the hackett money flow commodity report july 8, 2017 · the hackett money flow commodity report ....

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The Hackett Money Flow Commodity Report July 8, 2017

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Published By Hackett Financial Advisors, Inc.

Shawn Hackett, President 23162 Post Gardens Way

#720 Boca Raton FL 33433

561-573-3766 Email: [email protected]

www.HackettAdvisors.com

ISSN 1937-7207

Growing Financial Success

CONTENTS The Soft Pricing Environment of the SOFT’s May Not Last Much Longer. Seller Beware. Smart Money Buy Signals Galore Have a Similar Signature to That Which Was Seen In the Grains This past Spring That preceded the Recent Rallies-

All SOFTs Equal weighted Index

Special Report on SOFTS’s

Our all SOFT’s equal weighted index is nearing key multi-year support that should be the harbinger for major summer lows and spirited rallies into the fall of 2017. We believe that this support should begin a solid bottoming phase and in some instance could lead to V-bottom constructs. The intensity of our strong smart money buy signals we have in the entire SOFTs complex and in most individual SOFT markets is erringly similar to that which was seen in the Grain’s complex and individual grain markets that preceded the recent sizeable rallies in wheat and rice and now follow the on rallies in corn and soybeans.

The SOFT’s complex has approached key long term support from which a large rally into the fall 2017 should emanate.

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Right now, we believe that the SOFT’s complex is ripe for the picking and fertile ground for establishing long positions for what should be an historic multi-year bull market move that we believe actually began in 2016 for the SOFT’s we and now setting up for secondary lows. As we have discussed often, the next 5 years worth of weather are going to be some of the most challenging and aberrant than any of us have ever seen given the Grande solar cycle minimum phase the likes of which has not been seen in over 200 years. During a period of global cooling excessive wet weather becomes the more dominant weather impediment to yields than perpetual droughts that global warming tends to bring. Also, the colder than normal and extended winter seasons for both the northern and southern hemispheres brings with it excessive frost damage, shortened growing seasons and reduced maturation rates none of which is particularly good for top end yields The current seed genetics are not well suited for handling cold and wet weather conditions as they have been geared up to handle predominately hot and dry patterns. It will take much higher prices and a decade or more to retool seed technology to better address this major multi-decadal weather regime change. We have been and continue to be very bullish southern based Northern Hemisphere farm land prices and remain very bearish Northern tier farmland. Based upon historical precedent the middle of Iowa south will be the place to own farmland as a farmer or an investor. North of Mid-Iowa and life on the farm is going to be most unpleasant at best. That is not to say that drought won’t occur under the precipice of global cooling. Of course there will be some droughts that will cause problems but it is just that these drought events will be far less prevalent than the wet, cold and frost laden weather that will dominate weather patterns. The current large corrections in the SOFT’s and the tremendous smart money buy signals that have followed offer a tremendous long term buying opportunity as did the grain markets this past spring. Do not look a gift horse in the mouth when being offered such a treasured prize we say. We will endeavor on the following pages of this report go over the various smart money buy signals and what we are looking at for triggers. We hope you sense our state of urgency on this and why we have devoted a special report to it. Let’s get stated.

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SOFT’s Smart Money Indicator

The parabolic rise in smart money buying in the SOFTs has rarely ever been seen before at this rate. This is as clear a sign as possible that the SOFT’s markets have overshot fundamental value not by a little but by a large margin. You would have to go back to 2008 to find a buy signals this strong and even then the rate of buying was not as intense as the buying right now. This is an incredible opportunity to buy this group.

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One of the greatest smart money buying binges ever seen has just occurred right into a very intense buy signal. This projects a very strong rally in this group heading into the fall 2017.




The cocoa market remains weighed down by the perception that another near record crop is going to be harvested over the next crop cycle. We are not aware of two back to back record crops ever occurring over the last 40 years. So the bears are betting on an outlier. We feel that this is a very poor bet to make. The catalyst here in our view is the eventual recognition that the cocoa crop in West Africa is going to come up short and should Mother Nature throw any adversity into the mix which we feel is very likely then the downward revisions to the cocoa crops could be very severe. All the while these lower prices are firing up demand which will prove fatal when supplies are less prevalent as originally thought. The combined ratio is one of our best fundamental indicators for predicting major lows in cocoa prices. Whenever the combined ratio, which is the combined price of cocoa butter and cocoa powder relative to cocoa bean prices, reaches 3.5 or higher cocoa prices have an uncanny historical precedent of consistent bottoms. Right now we are at 3.6 suggesting that demand for cocoa butter and powder far exceeds their supply which will require the grinding of far more cocoa beans to satisfy the market.

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The extension of the recent cluster of smart money buy signals against an ongoing consolidation continues to project higher prices into the fall 2017.




