Sugar “Supply and Demand Interrupted By Ike”

 

 

Hurricanes this year lining up in the Atlantic may hurt production for the 2008/09 season. Jamaica already feeling the interruption from Gustav, Gulf coast feels Gustav as well. Ike being a category 4 already may now hinder Florida and gulf coast again.

Fundamental Analysis

     A little bearish news first, sugar beet farmers in the Red River Valley, ND have seen record rainfall recently. Harvest begins this week for only about 10% of the acreage in order to prime the factories for American Crystal Sugar Company.

     American Crystal is expecting 420,000 acres of beets with an average of 23.5 tons per acre versus the long-term average of 20 tons per acre and the record of 25 tons per acre in 2006. The recent record rainfall will enhance the potential for increased tonnage when the full harvest starts on October 1.

     Even with a 80,000 acre shortfall from last year, American Crystal will still be at maximum capacity. They can only handle between 10 and 11 million tons in its 5 factories, and still finish their campaign before the summer of 2009. Last year they sold beets to another processor and the year before they left 8% in the field due to it being to much.

  Indonesian Agriculture Minister

      Indonesian Agriculture Minister, Anton Apriyantono admitted to an error in the refined sugar inventory. Anton admitted that there was an oversupply of refined sugar in the country due to sugar consumption miscalculations. Instead of a shortfall of 200,000 tons they have a glut of 400,000 tons.

     Now for the bullish news, hurricane Gustav devastates some Jamaican sugar cane fields. The industry is likely to lose $4.2 million in the next crop year. The 2008 production was already under estimates and now with Gustav damaging 2009 will even be weaker.

     Czarnikow, a sugar merchant, sees tighter global 2008/09 sugar supply. Czarnikow forecast global sugar output would fall by 8 million tons to 164.1 million in 2008/09. Largely due to a drop in India production. Underlining stronger demand, the merchant projected global sugar consumption would rise to 166.4 in 2009 from 161.6 in 2008 and 155.2 in 2007.

      Hurricanes can have a huge impact on the domestic sugar market. With Florida’s 2007 season below 2006 by 63,000 tons. If a major hurricane impacts the South Florida area, the 2008/09 season will fall short of the recent estimates.

     Once again, the emerging markets are play a large role in consumption. For example Ethiopia used to use honey to sweeten there coffee, and they are now using sugar. If this continues, the 9.4 million surplus will be diminished considerably. The forecasted shortfall for sugar now stands at 3.3 million, but the fundamentals may prove differently.

     Of course we can not forget the ethanol tie in with sugar. If major hurricanes continue to line up and threaten the Gulf States, crude will eventually rise to record levels again. Which will increase the sugar prices. I for one, believe sugar consumption will be the driving force for the next year or so.

 

Technical Analysis 

     The March 2009 has formed an ascending triangle. Volume has stayed steady since July. The past few days we have seen increased volume. Sugar is testing the trend line from June and July lows. If we break this trend line sugar will see the major trend line starting back from August of 2007. The 200 day moving average is at the 1355 level which would show the next support. Resistance is at the 1550 level after testing three previous times. It will take a lot of momentum to break but with the higher volume we should see a break before March 09.

 

Trade Recommendation

     Bull call spread for the downside protection. Buy the March 09 1600 call and sell the March 09 2000 call for 60 points or $672.00.

      Buy the straight call option, no downside protection. Recommend buy the March 09 1800 call for 55 points or $616.00

     Selling options is another recommendation please contact me to discuss recommendation.

 

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.

Natural Gas “Anticipation Of Colder Winter Drives Demand”

NATURAL GAS

Anticipation of colder winter months fastly approaching may drive natural gas prices up. Last week, natural gas only gained 1.0% of storage over the 5 year average. August through October usually largest increase months for Natural Gas.

 

Fundamental Analysis

     The fundamentals for natural gas can and will be a little tricky these days. Natural gas only gaining 1.0% over  a five year average for storage. Consumer and commercial consumption averages on the increase  and industrial usage down. How much natural gas are we going to use is the question.

     The experts are looking at this late hurricane season setting up like 2004-2005 seasons. if this happens you can expect disruptions in crude within the next few months. Natural gas may piggy back off of the increase in crude oil. Any geopolitical issues involving Russia and Iran may also boost the energy sector.

