather forecasters are looking for the drought to continue and possibly intensify in the top two Cotton producing states of Texas and Georgia. If so, production numbers will likely take a hit.

Many buyers continue to back away from their contractual obligations with U.S. Cotton merchants (have not paid their bills). What to do? What to do? I will keep you informed of any further developments. U.S. Cotton exports for the week ending 2/9/2012 were 101,400 running bales. Up noticeably from the previous week and four week average.

Cotton output from southern hemisphere growing areas is pressuring the price of Cotton.

Weekly technical indications for Friday, February 24th: At this time the week’s trading range was 93.79-89.01, the last print is 89.36. The stochastic remains in sell mode. RSI at 41.38 is lower than last week’s indication of 45.17. The M.A.C.D. histogram at 0.36 is lower than last week’s reading of 0.86. The market was able to pierce the center Bollinger band above, but again was unable to hold and has now pierced the 9 bar average below. A weekly close at or above 93.51 in May 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

The International Sugar Association has increased it’s estimate for the Global Sugar surplus following the 2011-2012 growing season. An increase to 5.17 million tonnes is expected. The prior estimate stood at 4.46 million tonnes. That is one large increase! 2011-2012 World Sugar production is expected to reach a record 173 million tonnes. That’s up 4.9 percent from the previous season. Consumption is expected to increase 2.3 percent to 167.83 million tonnes.

A cut in Brazil’s output has limited the amount of Sugar the country has available for export. The EU, India, Pakistan and Ukraine are expecting significant increases in output. These increases will more than make up for the Brazilian deficit.

Vietnam intends to export 100,000 to 150,000 tonnes of Sugar this year. Although 100,000 tonnes lower than the Viet Nam Sugarcane Association’s recommendation this will aid in offsetting surplus domestic supply and allow Sugar refineries to recoup investment capital quickly. Refiner’s had been selling Sugar at a loss. This growing season the country’s Sugar crop is expected to reach 1.57 million tonnes. Demand will be in the vicinity of 1.4 million tonnes.

If the ever present illegal importation of Sugar from nearby producers is allowed to continue Vietnam’s Sugar surplus could be much higher. Vietnam’s Sugar refiners produce much less Sugar than local demand requires. The country has produced more Sugar each year for three years running. Many of it’s sugar mills have huge surplus’ of sugar at this time.

Weekly technical indications for Friday, February 24th: At this time the week’s trading range is 25.04-23.81, the last print is 24.99. The stochastic remains in buy mode. RSI at 56.13 is higher than last week’s reading of 48.97. The M.A.C.D. histogram at 0.21 is higher than last week’s reading of 0.11. The market is finishing out the week between the center and upper Bollinger bands. Continue to treat dips as buying opportunities. A weekly close at or above 24.57 in May Sugar will turn the weekly trend up. I see upside potential in this market.

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

The Soft Spot(51)

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

Note: Beginning this week technicals are based on May futures contracts.

Weekly technical indications on Friday, March 24th: At this time the week’s trading range was 206.75-200.40, the last print is 203.80. The stochastic remains in sell mode. RSI at 32.63 is higher than last week’s indication of 31.46. The M.A.C.D. histogram reads -1.88 and is lower than last week’s indication of -1.35. The market traded on both sides of the lower Bollinger band this week. A weekly close at or above 203.10 in May 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

Olam International C.E.O. Sonny Verghese expects a 100,000+ tonne supply deficit following the 2011-2012 crop year. Olam is one of world’s largest food processors and traders.

Weekly technical indications for Friday, March 24th: At this time the week’s trading range was 24.67-23.07 the last print is 23.68. The stochastic remains in buy mode. RSI at 46.02 is higher than last week’s reading of 45.16. The M.A.C.D. histogram at 51.76 is higher than last week’s indication of 44.47. A weekly close at or below 21.86 in May cocoa will turn the weekly trend down. The technicals are improving, but the market is not. It appears that Cocoa’s price action will remain a range trading affair. May Cocoa topped out at 36.09 and broke to 20.05. Bulls do not want May Cocoa to trade below 20.05.

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 output from southern hemisphere growing areas is pressuring the price of Cotton.

