Softs Report 10/11/19

COTTON
General Comments: Cotton was lower in response to the USDA reports. USDA showed little change in overall US production and made no changes at all to the demand side. Bullish traders had hoped for less production and ending stocks. No big changes were seen in the world data. China made an offer to buy a lot of US ag goods if the US would accept a reduced trade deal. The USDA crop condition report was much more mixed as some crops got better and some got worse. This trend has been a feature of the market all year as the Texas Panhandle and nearby areas have been very hot and dry for a big part of the growing season. Crops in the southeast have seen perhaps too much rain and much cooler weather. These trends have changed in the last couple of weeks and now Texas if getting a little rain while the Southeast has seen record heat and a drought has started to develop. The weekly report showed increased stress in the southeast last week. Some rains were seen in the Southeast over the weekend and temperatures have now moderated. The export demand remains weak. World demand has been weak in part due to the US-China tensions and fears of a recession or at least a global economic slowdown are keeping buyers away. World prices are weak.
Overnight News: The Delta should see mostly dry weather, but some showers on Friday, and Southeast should see mostly dry weather. Temperatures should be near to above normal. Texas will have mostly dry conditions. Temperatures will be mostly below normal. The USDA average price is now 58.56 ct/lb. ICE said that certified stocks are now 10,523 bales, from 10,523 bales yesterday. ICE said that 0 notices were posted for delivery against October contracts and that total deliveries for the month are now 13 contracts.
Chart Trends: Trends in Cotton are mixed. Support is at 6070, 6010, and 5970 December, with resistance of 6250, 6290, and 6340 December.

DJ USDA Crop Production: U.S. All Cotton/Cottonseed-Oct 10
Cotton: Area Harvested, Yield, and Production by Type, State,
and United States, 2018 and Forecasted Oct 1, 2019
=============================================================================
Area Harvested Yield Production 1/
State ======================================================================
2018 2019 2018 Sep 1 2019 2018 Sep 1 2019
=============================================================================
1,000 Acres ==Pounds== == 1,000 Bales 2/ ==
Upland
U.S. 9,957.0 12,281.0 847 826 820 17,566.0 21,145.0 20,981.0
Amer-Pima
U.S. 248.8 228.4 1,545 1,507 1,522 801.0 717.0 724.0
All
U.S. 10,205.8 12,509.4 864 839 833 18,367.0 21,862.0 21,705.0
=============================================================================
1/ Production ginned and to be ginned.
2/ 480-pound net weight bale.
Cottonseed: Production, United States,
2018 and Forecasted Oct 1, 2019
=============================================================================
Production
State ====================================================================
2018 2019 1/
=============================================================================
1,000 Tons
U.S. 5,631.0 6,725.0
=============================================================================
1/ Based on a 3-year average lint-seed ratio.

DJ USDA Supply/Demand: U.S. Cotton – Oct 10
U.S. Cotton Supply and Use 1/
=========================================================================
Item 2018/2019 2019/2020
prev Oct 10 prev Oct 10
==========================================================================
Area
Million acres
Planted 14.10 14.10 13.76 13.76
Harvested 10.21 10.21 12.51 12.51
Pounds
Yield per harv. acre 864 864 839 833
Million 480 pound bales
Beginning stocks 4.20 4.20 4.85 4.85
Production 18.37 18.37 21.86 21.71
Imports 0.00 0.00 0.01 0.01
Supply, total 22.57 22.57 26.72 26.56
Domestic use 2.98 2.98 3.00 3.00
Exports 14.76 14.76 16.50 16.50
Use, total 17.74 17.74 19.50 19.50
Unaccounted 2/ -0.02 -0.02 0.02 0.06
Ending stocks 4.85 4.85 7.20 7.00
Avg. farm price 3/ 70.50 70.50 58.00 58.00
==========================================================================
1/ Upland and extra-long staple; marketing year beginning August 1. Totals
may not add due to rounding. 2/ Reflects the difference between the
previous season’s supply less total use and ending stocks. 3/ Cents per

