PFGBEST Softs Comment

CHICAGO - Feb 8/10 - SNS -- Following is the orange juice, cotton and coffee comment from PFGBEST Research.

The Softs Spot

Here we go again! Debt problems have once again taken center stage and become the focus of the markets. This time they are European in origin; Portugal, Ireland, Greece and Spain to be exact. They're being referred to as 'PIGS' by the news media. The U.S. stock market is down sharply as I write this (Thursday 02/04/10 at 10:30 AM CST ). Everyone has to have something to blame weak market conditions on, but I have always believed that the markets go where they want to go. In this case, it's lower. The U.S. dollar is up sharply today and will no doubt pressure many commodity markets.   Coffee, Cocoa, Sugar and Cotton are all lower. The Reuters Jeffries Commodity Channel Index has retreated below the 50% retracement level of the correction that followed the massive deleveraging break of 2008-09. This is not a good sign for commodity bulls. If you would like to see a chart of this index just e-mail me and I will send one.

Coffee 02/05/2010

Life Time Trading Range 41.50 Cents  - $337.50 per Pound

Trades on The ICE 2:30 AM ' 1 PM CDT

Coffee prices are again on the ropes as worries regarding further long liquidation mount. Traders are quite concerned that the strong U.S. dollar and the threat of further long liquidation in other commodities do not bode well for Coffee prices. If Coffee futures continue to slice through support and the general softness in commodities prices persist, we will more than likely see Coffee futures at lower price levels.

There are however bullish fundamentals that should not be ignored. ICE exchange stocks are at their lowest levels in seven years. Japanese Coffee stocks are down for the fourth month in a row. They presently stand at five year lows! It appears that buyers are purchasing exchange stocks to avoid paying the hefty premiums being charged in the cash markets of Central America and Colombia.

The Coffee market is caught in a wide trading range bounded by 115 and 150. Right now we are heading lower but do keep in mind that each time the market moves down it establishes a low higher than the previous one. Until we make lower lows I shall maintain that Coffee is in a well established bull market. There could be some rough road ahead for bulls, but sometimes the markets do things to shake out the weak hands. Guess who would buy from these weak hands? Why the strong hands, that's who.

Coffee is an extremely tricky market that demands close attention. We have witnessed a breakdown in March Coffee of close to 20 cents. This is the type of weakness I refer to when I say 'buy the weakness of the strength'. The potential energy being built up while this market trades sideways could lead to a phenomenal move on a confirmed breakout. The projections as I see them are 2.10 on the upside, .50 on the down! Do you think we could see .50 Coffee?

I recommend purchasing May Coffee call spreads at this level.

March Coffee must close above 141.25 Friday to turn the weekly trend up.

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

To open an account with Robin E-Mail  rrosenberg@pfgbest.com or telephone 800.611.6974.

You can open an account online in a matter of minutes, or if you prefer a paper account form we will send one your way. Direct to floor order execution where possible. Options a specialty.

Cocoa 02/05/2010

Life Time Trading Range $444 ' $5379 per Tonne

Trades on The ICE 3 AM ' 1 PM CDT

The macroeconomic picture has failed to improve markedly. Yes, some of the economic numbers released by the U.S. have been surprisingly positive, but the European debt problem is hanging over the marketplace. As I've stated before, Europe is a large consumer of chocolate. Any cutback in purchases will affect luxury items first; chocolate is just that. This does not make me feel warm and fuzzy towards Cocoa prices!

There is talk that tightness in the Ivory Coast supply is beginning to be seen as the amount of Cocoa arriving at ports for export is decreasing. This is not a big thing at this point as harvest is coming to an end soon. One would expect the quantity to drop off, no? Cameroon, which produces about 5% of the worlds Cocoa, is experiencing hot dry weather. This could adversely affect their harvest which is still in progress.

We must pay close attention to Ghana. In an attempt to reduce the number of people living in poverty, the government of Ghana is looking to increase annual Cocoa production by as much as 30%. A free spraying program has been provided for Cocoa farmers to control black pod disease. The roads used to transport supplies to Cocoa farmers and Cocoa beans to port are also being improved. The additional supply provided by this government program will weigh on Cocoa prices in the future.