Weekly technical indications for Friday, March 24th: At this time the week’s trading range was 93.79-89.01, the last print is 89.36. The stochastic remains in sell mode. RSI at 41.38 is lower than last week’s indication of 45.17. The M.A.C.D. histogram at 0.36 is lower than last week’s reading of 0.86. The market was able to pierce the center Bollinger band above, but again was unable to hold and has now pierced the 9 bar average below. A weekly close at or above 93.51 in May 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

Weekly technical indications for Friday, March 24th: At this time the week’s trading range is 25.04-23.81, the last print is 24.99. The stochastic remains in buy mode. RSI at 56.13 is higher than last week’s reading of 48.97. The M.A.C.D. histogram at 0.21 is higher than last week’s reading of 0.11. The market is finishing out the week between the center and upper Bollinger bands. Continue to treat dips as buying opportunities. A weekly close at or above 24.57 in May Sugar will turn the weekly trend up. I see upside potential in this market.

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

The Softs Spot

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

Greek debt woes, strength in the U.S. dollar and sliding equity prices have the Coffee market under pressure. Expectations for a huge Brazilian crop continue to weigh on the market. U.S. green Coffee stocks were up 211,753 bags to 4.507 million in January. Each day more bearish information is surfacing. When Coffee was moving higher there was new bullish developments each day.

March Arabica futures traded below $2.00 this week. Something we haven’t witnessed since November of 2010! It appears that speculators are exiting the market while producers continue to sell. A high ranking Guatemalan coffee official has stated that Coffee prices are not reacting to supply and demand fundamentals so much as they are to macroeconomic problems. Translation: the bear market in Coffee is hurting producers.

Vietnamese trading executives expect Coffee sales in Vietnam for local consumption and exports may rise in the coming weeks due to lower than expected output. What are they putting in their Coffee? Wishful thinking on their part. Futures traded below $2.00 and these people are looking for higher prices. Time for a visit to the optometrist! It really doesn’t matter if production falls; you’ve got to have buyers. My question is always, what’s bid?

Weekly technical indications on Friday, March 17th: At this time the week’s trading range was 217.60-195.90, the last print is 2.00. The stochastic remains in sell mode. At 31.47 the RSI is lower than last week’s reading of 37.88. The M.A.C.D. histogram reads -1.21 and is lower than last week’s indication of -0.18. The market reached the bottom Bollinger band and rallied back to the weeks opening level. Coffee traded below 2.00 this week for the first time since 2010. When markets trade above or below significant price levels commercial interests know something we don’t. Go with the flow, and the flow is down! A weekly close at or above 216.40 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 Cocoa market has been exhibiting some strength as of late. We could chalk that up to improvement in the Eurozone’s economic situation. However, the expected shortfall in Cocoa yields and short covering by non commercial traders are the real drivers behind the rally.

Weather conditions in the Ivory Coast’s Cocoa growing areas continue to have Cocoa farmers particularly concerned. Spotty rainfall interspersed by hot dry periods has stressed the country’s Cocoa trees. Rain is needed at this time to strengthen the trees and assist in producing new foliage in advance of the flowering period. Farmers are uncertain how their April-September mid-crop harvest will fare.

Coastal regions were blessed with some heavy downpours, but the balance of the Cocoa belt remained dry. The weather is very hot and at least one good soaking is required each week to ensure proper development of the mid-crop. The extended drought and strong Harmattan winds have slowed the development of Cocoa in the world’s number one producer. Earlier this growing season there were forecasts that this seasons Cocoa crop would be larger than the record main-crop of the prior marketing season.

Some rain over the last two weeks had raised hopes for the smaller mid-crop. At this point in time the soil is dry and hard. Farmers said the weather is remains very hot and that at least one good downpour is needed every week to ensure adequate growth for the mid-crop. Production forecasts and estimates are helpful, but just let the weather throw a curve ball and it’s all over but the slow dancing and the sad singing.

Nigerian Cocoa farmers are faced with a shortage of insecticide. Actara is the only insecticide permitted for use on Nigeria’s Cocoa crop. Without it the control of insects called mirid bugs (think leafhopper) is nearly impossible. These guys can reduce Cocoa yields as much as 75 percent.

