Technical Breakout in March Sugar?

COCOA

March Cocoa was slightly higher this morning after closing higher for the fourth straight session yesterday. The market has been see-sawing for several months as it has awaited the outcome of the west African main crop. Early arrivals in Ivory Coast have been strong, and the weather has been generally favorable, but there have also been periods of too much rain. As of Sunday, cumulative arrivals since October 1 had reached 285,000 metric tons, up from 170,000 for the same period last year and the highest in at least four years.  World Weather Service said scattered showers occurred from Ivory Coast into Ghana this week, and they expect more to occur daily through the next week. All cocoa areas should see rain at one time or another, with activity diminishing on the weekend and into next week. Much of west-central Africa has been wetter than usual in recent months, raising some concern over the condition of the crops.

COFFEE

As expected, coffee plants in Vietnam were unaffected by Tropical Storm Trami. World Weather Service said yesterday that there was still potential for another tropical disturbance to form in the southern South China Sea this weekend that could move toward the central coast of Vietnam. The system should bring another round of heavy rain to coastal areas and mostly light to moderate and locally heavy rain in the northern Central Highlands. Their harvest in just getting underway, with about 5% of the crop completed, according to a quote in Reuters. Indonesia’s Sumatra robusta bean exports totaled 22,159.9 metric tons in September, up from 19,055.1 in August and 12,564.8 a year ago. (+37%). All Brazilian coffee areas are expected to see some rain another during the next 10-14 days. World Weather Services believes the entire month of November will see near to above normal rainfall and near to below normal temperatures. Peru, Colombia, and western Venezuela will also see regular rounds of showers and thunderstorms through the next that will bring enough rain to favorably support the crop. The Starbucks CEO told investors yesterday that he plans to overhaul Starbucks US locations, with more comfortable seating, ceramic mugs, and wait times down to 4 minutes. Starbucks posted a 7% drop in global comparable sales for the fourth quarter yesterday. Sales in China fell 14% in the fourth quarter for their third straight decline. ICE certified arabica stocks increased by 14,539 bags yesterday to 849,553, their highest since September 17.

COTTON

December Cotton is near unchanged this morning and is sitting near its lowest level since September 16. The market may be seeing harvest pressure, but it is also not being helped by stock market declines overnight, which undermine demand expectations. Flooding rains are possible in western Texas and Oklahoma this weekend and into early next week. As of Sunday, Texas was 48% harvested of which 95% had bolls open that could be vulnerable to damage. Net drying is expected to continue in the lower US Delta, the southern half of the Tennessee River Basin, and southeastern states during the next ten days, which will help with crop maturation and harvest. The export sales report this morning could support the market if it comes in strong, especially after prices have fallen for five straight sessions. However, we suspect a blockbuster would be needed to provide lasting support. Last week’s report showed net sales of 169,687 bales and was the second week in a row they were above 150,000, which marked an improvement over the previous five weeks. However cumulative sales had only reached 51% of the USDA forecast for the marketing year versus a five-year average of 63% for this point in the season.

SUGAR

March Sugar is sharply higher this morning after breaking above one trendline yesterday. It has traded up to the next trendline (drawn off the highs from late September and early October) and has put the market in position for a technical breakout from a bull flag formation. Recent rainfall in Brazil is viewed as beneficial to next year’s crop, but it could also slow production for the remainder of this year. Typhoon Kong-Rey hit landfall in Taiwan overnight, and it has been described as the largest Typhoon to hit that region in four decades. This could damage cane fields, but Taiwan is not a large producer. (They rank 70^th out of 77 countries.)

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