DAILY SOFTS CURRENCY COMMENTARY Friday July 26, 2019

DAILY COCOA COMMENTARY 07/26/19

Possible global deficit could long-term support

September cocoa has sold off sharply this week after a 140-point rally last week, but it remains inside its month-long trading range. While the overall global demand outlook remains positive, the market may need to see a rebound in global risk sentiment to finish the week trading on an upbeat note. ECB President Draghi hinted at a rate cut yesterday, but he also said that the Euro zone outlook is getting "worse and worse", and this puts a negative spin on demand. The EU accounts for one-third of global cocoa grindings, with two of the world's top four grinding nations (, Germany) and another four (France, Spain, Belgium, Italy) in the top 14. A rebound in the Eurocurrency from a 2-year low provided some mild support yesterday, but it was lower again overnight. A Reuters poll of industry players forecast cocoa prices to rise 2% from current levels by the end of this year. The poll also forecast that the upcoming 2019/20 season would show a global deficit of 80,000 tonnes. The International Cocoa Organization's current estimate calls for a 2018/19 surplus of 36,000 tonnes.

TODAY'S MARKET IDEAS: Europe may be a source of demand anxiety, but if the stock market ends the week on a strong note, it could help cocoa regain its upside momentum. Look for support in September cocoa at 2390, with resistance at 2480 and 2494.

NEW RECOMMENDATIONS: None.

PREVIOUS RECOMMENDATIONS: Long September Cocoa 2500/2700 bull call spread from 48 with an objective of 69. Hit risk at 20.*

COCOA TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

COCOA (SEP) 07/26/2019: The close under the 60-day moving average indicates the longer-term trend could be turning down. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The market's short-term trend is negative as the close remains below the 9-day moving average. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside target is now at 2394. The next area of resistance is around 2457 and 2487, while 1st support hits today at 2411 and below there at 2394.

DAILY COFFEE COMMENTARY 07/26/19

Oversold and close to key support.

September coffee inched lower late in the overnight session and came close to testing a key retracement level at 99.83. This follows a downside breakout this week and a 5-session losing streak. Ample near-term supplies could continue to weigh on prices, but the market is deeply oversold and could be susceptible to some short-covering going into the weekend. The Brazilian real rebounded from a 2-week low on Thursday, and that provided some measure of support to coffee prices, but the real was modestly lower overnight. Six sessions of lower highs and lower lows have kept the downtrend in the real intact, and this could continue to pressure coffee prices. Brazil is forecast to export more than 3 million bags of coffee this month. This is having far-reaching effects, as Vietnamese prices are lower in spite of their tight pre-harvest supply levels. Rabobank raised their price forecast for fourth quarter Arabica coffee to $1.10, up 4 cents from their June estimate off of damage from Brazil's early-July frost. Coffee stockpiles held in European ports increased to 706,223 tonnes, which was up 0.8% from April's month-end total. ICE exchange coffee stocks (86% of which are held in the European ports of Antwerp, Hamburg and Bremen) fell by 261 bags on Thursday. They remain on track for a fifth monthly decline over the past six months.

TODAY'S MARKET IDEAS: While frost damage may have a limited impact on Brazil's crop, that crop has already gone through flowering issues last year and extended periods of dry weather earlier this year. Given what is likely to be a sizable decline in this season's Brazilian Arabica production from last year, coffee is once again approaching bargain-price levels. A key support level for September coffee comes in at 99.83, the 0.618 retracement of the move from the May 7th (contract) low and the July 5th high. Look for resistance at 103.50.

NEW RECOMMENDATIONS: None.

PREVIOUS RECOMMENDATIONS: None.

COFFEE TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

COFFEE (SEP) 07/26/2019: Momentum studies are declining, but have fallen to oversold levels. The close below the 9-day moving average is a negative short-term indicator for trend. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 99.47. The next area of resistance is around 101.32 and 102.16, while 1st support hits today at 99.98 and below there at 99.47.

DAILY COTTON COMMENTARY 07/26/19

Weaker despite "allowing" some tariff-free US cotton

News that China would allow some tariff-free US cotton into the country was followed by news that the Chinese government sold 10,043 tonnes (98.67% of total offer) at an auction of state reserves, and that seemed to undercut any optimism regarding exports to China. There had been reports that the some textile mills in China reportedly have been given permission to purchase a total 50,000 tons of US cotton. But after finding some support, the market sold off sharply late in the overnight session, taking out Thursday's lows in what appeared to be a rejection of the highs from earlier in the week. Despite the selloff, the market is still respecting the key weekly reversal off its contract lows last week, and it could still find support on hopes for progress in China/US trade talks next week. Thursday's weekly USDA Export Sales Report showed cotton net sales coming in at 163,000 bales for the current marketing year and 208,000 for the next marketing year for a total of 371,000 for the week ending July 18. New crop sales have reached 28.7% of the USDA forecast for the 2019/20 marketing year versus a 5 year average of 26.7%. While sales were strong, traders noted a lack of sales or shipments to China for the week. Certified deliverable stocks came in at 44,547 bales, down from 45,089 the previous session and from 60,410 earlier last week.

