Jurgens Bauer's Comments on the Soft Commodity Markets for 05.14.08
The strong dollar weighed on the soft commodities
Cotton: July down 91, Dec down 90. With no news of consequence traders reacted to the strong dollar and July's failure to get above 72 cents which it had reached in early e-trading. It did however manage to hold support well enough to survive the onslaught felt in other soft commodities, especially cocoa and sugar. Cotton is cheap relative to other crops and that should work in its favor. Yet, a break below 7020 would cause further selling and likely find stops. I like this market and think it worth a look from the long side, but need to see a close above 7225.
Cocoa: Got slammed. July broke down below 2700 and fell sharply taking no prisoners. Since July cocoa wasn't able to muster an attempt at cracking the 2780-2800 level, with the dollar action it was inevitable that the downside would get tried, however when whatever buying swiftly became overwhelmed that only led to more selling . Stops were triggered and the result was a crash. Losses may be understandable, but today's action isn't an atmosphere that encourages a quick return. Therefore, unless something new gets added to the mix, like political unrest, (see below), I doubt that cocoa can achieve my objective of 3000 prior to the July options expiring.
Now along that line, while it may seem that Bio-fuels impact food production is removed from cocoa, think again. Food Riots are occurring in various parts of the world (including some cocoa producing nations) and I read an article today that spoke that some 1,500 protesters in Cote d'Ivoire, chanting "we are hungry" clashed with police for several hours. At least a dozen people were wounded. Protestors were demanding that the government curb food prices. Keep an eye on this type of situation.
Coffee: After flirting with 139 a couple of times, July coffee prices eased back in response to the dollar's gains, but did so without collapsing, instead giving back yesterday's gains, but significantly holding Monday's lows. This leaves longs optimistic, while many traders feel selling into rallies based on action in the dollar.
The ICO sees 2008-09 world production and consumption closely balanced, barring adverse weather. The group raised its estimate for 2008-09 global output Tuesday to 127 million 60-kilogram bags from their April view of 126 million. World consumption should reach 127 million bags in 2009 versus 125 million bags in 2008. Importing nations purchased a record 100 million bags of coffee in 2007.
The industry is waiting for Brazil's agriculture ministry to announce details of this season's Pepro subsidy plan, essentially providing them with puts by offering minimum prices to growers and encouraging them hold back beans. Temperatures should be near to above normal in Brazil's groves this week, the local frost watch starts in two weeks.
Sugar: Made new lows and looks weak. Recovery from the initial drop to 11.18 was sponsored by short covering. Options saw large quantities of Oct 14 calls sold. The July/Oct spread moved out to 115. Look for further downside action Wednesday and a beech of 11 cents.
©2008 Jurgens Bauer & Associates all rights reserved.
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Email me at jurgensb@gmail.com
DISCLAIMER: Any information and opinions contained herein comes from sources believed to be reliable, but certainly not guaranteed as to accuracy or completeness. No responsibility is assumed with respect to any statement, nor with respect to any expression of opinion herein contained. All views are the opinions of the author at the time of writing and are subject to change without notice. No statement should be construed as an offer to buy or sell a commodity. This publication is for information purposes only: Any and all trading ideas suggested are hypothetical in nature and also subject to change without notice. Commodity futures' trading is speculative by nature and investors can lose more than 100% of their account equity. DISCLAIMER
©2008 Jurgens Bauer & Associates all rights reserved
Jurgens' Technical Support and Resistance
05.14.08
Cotton: (70.90 -0.91)
Support: 70.50-7020, 68.80-68.50,
Resistance: 72.20-72.45-72.75
Coffee: (137.25 -1.30)
Support: 134.40-133.80, 132.30-131.85
Resistance: 140, 142-142.50
Sugar: (11.16 -0.49)
Support: 11.12-11.08, 10.88, 10.50
Resistance: 11.34-11.40, 11.59
Cocoa: (2624 -127)
Support: 2615-2595, 2550-2535,
Resistance: 2650-2660, 2713-2721