     With temperatures reaching the 40’s in the upper Midwest will sure get the bulls looking at the natural gas charts. Seasonal adjustments for natural gas usually start in August but with the correction in crude and the USD it sure had to follow suit. Out of the past 17 years natural gas has been stronger 13 years and weaker only 4 years.

Technical Analysis

     We should see natural gas touch or come close to touching the lows from last September at 8.273. December natural gas is trading at 8.600. I am looking for a dip back to those September lows and then a reversal to a minimum 50% retracement of the July/August drop. Which would land natural gas around the 10.000 mark. This also the area where the 50 day moving average is. Natural Gas may even reach the 100 day or the 200 day moving averages.

     Looking for bull call spread to cover our downside risk on trading this highly volatile market. I am also looking at trading the December contract for the next 88 days. The December options expire on November 21,2008. Looking to buy the December Natural Gas 1080 call and sell the  December Natural Gas 1170 call for 100 or $1000.00. If filled at this price would give you a 1 to 7 risk to reward ratio. Total loss would be $1,000.00 and the total profit would be $6,000.00. These figures do not include commissions and fees.

 

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.

Cocoa “Bullish Factors Going Into Harvest”

Fundamental Analysis

      With a combination of sun and rain in July but wet and cold in August raised fears the Black Pod disease has become more wide spread. Also among the fears is the pesticide shortage with only around 30% of the farmers needs for pesticide fulfilled in and around Daloa.

     The crop may reach record size but the quality of the beans may not be as good. The farmers really have no choice but to use the poor quality beans. This will definitely move the prices with more poor quality beans in the harvest.

      Emerging markets with more money, we should expect to see them consume more chocolate. Fortis Bank has also raised there expected shortfall to 29,000 tones from 6,000 in June. Due to the extra demand. This would be the third straight year of demand outweighing supply.

     Ivory Coast has doubled its port registration tax on cocoa and coffee exports to 10 percent of the cost, insurance and freight (CIF) price to help cope with rising fuel prices, a presidency statement said on August 9, 2008. The port registration tax is one of a range of levies imposed on cocoa and coffee exports.

     Seasonally, September and October are months of weakness for cocoa but with the mid crop ending and the outlook for the main crop unpredictable. Cocoa should if anything trend sideways or slightly lower before the turn around in November.

     Now lastly, we have seen a large run up in the USD and a small drop in cocoa prices, we see a correction in the USD we should see another jump in Cocoa prices.

Technical Analysis

      March 09 contract  just closed above the 100 day, 50 day and 39 day moving averages after coming close to tapping the 200 day moving average. 10 day RSI just broke above the 50 mark two days ago and stochastics are looking to the upside. Should probably see a retracement of yesterdays run up, today or in the beginning of the week.

Trade Recommendation

     The trade recommendation for Cocoa is a Bull Call Spread or a straight call. I am looking for the bull call spread more than anything just in case we get a good correction in September/October. If that happens we can look at buying the call we sold back for a profit and hold onto the one we purchased.

     Buy the March 09 Cocoa 3000 call and sell the March 09 Cocoa 3300 call for 90 or $900.00. Or buy the straight March 09 cocoa 3600 call for 100 or $1000.00. Straight call option has unlimited profit potential and the bull call spread has a profit potential of $2100.00 minus commissions and fees. It is a low risk to reward ratio at only 3.3 to 1.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.

U.S. Preview: Philly Fed to Remain in Decline for Ninth Straight Month

U.S. Preview: Philly Fed to Remain in Decline for Ninth Straight Month – “Traders are still looking like a short term bottom here in the markets,” said Jimmy Tintle, futures broker at Transworld Futures. http://www.economicnews.ca/cepnews/wire/article/110262

The Day Ahead Canada & U.S.: Canadian CPI and Philly Fed

The Day Ahead Canada & U.S.: Canadian CPI and Philly Fed – Jimmy Tintle, futures broker at Transworld Futures.com said traders are looking for a bottom in the U.S. manufacturing sector. He added that the index still remains weak. http://www.economicnews.ca/cepnews/wire/article/2/110277/

Trader Preview: Traders Expecting Short-Term Bottom in Philly Fed Survey

Trader Preview: Traders Expecting Short-Term Bottom in Philly Fed Survey Jimmy Tintle, futures broker from Transworld Futures.com said it will take a much stronger than expected Philly Fed survey to have a big impact on markets. http://www.economicnews.ca/cepnews/wire/article/110272

Cotton ” Technical and Fundamental Analysis”

 

 

Fundamental Analysis

WTO

 

The WTO wants the US to cut its Overall Trade Distorting Support (OTDS) by 70%. US would then be required to slash its cotton subsidies by 75% in the next two years. At present the us hands out subsidies of 3.8 billion dollars to roughly 25,000 cotton farmers.

