October 24, 2014 - Issue #759

In This Issue

1. Coffee, Sugar, Cocoa and Cotton Outlook
2. Hot Market Review - Bonds Highs are in?
3. Economic Calendar

1. Coffee, Sugar, Cocoa and Cotton Outlook

What's ahead for the soft markets including the volatile coffee market?

by J. Ganes Consulting, LLC

High Risk to Key Suppliers Creates Added Volatility Because of economies of scale, production of most commodities has become highly concentrated among a few key origins. This crea tes an element of added risk should the weather or other event threaten supply in the top producing countries because it is very difficult if not impossible for other nations to easily make up the shortfall. This is precisely what is happening in the coffee market and what co nstantly worries cocoa users; Brazil dominates coffee and the Ivory Coast is by the largest cocoa producer as well as now grinding an increasingly greater share of their cocoa bean production into the key ingredients of coco a butter and powder used in making chocolate and baked goods. Coffee seem s to be off to the races again with prices bolting back up as the weather in Brazil has not yet improved for the 2015 - 16 crop which should now be flowering but instead is baking under hot sun after c onditions were too dry all year leading to extreme soil moisture deficits. Forecasts have turned hot and dry with a blaze of sunshine indicated through nearly months end on some weather models. The situation in Brazil has gone from bad to worse to being a nightmare. The drought conditions at the start of the year were unprecedente d with high temperatures and dry weather hitting the heart of the coffee belt at a time where it impacted not one but two crops: the 2014 - 15 harvest which is now completed and the 2015 - 16 cro p that is getting set to flower. Last year f armers had chosen to delay ferti lizing because prices were so depressed, but then couldn’t fertilize when they wanted to during the January - March dry spell. The trees suffered and did not have their normal vegetative growth for this time frame which is extremely important because it sets the stage for the developmen t of the next crop (2015 - 16), since flowering only occurs in the areas of new growth .

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2. Hot Market Review - Bonds Highs are in?

From our friend Jim Wyckoff

Jim has an excellent daily newsletter where he reviews different markets, alerts you for potential trades and much more. Included is his great bi-weekly newsletter with charts and a little longer term outlook. We recommend checking out his website, educational CDROM, and services at www.jimwyckoff.com click on image below to enlarge

This was an extra-important week for the U.S. Treasury bond futures market. Last week's spike up and then big downdraft was followed by general price pressure this week. This is a solid clue that the bond market last week did put in at least a near-term top. The bond market bulls are still on shaky ground, but I do not look for strong downside price pressure, but instead choppy and sideways trading in the coming weeks.

3. Economic Calendar

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!