The Softs Market Review
For the week of July 26th, 2010
A week past by with changes that much influence to traders and investors. New week starts, just check out notes by PitGuru Jurgens H. Bauer for your trading week!
After dropping close to 10 cents in the first three sessions last week, coffee bounced on Thursday and then reversed weakness Friday to close KCU at 166. Fundamentally, F.O.Licht announced their estimates for global coffee production. Their total for green coffee is 124.2 million 60 kilograms for the 2009-10 crop. That figure is lower by 2.8 million bags than F.O.Licht's December projection. It's also 11.9 million bags below the 136.1 million bags produced in 2008-09. Arabica production is estimated at 74.3 million bags, compared with the December forecast of 74.7 million bags and down from 83.8 million bags in 2008-09. Robusta output is forecast at 49.9 million bags for 2009-10 compared with 52.3 million. I look for the 162 area to provide support, and don't rule out another drop to 160, but view either as a buying opportunity. On the upside if KCU moves above 170, then 176.50 highs come back into play. I still think the upside is in play and I like the risk reward available in owning upside calls in Sept and Oct.
The trend for cotton may be down, but I feel the positive action this past week is a signal not of a simple correction, but rather a potential turn. Before any verification of a trend change we'll need more evidence, but cotton supplies are tight and the front of the board strengthened and shows promise. The US crop is doing well, yet harvest is still a ways off and much can happen. Look for dollar weakness to help spur additional support from users and specs. I favor owning upside calls and call spreads and feel 80 cents is on the horizon.
Sugar prices reached 18.60 in the leading OCT contract, then backed off Friday in a bout of profit taking. I am looking for a new range to be established with support at 17.90-80. Resistance certainly ought to be found at the fresh highs, and this market may require some work to rebuild momentum for a further move up, yet I remain a bull and think 19.20-19.60 this week on the upside, and 20-21 cents possible soon. Cocoa ought to digest the news circulating in the industry. I am looking for 2900 to be seen as well as 3100. Play that range, and look to follow a break of 28.50 lower. |