Weekly technical indications for Friday, March 17th: At this time the week’s trading range was 25.77-21.48 the last print is 23.76. The stochastic remains in buy mode. RSI at 46.66 is higher than last week’s reading of 38.18. The M.A.C.D. histogram at 48.80 is higher than last week’s indication of 36.11. This week’s trade took place both above and below the 9 bar moving average. The market pierced the center band of the Bollinger study, but has broken back and is finishing out the week below it. A weekly close at or above 23.04 in March cocoa 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)

The National Cotton Council has released results of it’s 29^th annual early season plantings intention survey. U.S. Cotton producers intend to plant 13.63 million acres this spring. That’s down 7.5 % percent from 2011. Although planting intentions are lower the USDA has stated that production will be higher than last season “if” yield returns to normal. U.S. retail sales numbers indicate consumers are not chomping at the bit to purchase goods not required for everyday living. Large crops are expected from Southern Hemisphere Cotton producers. These factors could cause Cotton prices to stagnate for some time.

The University of Arkansas System – Division of Agriculture has released a new variety of Cotton that goes by the name of UA222. This is the second new variety they have released over the last three years. Agronomists are working to improve the fiber quality of Cotton grown in Arkansas and the mid-south. The only variety of Cotton to produce better results is UA48, a strain previously developed by the division. The design and use of innovative testing and selection methods have enhanced the ability to screen germplasm (seeds) for the combination of genetic traits most desired by the Cotton industry. These include exceptional quality, high yield, resistance to disease and early maturity. We will see how UA222 performs this coming growing season. Sounds like a winner to me. Now all we need is the cooperation of Mother Nature.

Not long ago I wrote that overseas Cotton buyers were defaulting on their contracts at an alarming rate. Granted, the wild swing in the market created hardships for many involved in the Cotton industry. However, unless they file for bankruptcy they are responsible for their contractual obligations. The American Cotton Shippers Association indicates that there are millions of dollars tied up in Cotton contracts that have not been fulfilled.

The world’s largest Cotton merchants are seeking the assistance of the U.S. government. Plans are to meet with representatives of the USDA and the Office of the United States Trade Representative to ask that there be “government to government” meetings with countries whose textile mills have defaulted on their contracts. We’re talking hundreds of millions of dollars owed on a quantity of three to five million bales of Cotton. That’s near 30 percent of last year’s U.S. production. There must be a better way to do business.

Weekly technical indications for Friday, March 17th: At this time the week’s trading range was 94.37-9062, the last print is 92.63. The stochastic has issued a sell signal. RSI at 44.79 is higher than last week’s reading of 41.98. The M.A.C.D. histogram at 0.85 is lower than last week’s indication of 1.04. The market was able to reach the center Bollinger band, but unable to hold and traded back down to the area between the center and bottom Bollinger band. A weekly close at or above 91.57 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

Brazilian Sugar growers are in a fix. The Sugar cane in many of their fields is far beyond maturity and has become unproductive. The cane should be replaced every five to six harvests. According to one of my sources the average Sugar plantation has gone through 3.7 harvests.

Though we witnessed a fall in global Sugar prices over the last year, some growers feel that prices are high enough to hold off replanting at this time. So what will they do if Sugar prices ratchet to the upside and they have a light harvest? Cry and stomp their feet are my best guess. If they do not prepare their fields for the future they can only blame themselves.

Rainy season continues in Brazil. This is when the majority of plant growth occurs. That being the case it’s too early to get a handle on the size of the 2012 crop. Rainfall in southern Parana state and Southwestern Matto Grosso Do Sul was not up to par and output shortfalls will likely take place in those growing areas. Thoughts are that this season’s production will eclipse last season’s. Isn’t that always the case?

According to the acting secretary of the Indonesian Sugar Association a 13 percent increase in Sugar production to 2.4 million tonnes is expected this season. In order to meet domestic demand the country will import an additional 240,000 tonnes of raw Sugar. Once processed, this will equal 220,000 tonnes of refined white Sugar. Indonesia is the largest consumer of Sugar in Southeast Asia. At one time there were many more operating Sugar mills in Indonesia. Between 1995 and 2000 the country’s sugar production declined some 30 percent as out of date milling operations were shut down.

Weekly technical indications for Friday, March 17th: Breaks to support should be viewed as buying opportunities. At this time the week’s trading range is 24.84-24.07, the last print is 24.62. The stochastic remains in buy mode. RSI at 50.07 is lower than last week’s reading of 50.23. The M.A.C.D. histogram at 0.19 is higher than last week’s reading of 0.15. The market is again finishing out the week above the 9 bar average and the center Bollinger band. A weekly close at or above 25.47 in March Sugar will turn the weekly trend up. I see upside potential in this market.