DJ USDA Supply/Demand: World Cotton – Oct 10
World Cotton Supply and Use 1/
(Million 480-pound bales)
=============================================================================
beginning domestic exports ending
stocks prod imports use loss 2/ stocks
=============================================================================
2019/20 (Projected)
World
Sep 80.80 124.90 43.28 121.74 43.34 0.15 83.75
Oct 80.73 124.77 42.90 121.61 42.91 0.19 83.69
World Less China
Sep 45.13 97.15 33.28 82.24 43.22 0.15 49.95
Oct 45.06 97.02 33.40 82.11 42.74 0.19 50.45
United States
Sep 4.85 21.86 0.01 3.00 16.50 0.02 7.20
Oct 4.85 21.71 0.01 3.00 16.50 0.06 7.00
Total foreign
Sep 75.95 103.04 43.28 118.74 26.84 0.13 76.55
Oct 75.88 103.07 42.90 118.61 26.41 0.13 76.69
Major exporters 4/
Sep 29.29 56.69 2.26 33.96 22.93 0.02 31.33
Oct 29.23 57.09 2.28 33.94 22.43 0.02 32.21
Major importers 8/
Sep 44.88 43.30 38.51 80.59 2.65 0.11 43.34
Oct 44.89 42.93 38.13 80.49 2.70 0.11 42.64
=============================================================================

DJ On-Call Cotton – Oct 10
As of Oct 4. On-call positions represent spot cotton sold to or
purchased from a merchant, based on New York cotton futures contracts
of 500-pound bales. Prices are not yet fixed against these contracts.
Source: CFTC
*-denotes changes from the previous week are based on revised data from
last week.
Call Previous Change Call Previous Change
Sales Purchases
Oct 19 0 0 0 0 0 0
Dec 19 24,369 23,949 420 36,163 37,616 -1,453
Mar 20 26,798 26,368 430 8,253 7,951 302
May 20 11,533 11,334 199 1,155 1,375 -220
Jul 20 15,416 15,166 250 2,320 1,995 325
Dec 20 11,262 11,164 98 19,386 19,256 130
Mar 21 3,949 3,951 -2 574 574 0
May 21 1,638 1,639 -1 0 0 0
Jul 21 2,812 2,815 -3 0 0 0
Dec 21 440 440 0 824 824 0
Mar 22 440 440 0 0 0 0
Total 98,657 97,266 1,391 68,675 69,591 -916
Open Change
Int
Oct 19 1 1 0
Dec 19 135,138 138,477 -3,339
Mar 20 63,818 61,368 2,450
May 20 8,794 8,542 252
Jul 20 8,457 8,402 55
Dec 20 17,445 16,947 498
Mar 21 1,156 1,156 0
May 21 196 207 -11
Jul 21 350 375 -25
Dec 21 2 2 0
Mar 22 0 0 0
Total 235,356 235,477 -121

FCOJ
General Comments: FCOJ was lower on higher production estimates from USDA. USDA now says that oranges production will be very close to last year. There are no threats out in the ocean right now but the state of Florida has been dry. Many are expecting increased production estimates from Florida on Thursday when USDA releases its next production reports but the drier weather could mean reduced fruit sizes and less than expected production. Chart patterns are mixed. Inventories in Florida are still 29% above a year ago. Fruit for the next crop is developing and harvest will be starting soon. Crop conditions are called good as irrigation is being used. The dry season there seems to be starting now. Rains are reported in Brazil to start flowering for the next crop.
Overnight News: Florida should get scattered showers this week and drier weather this weekend. Temperatures will average near to above normal. Brazil should get scattered showers this week and drier weather this weekend and above normal temperatures.
Chart Trends: Trends in FCOJ are mixed. Support is at 96.00, 95.00, and 92.00 September, with resistance at 100.00, 101.00, and 104.00 September.

