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.

Frozen OJ ” Is Weather The Only Factor ?”

Frozen OJ ” Is Weather The Only Factor ?”

Tropical storm “FAY” may not be the only factor driving this OJ market in the near future. Farmers sure had a decision to make on whether or not to keep there groves this year. With surplus going into this year and a good harvest did not help. Fuel costs, fertilizer costs, immigration issues and pesticide costs all on the rise sure hinders the pockets of the farmers.

 

Fundamental Analysis

     With hurricane season in full bloom and a few storms brewing in the past week the bulls are coming out of the wood works. Tropical storm Fay sure put the groves underwater this past week, with 30 inches of rain in certain spots and the Indian River area getting drenched also. The total damage from the excess water will probably take weeks to examine. Not only the rain but the wind-blown canker is another issue the farmers are dealing with.

     Citrus greening, also called huanglongbing or yellow dragon disease sure has an impact on the citrus market.Citrus greening carried by the Asian Citrus Psyllid scared the citrus farmers in California in July. They found the Asian citrus psyllid in and around the San Diego area. The reports also state the little pests that were caught did not show them carrying the disease. So far so good for the California growers.

     Farmers are stating that the Asian Citrus Psyllid has hurt China, Brazil, and Florida. They also report that the little bug may do more damage than the Mediterranean Fruit Fly due to the fact that it hurts the whole grove and not just the fruits.

     The increase in operating costs are affecting the farmers just as well as the over supply. The increase in fuel, fertilizer, pesticide and the weaker US dollar are all factors in whether the groves are going to be profitable or not. Immigration issue is another factor especially with only a few handfuls of farms use mechanical ways of harvesting the fruit.

     The 2007 – 2008 season saw a 32% increase in production form the 2006- 2007 season. Dreyfus estimates a 8% drop in production this year to 156 million compared to the 169.7 million for 2007 -2008 season. An independent analyst expects a 12% fall to 150 million boxes for the harvest that starts in October. October is also the month of the next major Orange juice report.

Technical Analysis

     The monthly has tested the breakout from October of 2005 at 1.00, should see a bounce back to the 50% retracement which would put OJ at 152.00 and also the highs from January 2008. The daily chart is starting to show an uptrend into the 120 – 140.00 level. 120-140.00 level is the range since March. Volume and Open Interests are both on the rise since late July. 10 day RSI is above 50 mark after reaching extreme lows last month.

      Trade recommendation for OJ is buying the straight  call option on the March 2009 contract. By doing this you not only including the high volatility for hurricane season but also the freeze season for Florida. March 2009 options expire on 02/20/09 and have 177 days left. Buy the March 09 150.00 calls for 6.50 or $975.00. This strategy has unlimited profit potential and a maximum loss of the price paid for the option plus 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
If you have any additional questions feel free to email, or to call us at 877-843-4519.

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.

Silver “Year End Rally”

Silver “Year End Rally”

Silver is as much as an industrial metal as it is a precious metal. Forty percent of silver use goes to industrial consumption. The use of silver in electrical components is due to its conductivity values. Also, with gold trading above $900.00 an ounce we will most likely see jewelers use more silver this holiday season. With the holiday season coming up quite quickly we should be looking for a year end rally.

Demand is usually on the increase for silver, in the upcoming months on speculation of the retail sales for jewelry, industrial components like computers and cameras. With that in mind, the normal rallies for silver are July through September and then again November through February.

With the metals increasing in value due to the inflation rates and price of energies. The outlook for world economy is looking like more countries will be jumping on board of the metal wagon to curb inflation. Also, we have to look at the emerging markets using more oil to suffice there new found wealth. We should see oil and gas rise not only on the over compensation, but also for the heat of the summer and increasing inventories for winter cooling.

Technically, we have seen silver touch the 200 day moving average three times in the past 3 months with no such luck of a close below to confirm a reversal in the market. Silver has been trading in a uptrend for a couple years with only on breakout to the upside. The February 2008 breakout was short lived as silver returned to the range in mid March 2008. First support is at 17.00 with second support around the 15.75 – 16.00 level. I am looking for a early year end rally with maybe a pull back into October before we see another rally.

I actually have two recommendations for silver at this point. First of all, is a bull call spread which limits your risk to the price of the spread purchased. This spread would be to buy the December 1950 call and sell the 2050 call for 21 cents or better. Maximum risk would be at $1050.00 Maximum profit if silver closed above the 2050 at expiration would be $4850.00 not including commissions and fees. That is a 4 3/4 to 1 ratio.

Exit strategy for this recommendation on the down side would be if December silver closed below 16.50 or 40% of the price paid for the spread. Exit strategy for the upside would be at that the underlying contract hits or closes above 1950.

Second recommendation due to the fact that silver has been trading in a range and the economic outlook is so uncertain, would be to sell out of the money options. Selling both puts and calls on either side of the range would be a strangle. Sell the December 2100 call and simultaneously sell the December 1550 put for 84 cents or a credit of $4200.00. By doing this we are taking advantage of the high price of the options and time value. The downside to this trade is that you have unlimited risk with limited profit potential of $4200.00.

Exit strategy for this recommendation is if the underlying contract is to or through the strike price liquidate or when you have collected at least 70% of the premium collected. ($2940)

 

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.