'Precarious' dynamics to keep coffee prices high

by Agrimoney.com

Coffee prices, which set fresh multi-year highs on Wednesday, are to remain strong, experts said, cutting their estimate for the world crop while highlighting rising consumption.

A "precarious balance" between supply and demand of beans "continues to favour firm prices", the International Coffee Organization said.

Although exports, of arabica beans – if not robusta coffee - were soaring, up by nearly one-quarter to 23.4m bags in the first four months of 2010-11, "the prospect for replenishment of stocks in producing countries remains weak", the ICO said.

Indeed, the organization cut by 1.1m bags to 133.7m bags its estimate of world output last year, noting that "adverse weather continues to affect the coffee-growing areas in many parts of the world".

Estimates for output in Mexico, Nicaragua, Tanzania and Uganda saw particular downgrades.

Rising demand 

Meanwhile, world consumption continues to grow, especially in producing countries - by 3.3% in 2010, the ICO said in its first forecast for the year, compared with flat demand in importers such as the European Union.

Brazil's consumption jumped 4.1% to 18.9m bags, leaving the country within 3m bags of overtaking the US as the top coffee-drinking nation, as well as the top grower of the bean.

World use rose by 1.0% to 132.5m bags last year, the ICO said, a figure signalling a production surplus of only 1.2m bags to spare – and this in an "on" year in Brazil, which has a two-year cycle of higher and lower production.

"Given the limited availability of arabica coffee on the international market, and the strength of domestic consumption in Brazil, high levels of production in Brazil… failed to have a negative impact on prices," the group said.

"Market fundamentals continue to favour firm prices."

Arabica vs robusta

The jump in exports so far in 2010-11 has been led, among the top producing countries, by Colombia, which is recovering from successive seasons of weather-hurt harvests, and whose shipments jumped 38% to 3.4m bags.

Brazil's exports rose by 23% to 12.8m bags.

However, world robusta shipments fell by 5.9% to 10.3m bags, depressed by a tendency among growers in Vietnam, the producer of the bean, to hold back crop in expectation of higher prices.

Robusta beans for May delivery rose 1.5% to $2,499 a tonne in London on Wednesday, the highest for a nearest-but-one contract for nigh on three years.

Arabica beans for May set a fresh 34-year high of 290.30 cents a pound.

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Ivory Coast crisis threatens lasting harm to cocoa

by Agrimoney.com

A failure to resolve quickly Ivory Coast's worsening political crisis could cause a longer-lasting impact on cocoa supplies, by deterring farmers from undertaking the husbandry needed to maximise the next harvest.

It was not too late for the settlement of a power struggle between Alassane Ouattara, the winner of Ivory Coast presidential elections in November, and Laurent Gbagbo, the incumbent premier who refuses to stand down, to puncture the rally in cocoa prices.

The  total of 475,000 tonnes of cocoa sitting in Ivory Coast ports, after Mr Ouattara, the UN recognised president,  forbade shipments, meant that "any sign of a potential lifting of the ban could send prices sharply lower", Hightower Report analyst Terry Roggensack said.

Ivory Coast, the world's top cocoa grower, should produce 1.3m tonnes of the bean in 2010-11, according to analysts at VM Group.

Charts suggested a pullback potentially to $3,185 a tonne, representing the loss of half gains during the recent rally, could be on the cards for New York cocoa futures, a decline of well over 10%.

"We could turn on a dime," Mr Roggensack said.

'Needs to happen soon' 

The point was echoed by Kona Haque, at Macquarie in London, who said there was "a lot of cocoa out there".

Indeed, Ghana, the second-ranked producer, on Tuesday reported a 40% jump to 706,600 tonnes in purchases of the bean by private buyers reported to Cocobod, the country's cocoa industry regulator.

However, Ms Haque added that if a political settlement was to fix the cocoa market, "it needs to happen pretty soon", before risking damage, through grower neglect, on future crops. Ivory Coast officially starts its main crop in October 1, with the mid crop starting in early April.

"If there is no resolution, there is no incentive to prepare for the next crop," she said.

"Why apply fertilizer to a crop, when you can't even sell it?"

Furthermore, even if growers wished to fork out for inputs, the near-collapse of the country's banking system had cut the obvious route to funds.

"It is the risks for the next crop which are having a big impact on the market," she said.

Sanctions working? 

The comments came as cocoa returned within $50 of a 32-year high in New York, before easing to stand 0.5% higher at $3,680 a tonne for May delivery, as of 15:45 GMT.

London's May cocoa lot was 0.4% higher at £2,356 a tonne.

Mr Gbagbo on Monday announced the nationalisation of the Ivory Coast cocoa sector, adding that he would confiscate the stored beans, worth more than $1.7bn, or £1.1bn, at current futures market prices.

The move appeared a sign that sanctions imposed at Mr Gbagbo "are beginning to work", Ms Haque said.

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Trading Advantages of the Elliott Wave Principle

What advantages does the Wave Principle offer to traders?

Here's one of the big advantages of using the Wave Principle when trading: you can increase your understanding of how current price action relates to the market's larger trend.

Other tools fall short in this regard. Several trend-following indicators such as oscillators and sentiment measures have their strong points, yet they generally fail to reveal the maturity of a trend. Moreover, these technical approaches to trading are not as useful in establishing price targets as the Wave Principle.