Utilized Production of Citrus Fruits by Crop – States and United States: 2018-2019 and
Forecasted October 1, 2019
[The crop year begins with the bloom of the first year shown and ends with the completion of
harvest the following year]
—————————————————————————————————-
: Utilized production boxes 1/ :Utilized production ton equivalent
Crop and State :———————————————————————–
: 2018-2019 : 2019-2020 : 2018-2019 : 2019-2020
—————————————————————————————————-
: —— 1,000 boxes —— —— 1,000 tons —–
Oranges :
California, all …………: 49,800 47,000 1,992 1,880
Early, mid, and Navel 2/ ..: 40,800 38,000 1,632 1,520
Valencia ………………: 9,000 9,000 360 360
:
Florida, all ……………: 71,750 74,000 3,229 3,330
Early, mid, and Navel 2/ ..: 30,400 32,000 1,368 1,440
Valencia ………………: 41,350 42,000 1,861 1,890
:
Texas, all ……………..: 2,500 2,700 106 115
Early, mid, and Navel 2/ ..: 2,210 2,050 94 87
Valencia ………………: 290 650 12 28
:
United States, all ………: 124,050 123,700 5,327 5,325
Early, mid, and Navel 2/ ..: 73,410 72,050 3,094 3,047
Valencia ………………: 50,640 51,650 2,233 2,278
:
Grapefruit :
California ……………..: 3,200 4,200 128 168
Florida, all ……………: 4,510 4,600 192 196
Red …………………..: 3,740 3,900 159 166
White …………………: 770 700 33 30
Texas ………………….: 6,100 5,700 244 228
:
United States …………..: 13,810 14,500 564 592
:
Tangerines and mandarins 3/ :
California ……………..: 26,000 23,000 1,040 920
Florida ………………..: 990 1,050 47 50
:
United States …………..: 26,990 24,050 1,087 970
:
Lemons :
Arizona ………………..: 1,350 1,400 54 56
California ……………..: 22,800 20,000 912 800
:
United States …………..: 24,150 21,400 966 856
—————————————————————————————————-
1/ Net pounds per box: oranges in California-80, Florida-90, Texas-85; grapefruit in California-80,
Florida-85, Texas-80; tangerines and mandarins in California-80, Florida-95; lemons-80.
2/ Navel and miscellaneous varieties in California. Early (including Navel) and midseason varieties
in Florida and Texas.
3/ Includes tangelos and tangors.

COFFEE
General Comments: New York and London both closed lower on reports of good rains in recent days in Brazil. IBGE said that 2019 production is 50.3 million bags, down 3.5% from last month and 16% from last year. It should now start to turn drier. Flowering is reported to be very good and there are ideas of a big production coming next year. However, there was some extreme cold and drought conditions earlier in the year that might have stressed trees and could hurt production potential for this year despite the good weather now. Trends are down in the markets and the funds are selling. The weather is also reported to be good in Vietnam. Vietnam crops are thought to be big despite some uneven growing conditions this year. It has been warm and dry at times, then the growing areas have seen some very heavy rains. The harvest there will be underway soon. Demand has been increasing over the last few weeks. Differentials have been stable. Certified stocks in New York keep dropping and suggest that futures remain underpriced when compared to cash prices. Certified stocks are now at one year lows.
Overnight News: ICE certified stocks are lower today at 2.235 million bags. The ICO daily average price is now 95.00 ct/lb. Brazil will get dry weather this weekend with above normal temperatures. Vietnam will see scattered showers in all areas.
Chart Trends: Trends in New York are down with objectives of 93.00 and 90.00 December. Support is at 91.00, 88.00, and 85.00 December, and resistance is at 95.00, 98.00 and 99.00 December. Trends in London are down with objectives of 1220 November. Support is at 1250, 1230, and 1200 November, and resistance is at 1290, 1310, and 1320 November.

DJ Brazilian Coffee Exports Rose 2.6% in September
By Jeffrey T. Lewis
SAO PAULO–Brazilian coffee exports rose in September from a year earlier as demand from big foreign buyers increased, according to exporters group Cecafe.
The South American country exported 3.2 million 132-pound bags of coffee last month, an increase of 2.6% from the same month a year earlier and the biggest amount for the month in five years, Cecafe said Wednesday.
Brazil is the world’s biggest producer and exporter of coffee, and sales to the U.S., Germany, and Spain, all big importers of the aromatic beans, jumped from a year earlier. Exports to Spain rose 40% in September from a year earlier, sales to the U.S., the single biggest buyer of Brazilian coffee, increased 38.6% and sales to Germany advanced 37.2%.
Sales abroad of the arabica variety of coffee rose 3.7% to 2.6 million bags, while exports of robusta beans decreased 9.9% to 263,121 bags.
Exports of roasted, ground and instant coffee rose 5.1% in September to 324,704