The technical picture exhibits an oversold market that could have some upside lurking around the corner. Take a close look at the market if this should come to pass. Consider establishing a short position or purchase put spreads on strength.

March Cocoa must close above 32.82 Friday to turn the weekly trend up.

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

To open an account with Robin E-Mail  rrosenberg@pfgbest.com or telephone 800.611.6974.

You can open an account online in a matter of minutes, or if you prefer a paper account form we will send one your way. Direct to floor order execution where possible. Options a specialty.

Sugar 02/05/2010

Life Time Trading Range 2.30 Cents ' 66.00 Cents per Pound

Trades on The ICE 2:30 AM ' 1 PM CDT

Until this week, the Sugar supply deficit had been enough to support high prices. Last week I reported that Sugar reached new contract highs of 30.40. This week, European debt problems have taken center stage and Sugar has retreated over 3 cents. Many investors have opted out of risky commodity investments and rolled their funds into U.S. debt instruments or U.S. dollars.

With supply deficits existing in many countries, this break down in Sugar prices could be just what the doctor ordered. European debt won't make Sugar supply deficits disappear, but lowering Sugar prices will certainly spark buying interest. This will be supportive to the market for the time being. But, if those that need Sugar are able to fill their orders, Sugar bulls must take a very close look at the situation. There are still many long speculators in the Sugar market. Further deterioration of the macroeconomic situation may force their hand and make it necessary they exit their long positions. This could lead to much lower Sugar prices.

Sugar's technical picture has deteriorated. We now have a weekly key reversal in place. The market is below the center Bollinger band (Which by the way is a 20 bar moving average), below the 9 bar moving average and the next strong support comes in at the 26.70 low made on January 11^th 2010. I do not see any reason to be buying weakness. It is quite possible that the highs were put in during January. At this point I recommend selling into strength or purchasing put spreads in Sugar. Spreading by purchasing the deferred months and selling an equal number of May and July Sugar could also be quite rewarding if the top has been put in.

March Sugar must close below 29.92 Friday to turn the weekly trend down.

Do not trade without protective strategies such as stops and or options. To open an account with Robin E-Mail rrosenberg@pfgbest.com or telephone 800.611.6974.

You can open an account online in a matter of minutes, or if you prefer a paper account form we will send one your way. Direct to floor order execution where possible. Options a specialty.

Cotton  02/05/2010

Life Time Trading Range $26.84 ' $117.20 per Pound

Trades on The ICE 8 PM ' 1:30 PM CDT (Next Day)

Cotton had been doing a good job holding its own this week. For a while it appeared as if there had been more than enough long liquidation in January and the market had found some meaningful support. But today, Cotton decided to join just about every other commodity and head lower.

Hedge fund managers have been moving money out of risky commodity investments and placing them in U.S. Debt instruments or cash. When the massive deleveraging break of 2008-09 took place that was also what happened. Technicals and fundamentals were cast aside and everything was turned into cash. Albeit the European debt situation does not seem quite as severe, I'm afraid that the investment world is reacting in much the same fashion. Hopefully the weekend break will give people time to sort things out in a rational manner.

Cotton had been on a bull run for more than a year before putting in a high of 76.77 the week of January 4^th, 2010. Since that time, the Cotton market has fallen more than ten cents per pound. This is the fifth week in a row that Cotton prices have worked lower. The old adage is that three bars exhibiting lower highs and lower lows in a row makes for a change in trend. Based on that alone, a bear market in Cotton began two weeks ago.

March Cotton must close above 70.41 Friday to turn the weekly trend up.

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

To open an account with Robin E-Mail  rrosenberg@pfgbest.com or telephone 800.611.6974.

You can open an account online in a matter of minutes, or if you prefer a paper account form we will send one your way. Direct to floor order execution where possible. Options a specialty.

PFGBEST Research Team

Phone: 800-361-6855 or 319-553-2181

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