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

The Soft Spot(50)

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

Coffee drinking is becoming increasingly popular in China. In a play on words spoken by Winston Churchill – We have not yet begun to drink! The average Chinese Coffee drinker consumes three cups of Coffee annually. Coffee drinkers worldwide consume 240!

They better discover a fresh vein of Coffee in the Coffee mine. With a population of 1.6 billion people, Chinese Coffee drinking is at the beginning of what could be a long, sustained period of growth. This puts the Chinese province of Yunnan in a very good position. Yunnan produces more than 95 percent of China’s Coffee.

Guess who’s already gotten into the act? Right – Starbucks. The company inked an agreement with China’s Ai Ni Group this week to establish a joint venture to enlarge it’s Coffee sourcing in Yunnan. Serving to increase both domestic and global supply needs, the joint venture will focus on buying and exporting high quality arabica Coffee beans grown in Yunnan. The joint venture will also build and operate dry mills throughout the province. Starbucks has 800 stores in China today and expects to have 1500 by 2015. Amazing!

The International Coffee Organization has reduced it’s global Coffee production forecast for this growing season. Strengthening market sentiment, a major shortfall in the Ethiopian Coffee crop and a decrease in Brazilian green Coffee exports for January year over year is all supportive to the market.

Over the last few years Coffee yields have been decreasing. Colombia has been the world’s second largest producer of arabica Coffee for many years. Recent production has declined to levels not seen for 35 years.

Many Latin American growing areas have experienced rising temperatures and unpredictable rains of high intensity. Many scientists have linked this to global warming. Keep in mind that global warming is a shift in weather patterns, not just warmer temperatures. Coffee plants require the correct mix of temperature, rainfall and dryness to ripen beans properly and retain their taste. Conversely, Coffee pests thrive in warmer, wetter weather. The Coffee industry overall is quite concerned that the world’s Coffee production may not be able to recover. Has world Coffee production reached it’s peak? If so, be prepared for much higher Coffee prices in the future.

Weekly technical indications on Friday, March 10th: At this time the week’s trading range was 222.45-213.05, the last print is 215.65. The stochastic is in sell mode. At 38.04 the RSI is again a bit lower than last week’s reading of 38.19. The M.A.C.D. histogram reads -0.16 and is again a bit lower than last week’s indication of -0.25. A rally to just above the 9 bar moving average failed to hold. The market is continuing to trade in a range. There is nothing to get excited about here. A weekly close at or above 219.50 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

According to port data, Cocoa bean exports from Ivory Coast’s port of Abidjan increased 53 percent in December. Shipments rose to 125,816 tonnes versus 82,082 tonnes in November. Exports of Cocoa products rose to 20,237 tonnes from 15.221 tonnes. Cocoa products include butter, powder, liquor and cake.

The improving macroeconomic environment is having little effect on Cocoa’s price. Once the debt problems of Greece are settled we can expect some strength to show it’s face and lift Cocoa prices higher. The expected 10 percent decline in Cocoa production this season will see the global Cocoa supply move from surplus to deficit. In late January Cocoa purchases by Ghana from the country’s farmers were at least 5 percent higher than last a year ago. I will wait until further down the road to state my opinion. The main harvest will continue through March and the hot dry weather that was experienced by the Ivory Coast will no doubt negatively affect output.

In an interesting development Ghana and the Ivory Coast have formed a joint committee to streamline Cocoa production and marketing. The committee’s first objective is to regulate price differentials and put a stop to cross border Cocoa smuggling. There is a very long history of smugglers playing the spread. Can you imagine? Spreaders with guns! If the committee can accomplish their task Cocoa farmers in both countries will benefit. Ghana and the Ivory Coast produce 60 percent of the worlds Cocoa.

