The ICAC in their monthly supply/demand report cut their price forecast for the A index for 13/14. Now its “only” 108c. Adding a +/- 10c, this implies the A ranging from 98c to 118c. This is down from 115c earlier, so it appears the K Street boys are a little less fanatical on their outlook. Adjusting the A to futures, we subtract 6c, so the futures range for the year is in the 92c to 112c band. Still, a very friendly forecast.
The ICAC has kicked up its world end stocks to 90.93 Mb, which remains much under the USDA at 94 Mb. They cut old crop world use by 1.5 Mb, cut 13/14 use by 1.0 Mb, and raised production for 13/14 by 3.0 Mb. Thus they are no longer 7 Mb shy of the USDA, and are now only 3.4 Mb under the USDA figure. 91 Mb from one major house, vs 94 Mb from another. In times past a 3 Mb end stocks disagreement would mean a 3c to 5c move either way. But this year it means nothing with the Chinese sitting on most of the stocks.
Our guess is that the ICAC will continue to whittle down their average annual A forecast, as we believe it started at 122c, then 115c, and now 108c. A vexing question we would love to pose to the ICAC is what price they would forecast if and when China decides to destock, or at least not continue to build their hoard. China needs only 3 Mb of imports to match use, and if they only imported the deficit then this market would behave in a much different matter than a pivot around 85c. This is inevitable, but it’s the timing of the inevitable that has us crawling the walls. Still negative, and worn out. Technicals
The spot continuous chart has come to rest on a positive trend line beginning with the low of early June then touching the low of 7/18. The Oct is now spot, following the July expiry, so the spot month may not be the most efficient contract of price discovery. Regardless, a break below 8500 on Oct would breach this support trend line.