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Cocoa production outlook remains strong for the year while China could import US rice

Cocoa crops in the Ivory Coast are estimated at 1.985 million tons while weekly charts show a downtrend for rice crops.

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Wheat

Winter wheat markets were a little higher on Friday and higher for the week. Chicago SRW held support near 500 March but could not turn weekly trends up again. A weaker US Dollar was supportive to the US wheat price, but the lack of new demand news hurt. World markets were firm, and US FOB prices are of below just about all the competition. Ideas are that demand for US wheat is about to improve, and the weekly charts show that higher prices possible in the next few weeks.

World crop reports continue to indicate less production and tightening supplies. Firm prices extend from Russia to Australia on reduced world production, although Russia still shows the potential for strong exports this year. Australian and European prices have also been relatively strong. Argentine wheat is facing quality and yield losses after more rains hit growing areas last week. It is harvest time, so the big rains are causing damage and harvest delays.

Weekly Chicago Soft Red Winter Wheat Futures © Jack Scoville

Weekly Chicago Hard Red Winter Wheat Futures © Jack Scoville

Weekly Minneapolis Hard Red Spring Wheat Futures © Jack Scoville

Corn

Corn was slightly higher on Friday and higher for the week as demand ideas for US corn remain strong. USDA is shut down now, so any demand news will have to wait or will come from the commercials. However, export inspections reports are still being published and the corn export pace has been very good.

Petroleum markets are showing signs of completing a bottom on the charts now, and that means that ethanol demand could improve soon. Corn demand for ethanol has softened in the wake of the crushing move to lower prices over the last couple of months in petroleum futures markets. Ethanol prices have also weakened and blenders no longer have a profit margin and have been cutting back on production.

The corn market seems to have found increased selling interest when prices get close to the 390 March area and have been able to find support near 370 March. Trends are currently up on the daily charts and also mostly up on the weekly charts. Bad weather is in the forecast for Brazil and Argentina. Argentine areas could get some more big rains in the short term, and these areas and southern Brazil look to stay generally wet. Central and northern Brazil should get more hot and dry weather.

Weekly Corn Futures © Jack Scoville

Weekly Oats Futures © Jack Scoville

Soybeans and soybean meal

Soybeans and soybean meal were a little higher. Trends are turning up again on the weekly charts for soybeans. Some talks last week that China might be buying again supported a good rally in both soybeans and soybean meal. There was no way to confirm the sales if any were made, but nearby basis levels at the Gulf of Mexico were a little firmer on the week.

USDA will not be confirming any new sales due to the partial shutdown of the US government. China bought US soybeans to fulfill its part of an agreement made in Buenos Aires, and might have completed the promised sales with the purchases over the last couple of weeks. However, the market knows that there are plenty of soybeans to sell from the US and South America.

Soybeans are once again turning into a weather market. South American weather has been less than perfect this year as it has often been too wet in Argentina and southern Brazil and too dry in western Parana and parts of Mato Grosso an Mato Grosso do Sul. These weather trends continued last week as forecasts for a change in the overall South American weather trends did not verify.

There have been reports of losses in the early harvest areas of western Parana and Mato Grosso, but the expectations of a big Brazil crop remain. Private estimates range from about 115 million tons to about 121 million tons right now. That means the crop could be less than a year ago despite increased planted area.

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Weekly Chicago Soybeans Futures © Jack Scoville

Weekly Chicago Soybean Meal Futures

Rice

Rice was mostly a little higher on Friday, and also higher for the week. Weekly charts still show a down trend, and the quiet tone in the cash market is reflected in the futures market as buyers and sellers are not eager to be involved.

Basis levels remain generally firm as the market needs a little rice and is not getting much offer from the producers. Producers do not seem interested in further sales at this time, and prices are too cheap for them right now.

The export demand is holding relatively strong, and there is some mill demand. There has been talk that China will now buy rice as imports of US rice are now permitted by the government, but no one thinks it will buy very much if it buys anything at all. The purchases that might be made should be done sooner rather than later given the current thaw in the trade war.

It will probably take until the middle of this month to see much movement in rice futures and cash markets.

Weekly Chicago Rice Futures © Jack Scoville

Palm oil and vegetable oils

World vegetable oils prices were mixed on ideas of big supplies. All oilseeds are available to the market, and prices have been generally working lower in search of demand. Demand remains below optimal levels in palm oil, and most in the market worried about finding enough demand to take up the increasing supplies.

MPOB is expected to show ample supplies in its monthly supply and demand reports this week. Production should start to fall soon as the weather will change and inhibit palm production. Daily charts and weekly charts show futures mostly in up trends.

Soybean oil closed higher in sympathy with palm oil and as petroleum futures showed signs of forming a bottom. Canola was lower on improved weather and as demand is only routine. Canola is taking its cues from Chicago and the reports of an abundance of soybeans in the US and South America. Prices started to fade later in the week on the higher Canadian Dollar and worries about overall demand. It was higher in choppy trading last week.