Weekly technical indications for Friday, March 10th: At this time the week’s trading range was 23.32-21.86 the last print is 21.90. The stochastic is in buy mode. RSI at 39.08 is lower than last week’s reading of 42.27. The M.A.C.D. histogram at 38.67 is unchanged from last week. This week’s trade again took place both above and below the 9 bar moving average. The market is again finishing out the week below the average. There is nothing to get excited about here. A weekly close at or above 24.60 in March cocoa 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)

See no weevil! Eradication of the boll weevil is succeeding. This little bug with a huge appetite is in it’s death throes. U.S. cotton producers could not be more pleased. The boll weevil migrated to the U.S. from Mexico in the 1890’s. It lays it’s eggs in the reproductive part of the Cotton plant called the square. Soon after the square falls off. No square, no Cotton! The coordinated boll weevil eradication program is overseen by the USDA and executed by state and local weevil fighters. Many Texas Cotton growers have not even seen a boll weevil for several seasons. Last year was the first that there was no weevil damage. The pest has been wiped out in most of the U.S. As of now, southern Texas is the only area dealing with boll weevils. This is a major accomplishment for the U.S. Cotton industry.

In years past supply and demand determined Cotton prices. Nowadays macroeconomic events have taken over that job. Cotton prices have been pressed to levels on both the high and low side that are out of line with fundamental reality. I again stress that we must view Cotton as a leading economic indicator. Cotton began to move higher in mid December. The S&P 500 did as well. At that time the world’s economic situation was thought to be in shambles. Well guess what? Cotton continues to be holding very well and appears to be backing and filling prior to beginning another leg to the upside.

Australia’s flooding problems have taken a toll on the country’s Cotton crop. The world’s third largest shipper predicts the deluge has the potential to damage as much as 10 percent of the crop. Key will be how high the water gets in the next week or so. Last year’s torrential rains did 9 billion $AD damage to the country.

Weekly technical indications for Friday, March 10th: At this time the week’s trading range was 97.26-90.23, the last print is 90.51. The stochastic has issued a sell signal. RSI at 41.88 is lower than last week’s reading of 48.48. After failing to hold a rally above the 9 bar moving average and center Bollinger band it broke to a level centered between the center and lower Bollinger bands. The M.A.C.D. histogram at 1.03 is lower than last week’s indication of 1.39. The market continues to respect the double top at 99.47. Harvest pressure from Southern Hemisphere output is pressuring this market. A weekly close at or above 97.67 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

The Kingsman Sugar Conference is the place to be if you depend on Sugar for your livelihood. This year’s conference was held in Dubai this week. One of the featured speakers was Cargill Incorporated vice chairman Paul Conway. He stressed that the era of low food prices has come to an end. He also made it clear that speculators are an essential part of the market place and do not change supply and demand fundamentals. It’s nice to hear that for a change. I can’t count how many times I’ve heard the opposite.

The overabundant supply of Sugar that pressured prices last year is expected to shrink 43 percent next season as consumption growth is set to exceed the 10 year average. According to Switzerland based researcher Kingsman S.A. the surplus will drop to 5.5 million tonnes in the 2012-2013 marketing from 9.7 million tonnes this season. Global Sugar usage is expected to rise to 2.7 percent, a record 170.6 tonnes. According to the London-based International Sugar Organization the annual average over the last ten years had been 2.2 million tonnes.

Continued flooding in Australia has inundated portions of the country’s northeast. Not only have crops been damaged, thousands of people have abandoned their homes and headed for higher ground. Where is the higher ground in Australia? All I’ve ever seen is that large red domed rock formation named Uluru. It’s not large enough to hold that many people. But then again I’ve yet to visit Australia. Last year’s flooding cost the country’s economy in excess of 9 billion dollars.

As expected, India’s food ministry has again approved an additional 1 million tonnes of Sugar for unrestricted export. Sugar exporters had been clamoring for permission to do so since last year. India is the world’s largest consumer of Sugar. To allow 1 million tonnes of the sweetener at a crack one can only imagine the amount of Sugar the country’s suppliers have on hand. No, they won’t give us an accurate figure. That would depress prices now wouldn’t it?

Weekly technical indications for Friday, March 10th: Breaks to support should be viewed as buying opportunities. At this time the week’s trading range is 24.89-23.94, the last print is 24.69. The stochastic continues in buy mode. RSI at 47.88 is higher than last week’s reading of 46.39. The M.A.C.D. histogram at 0.12 is a bit higher than last week’s reading of 0.08. This week’s trade saw the market rally above the 9 bar moving average and center Bollinger band. It was unable to hold and is now trading just above the 9 bar moving average. In my opinion this market is itching for a reason to move higher. A weekly close at or above 24.86 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(49)

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!

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.

The Soft Spot(48)

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)

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(45)

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 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

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(46)

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 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

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

The Soft Spot(44)

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)

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)

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.

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Past performance is not indicative of future results