If the us cuts OTDS, farmers in India and emerging markets would get a better price for their produce. Subsidies lead to overproduction in US. Taking away from export markets and businesses from millions of farmers.

Pakistan

2007 – 2008 production was 12.6 million bales. That is a 3 million bale short fall of their annual consumption of 15.5 million bales. In order for the textile industry to fill their short fall it will cost roughly Rs 50 billion yearly. In order to save the apparel industry the Pakistan Apparel Forum has urged Pakistan government to discontinue the export of cotton.

India

July revisions for the global 2008/09 crop included a significant 1 million bale reduction (from 26.5 million bales to 25.5 million bales) in the production estimate for India, bringing the forecast in line with 2007/08 levels. High grain prices, leading to a reduction in cotton acreage, and a light monsoon season contributed to the revision and suggest a leveling in Indian production after six years of dramatic increases (production in 2007/08 more than doubled the 10.6 million bales from 2002/03). Indian exports have increased to an even greater extent over the same period (from only 56,000 bales in 2002/03 to 7 million bales in 2007/08). The exceptionally rapid pace of Indian export trade relative to the domestic market lowered the national stocks to use ratio below 20% in 2007/08 – a year of record production. An effect of this drawdown in stocks has been a 45% increase in the price of cotton in India this year. The price increase has impacted Indian textile and yarn mills to the extent that they have been drawn to political action and their efforts to increase domestic supply have already led to the elimination of a 10% import levy and a 4% import tax as well as the removal of a governmental export support.

China

 

China, the clothing and textile powerhouse. The number one consumer and producer of cotton. Has a one million bale revision in this month’s report. Reduced the Chinese 2008/09 consumption forecast to 54 million bales. Even with this downward revision, Chinese consumption is still estimated to increase 1.5 million Chinese production of cotton is expected to decrease 0.3 million bales. 

 

 

US

 

Projected US 2008 – 2009 production is at 14 million bales. Decreased half a million bales. Domestic mill use was raised 100,000 bales to 4.4 million. Due to the weaker dollar and higher transportation costs. International Cotton Advisory Committee estimates prices in the US at 83 cents/pound compared to 59 cents two years ago. 

Hurricane Dolly may have wiped out an entire 90,000 bale crop in Texas. With good growing weather in the other regions could make up some of the Texas loss but still have a few months to harvest.Conclusion of fundamental market analysis

 

Even with a slowing economy might not be enough to keep the cotton prices down. With the increase in demand from China, lower precipitation in India, lower production in Pakistan, WTO trade talks and the assumption of a busy hurricane season . This would suggest bullish influence in upcoming cotton prices.Technical Analysis

December contract has held the major support at 7150. Cotton has also seen a drop in volume with an increase in open interest. RSI has just come off of the over sold area and working its way back up. Weekly chart stochastics are showing signs that a bottom may be in. The USD hitting major resistance and a small rebound in other grains could help in an upside move. Fundamentals could divorce cotton from any other commodities and have a bullish sentiment for months to come.

Trade Recommendation – Bull Call Spread

I would much rather buy the March cotton options than December considering the cotton harvest period running into late fall early winter. Buy the March 90 call and sell the March 100 call for 165 or $825.00. That is a 6 to 1 ratio with a total profit of $4175.00 if March options expires higher than 1000. You also have to deduct commissions and fees.

Exit strategy to the down side would be for the march contract to close below 7600 or a 35% decrease in spread value. To the upside would be for the March contract to reach the 9250 level or a 50% increase in value. If multiple positions are entered liquidate half at the 9250 level and let the rest run.

 

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

Wheat ” Is Promising Harvest Enough For Middle East Drought”

Lets start on the fundamental side of things. Canada, US and Australia are key players in the price of wheat in the upcoming months.

Australia had the driest month of May on record. Also according to the Australian Bureau of Meteorology most of the country received below average or very much below average rainfall March 1 through May 31. Those are key months for Australia due to those are sowing months for wheat.