Weekly Malaysian Palm Oil Futures © Jack Scoville

Weekly Chicago Soybean Oil Futures © Jack Scoville

Weekly Canola Futures © Jack Scoville

Cotton

Cotton was a little higher once last week after testing major support near 7,000 on the weekly chart. These levels held and a short covering rally was seen in the second half of the week.

Weak overall demand continues to impact the US market. Traders were also looking at the big moves seen in the stock indices and petroleum complex and were wondering what that meant for cotton prices. There was talk of a recession coming that could hurt demand eventually for cotton.

World production and supplies are going still lower due to bad weather in the growing season for major producers around the world, including India, Pakistan and Australia. China had problems with its growing weather, too, and has been forced to import a lot of cotton this year.

Demand for US cotton has been disappointing, as the weekly export sales reports have shown average demand at best since the start of the marketing year. China has not bought any US cotton this year and has been active in other markets, especially India. US prices are down and China might start to look at the US crop, but there have been worries about the quality of the US crop due to some extreme growing conditions in Texas and the Southeast over the Summer and Fall. Ideas are that the quality worries have kept some importers of US cotton away from the market. Even so, prices are cheap now, and it is possible that prices are cheap enough to create new demand.

Weekly US Cotton Futures © Jack Scoville

Frozen concentrated orange juice and citrus

FCOJ was mostly higher on Friday but lower for the week. The oranges harvest is active in Florida as the weather is warm and mostly dry. The fruit is abundant, but arrivals to packinghouses and processors are reported behind last year. Florida’s producers are seeing small-sized to good-sized fruit, and work in groves maintenance is active. Irrigation is being used in all areas.

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Packing houses are open to process fruit for the fresh market, and all processors are open in the state to take packing house eliminations and fresh fruit. Mostly good conditions are reported in Brazil.

Weekly FCOJ Futures © Jack Scoville

Coffee

Futures were a little higher in both markets last week in range trading. Speculators were on both sides of the market and cash markets were quiet.

Currency relationships, and especially the rate between the US Dollar and the Brazilian Real, continue to be an important force in coffee trading, but the trade seemed more concerned about the Dollar against major currencies last week.

The Brazil crops are getting harvested now, and production estimates now range as high as 63.7 million bags. It is a big crop and the main reason to see prices in New York as low as they are right now. Producers are also looking ahead to next year, and production could drop sharply in the off production year.

El Nino remains in the forecast and coffee areas in Brazil could be affected by drought that could hurt production even more. Many areas are dry now, and the forecast calls for more dry weather.

Vietnam is active in its harvest and middlemen were said to be active buyers of the harvest at levels just above the industry. Production in Vietnam is estimated less than 30 million bags due to uneven weather during the growing season. The harvest in both countries will wind down over the next few weeks.

Weekly New York Arabica Coffee Futures © Jack Scoville

Weekly London Robusta Coffee Futures © Jack Scoville

Sugar

New York closed lower last week. March futures are now near some support at about 1,200. London was higher as well. The weekly charts in both markets show down trends.

Sugar was hurt by the weakness in petroleum futures that have hurt demand ideas. Petroleum futures appear to be making some short-term lows at this time, so that might help change the tone in sugar.

Brazil has been using a majority of its sugarcane harvest to produce ethanol this year instead of sugar, and there are some talks the mills might switch back to sugar unless petroleum prices improve soon.

There are doubts on just how much production will be seen this year in India. Northwest India had been experiencing hot and dry weather that could cut yields. It has not announced a reduction in its export goal of 5 million tons this year.

Dry conditions continue in Brazil, the EU, and Russia, but conditions are mostly good in Ukraine. Very good conditions are reported in Thailand, but the next production could be less as farmers might switch to other crops due to low prices for sugarcane.

Weekly New York World Raw Sugar Futures © Jack Scoville

Weekly London White Sugar Futures © Jack Scoville

Cocoa

Futures closed lower for the week in New York and lower in London as the new main crop harvest comes to market in West Africa. Trends are still up in both markets, and the weekly charts show that a significant up side move is possible. However, futures were unable to extend the up move last week, so a correction lower might be seen this week. The outlook for strong production in the coming year is still around, and ports are said to have plenty of cocoa on offer.

The main crop harvest is active in West Africa. Main crop production ideas for Ivory Coast and Ghana are being reduced, with Ivory Coast now estimating its main crop production at 1.985 million tons, down from previous estimates just over 2.0 million tons. The crop production estimates might become smaller due to Harmattan winds and hot and dry conditions that have moved into West Africa. These conditions can take moisture out of the soil very rapidly and cause some very significant stress on the trees. Conditions appear good in East Africa and Asia. Demand is said to be improving as offers from the new harvest start to increase.

Weekly New York Cocoa Futures © Jack Scoville

Weekly London Cocoa Futures © Jack Scoville

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Jack Scoville is a futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. In addition to writing daily market commentaries in both English and Spanish, he offers brokerage services to an international clientele of agricultural producers, processors, exporters, and other professional traders. He is regularly quoted by major wire services including Dow Jones, AP, and Reuters. His comments are sourced by newspapers around the world and on various radio and television programs.

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