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Fund buying across the spectrum of agricultural commodity markets yesterday and continued trade house buying in London helped keep the market in a well defined uptrend channel. The market continues to find support from tightening exchange stocks and a perceived tight supply situation in Europe. Ideas that the European economy is doing much better than expected along with bull spreading and a widening inversion in London is also helping to support. End user buyers remain on edge as deliverable stocks are tight and a large London trade house took a large portion of deliverable supply off of the market with the July expiration. Cocoa supply should be on the rise in the months ahead but near-term supply is tight and quality of the mid-crop out of Ivory Coast remains an issue. The main crop harvest does not start until October. Traders see a slight world production surplus for the 2010/2011 season but the focus of attention into the fall could be the size of the Ivory Coast crop. Many traders see the crop near 3.75 million tonnes from 3.518 million last year. Brazil arrivals remain behind last year’s pace but some traders see supply on the rise. September cocoa was able to post a sizable gain for the session yesterday but finished well below the highs as a sharp mid-session rally was quickly reversed. Cocoa’s strength was sustained throughout the session, in spite of a turnaround in the British Pound. Cocoa exports from the Indonesian island of Sulawesi during July were up nearly 50% from last season’s totals. However, cocoa exports from Cameroon this season are running over 4% below last year at this time. ICE cocoa warehouse stocks were down 55,790 bags to 3.819 million bags.
TODAY’S GUIDANCE: Commercial traders are meeting with London exchange representatives to discuss the deliveries situation in July and there is continued talk of position limits to discourage speculation. This may end up having some influence ahead. A continued tightening of exchange stocks in the US and a pick-up in fund buying activity continue to provide underlying support. The close above $3092 (now close-in support) has improved the technical picture and opens the door for another test of the July highs. Resistance is now at $3180 and $3228.
TODAY’S MARKET IDEAS: It will likely take a turn down in outside market forces or a shift to increasing exchange stocks to turn the minor trend down.
Cocoa Market Commentary – 2010.08.05
by Terry Roggensack on August 5, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Fund buying across the spectrum of agricultural commodity markets yesterday and continued trade house buying in London helped keep the market in a well defined uptrend channel. The market continues to find support from tightening exchange stocks and a perceived tight supply situation in Europe. Ideas that the European economy is doing much better than expected along with bull spreading and a widening inversion in London is also helping to support. End user buyers remain on edge as deliverable stocks are tight and a large London trade house took a large portion of deliverable supply off of the market with the July expiration. Cocoa supply should be on the rise in the months ahead but near-term supply is tight and quality of the mid-crop out of Ivory Coast remains an issue. The main crop harvest does not start until October. Traders see a slight world production surplus for the 2010/2011 season but the focus of attention into the fall could be the size of the Ivory Coast crop. Many traders see the crop near 3.75 million tonnes from 3.518 million last year. Brazil arrivals remain behind last year’s pace but some traders see supply on the rise. September cocoa was able to post a sizable gain for the session yesterday but finished well below the highs as a sharp mid-session rally was quickly reversed. Cocoa’s strength was sustained throughout the session, in spite of a turnaround in the British Pound. Cocoa exports from the Indonesian island of Sulawesi during July were up nearly 50% from last season’s totals. However, cocoa exports from Cameroon this season are running over 4% below last year at this time. ICE cocoa warehouse stocks were down 55,790 bags to 3.819 million bags.
TODAY’S GUIDANCE: Commercial traders are meeting with London exchange representatives to discuss the deliveries situation in July and there is continued talk of position limits to discourage speculation. This may end up having some influence ahead. A continued tightening of exchange stocks in the US and a pick-up in fund buying activity continue to provide underlying support. The close above $3092 (now close-in support) has improved the technical picture and opens the door for another test of the July highs. Resistance is now at $3180 and $3228.
TODAY’S MARKET IDEAS: It will likely take a turn down in outside market forces or a shift to increasing exchange stocks to turn the minor trend down.
Tags: Cocoa, Softs
About Terry Roggensack