February 21, 2014 - Issue #725

In This Issue

1. The hard facts on soft commodities
2. Hot Market Review - Crude Oil Soars to Multi Month High
3. Economic Calendar

1. The hard facts on soft commodities:

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

by J. Ganes Consulting, LLC

Weather & Politics Moisture Deficit Increases in Brazil; Farm Bill Deficit Reduction Cut by Commodity Price Drop The 2014-15 Brazilian crop had potential to be a record breaker due to the possible enormous size but now it may be remembered for breaking a different type of record—the first Brazilian crop to be seriously jeopardized by dry weather after it has successfully flowered. Typically worries about dryness start beginning in September/October and are related to the onset of the rainy season that spurs the blossoming of the trees. Once the flowering occurs it is extremely critical for the trees to receive a good mix of rain and sunshine for the next 2-3 months for the cherries to develop properly. The flowering determines the number of cherries that can form, but the follow-up rain helps to determine the quality or yields of the crop. While there have been a few instances where rainfall was intermittent in December and January, by February rains are generally sufficient to aid the crops development. In this past December, there was actually too much rain and then it stopped and since has turned exceptionally warm and dry with no relief anticipated for at least two more weeks. This puts the crop in serious jeopardy of being substantially reduced and the market in unchartered territory, not knowing quite how to respond. The coffee market has been propelled sharply higher already but with each passing day of no rain in the forecast the risk of loss and the point of no return even if rains fall is that much closer. It is not yet too late, but the forecasts extending out two weeks show only more the same. It is perhaps more the high temperatures than the lack of rain that could hurt the crop more. The area of dryness covers much of the coffee region and reservoirs that provide moisture to the region are already running low.

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2. Crude Oil Soars to Multi Month High!

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

The crude oil market is on fire as Nymex futures this week notched a fresh multi-month and contract high. The crude oil bulls are in full near-term technical command. This leader of the raw commodity sector, in its bullish technical posture, is another clue that the raw commodity sector has made a bullish turn.

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!