SUGAR
General Comments: Futures closed slightly lower in New York and lower in London. There was no obvious news for the selling in London as opposed to New York. Europe had a bad Sugar beet crop and the effects of the reduced production are now being felt. Reports of improving weather in Brazil were negative. World petroleum prices are relatively cheap and are not supporting ethanol demand ideas. Reports from India indicate that the country is seeing relatively good growing conditions and still holds large inventories from last year. The weather there has improved with the monsoon and some areas are seeing some excessive rains. Brazil mills are refining mostly for ethanol right now as has been the case all season but weakness in the petroleum markets could mean that more Sugar is being produced. The fundamentals still suggest big supplies, and the weather in Brazil is good enough and India has improved as the monsoon was late but brought ample rains in the end. The weather has been much more uneven in production areas from Russia into western Europe. Those areas had a very hot and dry start to the growing season and there are reports of crop losses this year.
Overnight News: Brazil will get scattered showers this week and drier weather this weekend. Temperatures should be near normal. ICE said that 806 contracts were posted for delivery against November Sugar 16 contracts.
Chart Trends: Trends in New York are down with objectives of 1230 and 1190 March. Support is at 1230, 1210, and 1190 March, and resistance is at 1260, 1290, and 1300 March. Trends in London are mixed to down with objectives of 331.00 and 322.00 December. Support is at 338.00, 335.00, and 331.00 December, and resistance is at 345.00, 349.00, and 355.00 December.

Sugar beet Area Planted and Harvested – States and United States: 2018 and 2019
[Includes updates to planted and harvested area previously published]
——————————————————————————————
: Area planted : Area harvested
State :———————————————————————–
: 2018 : 2019 : 2018 : 2019 1/
——————————————————————————————
: 1,000 acres
California …….: 24.6 24.6 24.6 24.2
Colorado ………: 26.3 25.1 25.5 24.5
Idaho …………: 163.0 171.0 163.0 166.0
Michigan ………: 150.0 146.0 147.0 145.0
Minnesota ……..: 415.0 427.0 408.0 421.0
Montana ……….: 43.5 41.9 42.4 41.6
Nebraska ………: 45.5 44.1 44.1 43.6
North Dakota …..: 202.0 212.0 199.0 208.0
Oregon ………..: 9.3 9.9 9.3 9.7
Washington …….: 1.8 2.0 1.8 2.0
Wyoming ……….: 32.1 31.3 30.7 30.6
United States ….: 1,113.1 1,134.9 1,095.4 1,116.2
——————————————————————————————
1/ Forecasted.
Sugar beet Area Harvested, Yield, and Production – States and United States: 2018 and
Forecasted October 1, 2019
[Relates to year of intended harvest in all States except California]
——————————————————————————————
: Area harvested : Yield per acre : Production
:—————————————————————————
State : : : : 2019 : :
: 2018 : 2019 : 2018 :————————-: 2018 : 2019
: : : :September 1 : October 1 : :
——————————————————————————————
: — 1,000 acres — ———— tons ———– — 1,000 tons —
California 1/ : 24.6 24.2 44.4 43.9 43.9 1,092 1,062
Colorado …..: 25.5 24.5 32.6 33.0 33.0 831 809
Idaho ……..: 163.0 166.0 40.5 40.2 40.2 6,602 6,673
Michigan …..: 147.0 145.0 29.1 28.1 27.5 4,278 3,988
Minnesota ….: 408.0 421.0 25.7 26.7 27.0 10,486 11,367
Montana ……: 42.4 41.6 31.1 31.5 31.3 1,319 1,302
Nebraska …..: 44.1 43.6 31.9 28.1 27.6 1,407 1,203
North Dakota .: 199.0 208.0 28.8 28.0 28.3 5,731 5,886
Oregon …….: 9.3 9.7 39.4 39.2 39.3 366 381
Washington …: 1.8 2.0 48.2 48.2 48.3 87 97
Wyoming ……: 30.7 30.6 30.8 27.4 27.4 946 838
United States : 1,095.4 1,116.2 30.3 30.0 30.1 33,145 33,606
——————————————————————————————
1/ Relates to year of planting for overwintered beets in southern California.
Sugarcane for Sugar and Seed Area Harvested, Yield, and Production – States and
United States: 2018 and Forecasted October 1, 2019
——————————————————————————————
: Area harvested : Yield per acre 1/ : Production 1/
:—————————————————————————
State : : : : 2019 : :
: 2018 : 2019 : 2018 :————————-: 2018 : 2019
: : : :September 1 : October 1 : :
——————————————————————————————
: 1,000 acres ———— tons ———– — 1,000 tons —
:
Florida ……: 412.3 411.0 41.9 44.1 44.2 17,256 18,166
Louisiana ….: 448.5 480.0 35.4 32.4 32.0 15,861 15,360
Texas ……..: 38.9 33.3 36.6 37.0 37.5 1,425 1,249 :
United States : 899.7 924.3 38.4 37.8 37.6 34,542 34,775
——————————————————————————————
1/ Net tons.
U.S. Sugar Supply and Use 1/
================================================================================
2017/18 2018/19 Est. 2019/20 Proj. 2019/20 Proj.
Item Sep Oct
================================================================================
1000 Short Tons, Raw Value
Beginning Stocks 1876 2008 1747 1725
Production 2/ 9293 8935 9134 9184
Beet Sugar 5279 4907 5005 5055
Cane Sugar 4014 4028 4129 4129
Florida 1983 2005 2096 2096
Hawaii 0 0 0 0
Louisiana 1862 1875 1900 1900
Texas 169 147 134 134
Imports 3277 3067 3125 3165
TRQ 3/ 1663 1540 1587 1627
Other Program 4/ 326 438 350 350
Other 5/ 1287 1089 1188 1188
Mexico 1223 997 1118 1118
Total Supply 14445 14010 14006 14074
Exports 170 35 35 35
Deliveries 12185 12250 12305 12255
Food 12048 12125 12200 12150
Other 6/ 137 125 105 105
Miscellaneous 82 0 0 0
Total Use 12438 12285 12340 12290
Ending Stocks 2008 1725 1666 1784
Stocks to Use Ratio 16.1 14.0 13.5 14.5
================================================================================
Mexico Sugar Supply and Use and High Fructose Corn Syrup Consumption 1/
================================================================================
Supply Use
Fiscal Beginning Produc- Imports Domestic Exports Ending
Year Stocks tion 2/ Stocks
================================================================================