TODAY'S MARKET IDEAS: Declining deliverable stocks, a record net short position from speculators and solid export sales news failed to support a further advance. If crop conditions remain strong, the market could face a surge higher in ending stocks this year. Close-in resistance for December cotton comes in at 65.00 and 65.79, with support at 63.16 and 62.80. Failure to hold support on a closing basis would leave 60.52 as the next downside target.

NEW RECOMMENDATIONS: None.

PREVIOUS RECOMMENDATIONS: None.

COTTON TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

COTTON (DEC) 07/26/2019: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The market's short-term trend is positive on the close above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside target is at 64.96. The next area of resistance is around 64.54 and 64.96, while 1st support hits today at 63.84 and below there at 63.55.

COTTON (MAR) 07/26/2019: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 65.67. The next area of resistance is around 65.41 and 65.67, while 1st support hits today at 64.89 and below there at 64.62.

DAILY SUGAR COMMENTARY 07/26/19

Weekly reversal setup could spark short covering today.

October sugar was slightly lower overnight, possibly due to slight weakness in the Brazilian currency and some improvement in the weather outlook for India. The sugar market has consolidated its gains after making a sharp bounce off of contract lows earlier in the week. It is on track for a key reversal low on the weekly charts, and this supports the idea that this week's low was a major low. India's monsoon rainfall will be above average over the next two weeks, and that is expected to reduce this season's rain deficit from the current 17 to less than 10%. Egypt's Agriculture Minister said his nation's sugar production has reached 2.48 million tonnes, a new record. Egypt has been an aggressive importer in recent years due to domestic shortages, and their record output should diminish their import demand. China's sugar imports during June were 140,000 tonnes, 49% below a year ago. Their first-half 2019 imports were 1.07 million tonnes, which was more than 22% behind last year's pace. A Reuters poll forecast sugar prices to rise some 15% from current levels by the end of this year and for the 2019/20 season to have a global deficit of 2.95 million tonnes.

TODAY'S MARKET IDEAS: India, Brazil, the EU and Thailand are all looking at lower production in 2019/20, which should result in a global deficit for the year. A rebound in energy prices today and any follow-through strength in the Brazilian currency could help to fuel some end-of-week short-covering. Near-term support for October sugar is at 11.81 and 11.72, with resistance at 12.50.

NEW RECOMMENDATIONS: * Buy October Sugar at 11.91 with an objective of 12.98. Risk to 11.67.

PREVIOUS RECOMMENDATIONS: None.

SUGAR TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

SUGAR (OCT) 07/26/2019: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's close above the 9-day moving average suggests the short- term trend remains positive. It is a slightly negative indicator that the close was under the swing pivot. The near- term upside objective is at 12.30. The next area of resistance is around 12.13 and 12.30, while 1st support hits today at 11.87 and below there at 11.77.

OJ TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

ORANGE JUICE (SEP) 07/26/2019: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 105.00. The next area of resistance is around 104.65 and 105.00, while 1st support hits today at 103.65 and below there at 102.95.

DAILY TECHNICAL STATISTICS 14 DAY 14 DAY 9 DAY 14 DAY SLOW SLOW 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE RSI RSI STOCH D STOCH K M AVG M AVG M AVG M AVG M AVG SOFTS MARKETS COMPLEX SBAV19 12.00 46.93 44.91 25.16 37.69 11.90 11.84 12.13 12.38 12.34 CTAZ19 64.19 51.14 46.92 25.29 34.90 63.90 63.32 64.24 65.63 66.73 CTAH20 65.15 51.45 46.94 23.40 32.46 64.74 64.30 65.25 66.43 67.55 CCAU19 2434 43.67 46.35 37.41 34.48 2476.00 2453.78 2475.28 2464.80 2434.02 OJAU19 104.15 53.76 51.65 51.58 55.92 103.15 102.91 102.64 104.45 103.42 KCAU19 100.65 35.27 41.77 17.88 8.04 102.26 105.35 107.07 103.93 101.15 MAU19 17.96 58.82 60.63 72.94 77.54 17.99 17.90 17.91 17.57 17.43 Calculations based on previous session. Data collected 07/25/2019 Data sources can & do produce bad ticks. Verify before use.

DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 SOFTS MARKETS COMPLEX SBAV19 Sugar 11.76 11.86 12.03 12.13 12.30 CTAZ19 Cotton 63.54 63.83 64.25 64.54 64.96 CTAH20 Cotton 64.61 64.88 65.14 65.41 65.67 CCAU19 Cocoa 2393 2410 2440 2457 2487 OJAU19 Orange Juice 102.90 103.60 103.95 104.65 105.00 KCAU19 Coffee 99.46 99.97 100.81 101.32 102.16 MAU19 Milk 17.89 17.92 17.97 18.00 18.05 Calculations based on previous session. Data collected 07/25/2019 Data sources can & do produce bad ticks. Verify before use.

***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Lakefront Futures is strictly prohibited.