Soft Commodity Q4 Report: Low Inventories Buoy Cocoa; Growing Stocks Weigh On Coffee, Cotton & Sugar

January 02, 2014



Cotton 4Q 2013

Cotton prices as measured by the ICE futures No. 2 contract (CT) finished the fourth quarter at 84.64 cents a pound, down 2.34 cents a pound, or 1 percent.

In its latest report, the USDA projects that global cotton stocks will continue to rise during the 2013/14 season ending Sept. 30, for the fourth consecutive year, to a record high of 96.4 million 480-pound bales.

Global stock growth has been profoundly influenced by Chinese government policy, which has supported prices and insulated stocks from the market through a national reserve purchase initiative.

Chinese government reserves have jumped from 42 percent of global stocks in 2011/12 to an estimated 59 percent of current world stocks. The Chinese government is replacing the reserve purchase initiative with a producer subsidy program.

The USDA expects global trade in cotton to decline this year by 16 percent, attributable almost entirely to a decrease in import activity from China, which is anticipated will bring internal stocks more in line with usage.

For the year, cotton prices are up 9.5 cents a pound, or 12 percent. The high for the year was made in early March at 93.93 cents a pound. The low for the year was made in late November at 73.79 cents a pound, representing a range of 20.14 cents.

Money managers have reduced their long positions for the second quarter in a row to net long 37,400 lots compared with net long 41,300 lots three months earlier and net long 51,700 six months earlier.


Sugar 4Q 2013

Sugar prices as measured by the ICE futures NY 11 contract (SB) finished down on the quarter to settle at 16.41 cents a pound, off 1.73 cents, or 9 percent.

In its latest estimate, the USDA projects global sugar production to outpace demand, albeit at a slower pace. For the 2013/14 crop year ending Sept. 30, the USDA continues to estimate total world production at 175 million tons, a new record. Consumption is projected at 167 million tons, and global ending stocks are expected to be 5 million tons higher, at 43 million tons.

For all of 2013, prices have declined by 3.10 cents a pound, or 16 percent. Sugar prices spent most of the year declining except for a brief six-week rally that began in early September on eventually unfounded concerns over production in Brazil’s Center South district.

The rally ran out of steam by mid-October and prices have eroded since then. The high for the year was made in mid-October during the rally at 20.16 cents a pound, and the low was made in mid-December at 15.86 cents a pound, representing a range of 4.30 cents.

Money managers have reversed positions and are currently net short 23,200 lots compared with net long 52,300 three months earlier.

Individual ETFs are available for:

Coffee: The Dow Jones-UBS Coffee ETN issued by Barclay iPath and Café Pure Beta Coffee ETN also issued by Barclay iPath

Cocoa: The Dow Jones-AIG Cocoa Subindex (NYSE Arca: NIB) and the iPath Pure Beta Cocoa ETN (NYSE Arca: CHOC)

Cotton: The iPath Dow Jones-UBS Cotton Total Return Sub Index (NYSE Arca: BAL) and the iPath Pure Beta Cotton (NYSE Arca: CTNN)

Sugar: The Dow Jones-AIG Sugar Total Return Sub Index (NYSE Arca: SGG) the iPath Pure Beta Sugar (NYSE Arca: SGAR) and the Teucrium Sugar Fund (NYSE Arca: CANE).

All are based on futures contracts.

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