1000 Metric Tons, Actual Weight
Sugar
2018/19 Est.
Sep 1395 6426 70 4716 2179 995
Oct 1395 6426 86 4565 2194 1148
2019/20 Proj.
Sep 995 6200 70 4776 1494 995
Oct 1148 6065 70 4624 1695 963
================================================================================
WASDE – 593 – 17 October 2019

COCOA
General Comments: Futures closed higher but held within the range established for this week. The reports from West Africa imply that a big harvest is starting to be harvested. The weather in Ivory Coast has improved due to reports of frequent showers. There were reports last week that Ivory Coast is moving to regulate production with the aim of supporting higher prices to the market. How they plan to do this is not yet known, but both Ivory Coast and Ghana are doing what they can do boost Cocoa prices and maintain good earnings for producers. Growing and harvesting conditions in Asia are also reported to be good. The harvest is ongoing amid somewhat drier weather.
Overnight News: Scattered showers and storms are expected in West Africa. Temperatures will be on both sides of normal. Malaysia and Indonesia should see showers. Temperatures should average above normal. Brazil will get mostly dry conditions and near to above normal temperatures. ICE certified stocks are lower today at 3.621 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2410, 2390, and 2370 December, with resistance at 2490, 2510, and 2540 December. Trends in London are mixed. Support is at 1910, 1890, and 1870 December, with resistance at 1950, 1990, and 2020 December.