Here's another big advantage of using the Wave Principle in your trading, which comes directly from the free eBook "How the Wave Principle Can Improve Your Trading" -

"Technical studies can pick out many trading opportunities, but the Wave Principle helps traders discern which ones have the highest probability of being successful." 

Indeed, this valuable free eBook shows you how to identify and exploit the market's price pattern, as shown in the Elliott wave structure below:

The Wave Principle also helps you to identify price levels where you may want to place protective stops.

"...although the Wave Principle is highly regarded as an analytical tool, many traders abandon it when they trade in real-time -- mainly because they don't think it provides the defined rules and guidelines of a typical trading system.
But not so fast -- although the Wave Principle isn't a trading "system," its built-in rules do show you where to place protective stops in real-time trading." "How the Wave Principle Can Improve Your Trading"

Before you attempt to identify price levels for protective or trailing stops, you should first become familiar with these three rules of the Wave Principle:

• Wave 2 can never retrace more than 100 percent of wave 1
• Wave 4 may never end in the price territory of wave 1
• Wave 3 may never be the shortest impulse wave of waves 1, 3, and 5 

U.S. Dollar Long-term Chart

By: Jesse

The weakness with this US Dollar DX index is that it is highly weighted to the developed economies of Europe and Japan. As such it may not reflect erosion of dollar purchasing power vis a vis the BRICs, and external measures such as gold, oil, and silver. It may be masked by the mutual weakness of central banks all inflating their currencies in unison. 

This is what the Federal Reserve desires: to repair its economy and unpayable debts by expanding its monetary base while exporting much of the negative effects of such monetary inflation to the rest of the world, keeping things relatively stable to maintain confidence in their paper. And this is why the central banks attempt to control the price of less manageable currencies such as gold and silver. Silver is the most problematic because its supplies are difficult for the banks, as they have none of their own, and the world has largely depleted its discretionary strategic stockpiles of this metal. Long term price suppression breeds underinvestment and the inevitable shortages of real goods.

The support levels are as marked and fairly obvious. With the dollar index around 76.28 today it is threatening to break down out of the chart formation. Lateral support around 74 and 71 is fairly strong.

Rather than rallies through economic vitality and recovery, the dollar rallies have been marked by relative declines primarily in the euro on their sovereign debt problems. It is almost like a couple of drunks leaning on each other for support, except that the US is picking the Eurozone's pockets while they do it. 

The Terrible Twos? Let's All Hope Not

by Bespoke Investment Group

After falling 22% over the last month and a whopping 57% from its highs less than a year and a half earlier, the S&P 500 closed the day on March 9th, 2009 at 676.53.  Had you asked 100 people that day where the index would be trading in two years, you likely could have counted on one hand the number that said higher than 1,300.

Tomorrow marks the two-year anniversary of the end to the bear market on 3/9/09, and the S&P 500 is now trading at 1,324, or 96% above its closing level that day.  Below is a chart of the S&P 500 since October 9th, 2007, which is the day that the index made its all-time high of 1,565.15.  The bear market from 10/9/07 to 3/9/09 is highlighted in red, and the bull market that started on 3/9/09 is highlighted in green.     

Below is a table highlighting the performance of key ETFs across asset classes since the bull market began on 3/9/09 as well as since 10/9/07 when the S&P 500 made its all-time high and the prior bear market started.  For each asset class, the best and worst performing ETF is shaded in light red and light green over each time period. 

While many ETFs are up more than 100% since the bull market began, only a handful are up from their 10/9/07 levels.  The Nasdaq-100 tracking QQQQ is one of them with a gain of 8% since 10/9/07.  The S&P Midcap 400 ETF (IJH) is also up, along with the Midcap 400 Growth ETF (IJK) and the Smallcap 600 Growth ETF (IJT).  Three sector ETFs are now above the level they were at when the market made its all-time high on 10/9/07 -- Consumer Discretionary (XLY), Consumer Staples (XLP), and Energy (XLE).  The Silver trust (SLV) is up the most of all securities shown since 10/9/07 with a gain of 160.47%, while Gold (GLD) is up the second most at 90.33%.  And all but one (TLT) of the fixed income ETFs are in the black versus where they were trading when equities hit their all-time highs.

Since 3/9/09, the Russia ETF (RSX) has been the best performer in the entire table with a gain of 247.54%.  The Smallcap 600 Growth ETF (IJT) has been the best performing US market index ETF with a gain of 144.78%, while the Financials ETF (XLF) has been the best performing sector ETF during the bull market.  Unsurprisingly, UNG -- which is supposed to track natural gas -- has been the worst performer since 3/9/09 with a decline of 66.69%!

 

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THE COPPER/EQUITY DIVERGENCE

by Cullen Roche

The most notable divergence of the last few weeks has been the oil/copper divergence. Prior to the MENA crisis the prices of both assets were highly correlated as investors bid up prices in anticipation of stronger economic growth.  But the divergence sent a clear message – oil was now worrying investors about future growth prospects and copper was taking the brunt of the beating.

In the last few days another divergence has appeared – equities are now diverging from copper prices.  Since the beginning of QE there has been a near 1:1 correlation in both assets, however, in the last few days this has entirely broken down as copper declines 10% from its highs and the equity market levitates.