In the Eyre Peninsula, west of Adelaide the South Australian capital, some Farmers skipped winter wheat plantings due to the rising costs of seed, fertilizer, and weed killer. (approx. $60.00 / acre not including wages) Also on mere projection on rainfall or lack there of.

If all goes well, we could see next to normal wheat harvest at 23.7 million tons verses 13 million tons in 2007.

Drought in Iraq slashed domestic wheat crop, forcing Iraq to import more than the usual 3 million tons per year. Pakistan is also suffering from wheat and flour crisis. Pakistan is planning on importing 2.5 million tons of wheat this year. As it has failed to production targets.

Even with Canada’s wheat plantings up 8% to 16.4 million acres and the USDA estimate for 2008-2009 ending stocks at 487-537 million bushels. Will it be able to keep up with the drought in the Middle East. Australia’s rainfall maybe the key to wheat prices in the upcoming months.

Technically speaking we are looking at December 08 wheat futures at support at 800.0 – 820.0 for the past couple days. We may have a break through down to the 770.0 level. Anything below 750.0 would be the continuance of the bear market in wheat.

Ten day RSI is at 36.91 and stochastics are in the over sold area. Open interest has been staying around the 98,000 level since the last down trend with volume picking up. If we can get back up above the 200 day moving average we should see a test to the 1000.0.

Wheat, since 1969 has been up 33 out of the past 39 years. (past performance is not indicative of future results.)

Trade recommendation is to purchase a bull call spread. Buying the December 08 Wheat 900 Call and selling the December 08 Wheat 1000 Call at 18.4 or $925.00. Exit strategy if market goes against you would be to liquidate position if the underlying futures contract closes below 768.0 or if the spread losses 33% of its value. Exit strategy to the profit side would be to liquidate half of your positions at next level of resistance. Which is 940.0.

Second trade recommendation would be Buy December 08 Wheat futures contract at 820.0 or lower and purchase a 820 put option for 67 or $3,350.00 . The in the money put option is about half the margin required for the futures contract. Use same exit strategies.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.

Canadian Dollar “Loonie Looking For Breakout”

      The Canadian Dollar on a weekly chart has formed a nice symmetrical triangle, but who is going to win the fight? The fundamentals are going to be the determining factor. There are two ways you can look at the Canadian economy.

      For the bulls, international investors bought C$10.7 billion in securities. Is this a pre-warning to the bears that the Canadian economy is better than any other G8 countries. Canada’s inflation record this year is better than the other group of seven industrialized nations. Consumer Prices advanced 2.2% in May from a year earlier, compared with US at 4.2% and the UK at 3.3%.

     Economists are looking at peak inflation in the first quarter 2009 between Jan and March. At a rate of 4.3%. After March they looking for slow down to 2.9% going into the following quarter.

     Now for the bears, if reports come out worse than expected would be good to drive the Loonie down and also better than expected reports in the US and UK. A continued stalling in export and home sales will also drop the Canadian Dollar.

     Canada is the second biggest crude reserves behind Saudi Arabia, and is the second largest wheat exporter. If crude and wheat continue there downward move will drive exports down.

     For a trade recommendation I am looking at going for a reverse ratio spread. This spread is initiated by selling an at-the-money put and call, and purchasing two or more out of the money puts and calls. You would like two obtain a credit or at worse break-even on the debits vs. the credits. You do not want to hold the position any longer than 30-45 days left and you want at the least 3 months left at time of entering.

     Sell the December 9900 put for 222 or $2220.00 and buy two 9550 puts for 95 or $950.00/each. At the same time sell a 9950 call for 222 or $2220.00 and buy two 10300 calls for 99 or $990/each. The options have 137 days left. For money money management or exit strategies please contact me at jimmy@transworldfutures.com .

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.

Record Highs!! Record Lows!! 2008

Is this going to be the year of records? We have already seen crude and gold hitting records, the British pound is on its way for lows and the US dollar is bouncing off of its record lows from 2007. The grain market is searching for “Beans in the Teens” and corn on the way to $5.00. Is the February break the end of the soybean complex massive bull run. If your money is not geting the returns in the stock markets, the futures and commodities maybe the place for a good return in 2008. Banks are hiring futures brokers at an alarming rate, due to the increase in the commodity prices.  Just remember,  Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.