DJ Cocoa Price-Relief Program Could Encourage More Production: World Bank — Market Talk
1324 GMT – In the long run, the new cocoa export-pricing system in West Africa could encourage farmers to grow more beans. “The pricing mechanism itself could also motivate farmers, including in other countries, to raise their production as they will benefit from higher prices,” says Jacques Morisset, who was the World Bank’s chief economist in Ivory Coast until July. “Unfortunately, if it happens, such an increase in the global supply of cocoa would eventually push international prices downward and put pressure on the mechanism.” For now, investors are wagering that prices have further to run. In London, hedge funds and other investors last week held 45,244 more futures and options contracts betting that prices will rise than contracts betting they will fall. (joe.wallace@wsj.com)

DJ West African Poverty Alleviation Program Makes Cocoa This Year’s Hot Commodity
By Joe Wallace
Cocoa prices are surging as traders grapple with a new method for pricing exports designed to alleviate poverty among farmers in Ivory Coast and Ghana, the world’s largest growers of the chocolate ingredient.
At a time when weakness in the world economy is hurting assets such as oil and industrial metals, cocoa has been one of the top performers in commodity markets. Futures prices have climbed 19% to GBP1,932 ($2,361) a ton in London since Aug. 29, and have risen 12% to $2,451 a ton in New York. Prices were even higher in both markets before slipping back in recent days.
Uncertainty about the new way of pricing West African cocoa exports, designed to improve living conditions for farmers, is driving the rally. According to the World Bank, 80% of cocoa producers, or four million people and their families, live on less than $3 a day.
In July, Ivory Coast and Ghana said they would introduce a “living income differential” of $400 a ton, to be charged on top of the London futures price. The neighboring nations have the ability to swing prices because they grow around 60% of the world’s cocoa. Both their harvests dwarf those of Ecuador and Nigeria, the next-largest producers.
When physical cocoa prices, including freight costs, exceed $2,900 a ton over the course of a season, the premium will be funneled into rainy-day funds for farmers.
Traders say the derivatives market is having difficulty adjusting to the shake-up. Buyers and sellers of cocoa beans typically use futures and options to hedge against moves in prices, while investors use them to bet on whether the market will rise or fall.
“If you look at the fundamentals, by which I mean simple supply and demand, there’s no big story at all,” said Jonathan Parkman, co-head of agriculture at brokerage Marex Spectron. “The difficulty that pretty much every cocoa professional is having is how exactly to interpret the effect of the [living income differential], the new pricing system.”
The premium applies to next year’s cocoa crop, which the two countries will start to ship from October 2020. However, it has already been used in export contracts because large Western chocolate companies have locked in purchases well in advance of receiving their cocoa.
One factor pushing futures prices higher: Companies that normally buy cocoa directly from West Africa appear to have been buying beans from exchange stores instead. The Ports of Delaware River and New York, where futures traders can hold cocoa in Intercontinental Exchange warehouses, housed 243,512 lots of Ivorian cocoa Monday. These stockpiles have depleted by 44% since the end of August, a steep decline in what is normally a source of last resort.
“It’s a different negotiation every time someone wants to buy cocoa from West Africa,” said Carlos Mera, an analyst at Rabobank.
This uncertainty has emerged since the price-relief system was introduced and “creates a huge amount of risk that is not hedgeable,” he added. “The market is scrambling for every good quality bean outside West Africa.”
Prices would be even higher if not for abundant cocoa bean supplies. Producing countries grew 4.85 million tons in the 2018-19 season, according to the International Cocoa Organization, the biggest crop on records dating back to 1960.
Improving rainfall in the Ivory Coast and Ghana has eased worries that the 2019-20 harvest would be hit by dry weather. In Ghana, the spread of swollen-shoot virus in cocoa trees is considered a slow-burn concern rather than an immediate threat to production.
In the long run, economists say the pricing system could encourage farmers to grow more beans, pulling prices down instead of pushing them up.
“The pricing mechanism itself could also motivate farmers, including in other countries, to raise their production as they will benefit from higher prices,” said Jacques Morisset, who was the World Bank’s chief economist in Ivory Coast until July. “Unfortunately, if it happens, such an increase in the global supply of cocoa would eventually push international prices downward and put pressure on the mechanism.”
For now, investors are wagering that prices have further to run. In London, hedge funds and other speculative investors last week held 45,244 more futures and options contracts betting that prices will rise than contracts betting they will fall, according to Intercontinental Exchange.