Also, given the poor quality nature of last year’s record crop, it will take far more quality beans from this year’s harvest to blend with poor quality beans form last year to produce the desired end user cocoa derivative products. So with the combined ratio giving off a buy signal and a strengthening smart money buy signal, the odds are fantastic for a majored low to form this summer. The Black Line drawn which represent 3.50 triggers a fundamental buy signal when reached

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Current level 3.60




Coffee Smart Money Indicator

We already discussed coffee last week and not much has changed. What we are watching right now is the development of what could be the last cold air mass of the peak winter season in Brazil to potentially impact the main coffee belt. The next period of threat would be the week of the 17th to 21st of July. Too early to tell if the cold air will make it far enough north but the models do show one of the more impressive air masses seen in many years. Please see weather chart on next page. The other factor we are watching are the cash differentials of high quality coffee using Colombia as the proxy. With the Colombian Mitaca second crop very disappointing this spring an now with the Brazilian harvest also disappointing and of lower quality, it appears to us that we may be in the beginning stages of a high quality coffee supply shortage more akin to what took place in 2010 versus the low quality coffee Robusta shortage that took place last year. We will be monitoring Colombian cash differentials along with our Brazilian cash coffee differentials to attempt to get a heads up to any physical tightness trade that may develop into year end.

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Coffee has triggered a major smart money buy signal against an epic completing wedge pattern. Bullish.




Although it is early, most of the long range models are alerting to a developing drought in Brazil from September through December 0217 timeframe. If verified this would provide a huge spark to all grain markets and most SOFT markets especially coffee. Ag market price forecasting is like playing chess as one must always be thinking 5 moves in advance to get ahead of the pack in price forecasting. Colombia Cash Coffee Differential

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Colombia cash coffee differentials have been developing a credible basing pattern very similar to that which took place a Decade ago. Any break out above this chart pattern would trigger a clear supply shortage trade construct.




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It has been a long time since we have seen an air-mass during the winter time in Brazil with this kind of impressive high pressure in such a large area of southern to central Brazil coffee regions. The week of July 17th could prove prophetic or pathetic for a major frost event depending in which way this air mass wobbles either north or south of current placement.




OJ Smart Money Indicator

We have a very hard time remaining bullish OJ for too long given the relentless and ongoing crashing demand in the US. Having said that, there can be times where OJ overshoots to the downside and offers some upside potential. This seems to be one of those times with the incredibly strong smart money buy signal and wild parabolic ascension if their buying pattern. The hurricane season this year for Florida citrus areas is now elevated given the more neutral El Nino reading and hence much greater weather risk this season exists for a named storm to have a track into central Florida. The other fundamental that should start to support prices is the apparent lower volumes of juice able oranges coming from Brazil’s harvest. This lack of suitable fruit is now contracting supplies below expectations and very aggressive Brazilian exports to the US and Europe may have been overdone leading to a pulling back of such exports and a tightening of the US supply/demand fundamentals.

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A dramatic parabolic rise in OJ smart money into a major buy signal bodes well for a rally into the fall 2017




We are expecting a very cold winter this season given the onset of a global cooling weather regime as global cooking will officially begin this winter adding extra demand for OJ versus the last few years when weather has been generally warmer than normal. Sugar Smart Money Indicator

One of the most sensitive Ag commodities to an underperforming Indian monsoon period is the sugar market given the lack of irrigation and high yield variability. After a good monsoon period in India for the month of June, July weather models are starting to indicate a pull back and an underperforming period into month end for the India monsoons especially in the highly productive sugar region of Maharashtra. As the markets begin to get comfortable with the current weather models for an underperforming monsoon in July, sugar prices could really take off and quickly build in some serious weather premium and possible ramifications of a potential Indian sugar import buying spree.

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A credible smart money buy signal has been triggered.




Cotton Smart Money Indicator

We are deeply concerned that a very hot dry weather patterns for the all important state of Texas cotton growing regions and a period of underpefromcne for the India monsoon in the Indian cotton growing areas of Maharashtra and Andhra Pradesh will likely cause price to rise and build in significant weather premium We believe the some serious weather premium will be priced into cotton prices for some decent upside. High quality cotton last year was very tight and can ill afford the US to come up short of expectations.

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Strong smart money buying has finally begun in cotton as we rapidly approach a buy signal




July Moisture potential for Texas looks very concerning to us for Cotton areas

Warmer than normal Temperatures for the month of July also look problematic to Cotton in Texas

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Weather Models keep below normal moisture for a Good Portion of India in the month of July

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Sugar and cotton could catch a bid on a drier than normal monsoon expectation for the month of July




Widespread Drought risk during the September-December 2017 timeframe In Brazil and Argentina could light a fire Under most Ag markets

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Hackett Financial Advisors Inc. specializes in the agricultural space where there is far less coverage by the commodity analyst community and where some of the greatest opportunities should remain in the years ahead. While everyone on the planet has an opinion on Crude Oil or Gold there are very few who study agriculture in the manner that we do. We would be happy to see if opening an account with us would fit your needs whether as a commercial operator and/or a professional investor/firm. Apply for an account online with the following link: https://www.hackettadvisors.com/Account_Open.asp We also put God first in our dealings with you and our approach to the markets. Our heart is in the right place and through is honor and grace great things are possible. We take the view that the more successful you are the more you can give back to those in need. It hardly makes any sense to do it for any other reason.

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Also remember that you can also open an account with us at Hackett Financial Advisors Inc. We clear all our operations through R.J. O'Brien & Associates whcih is the oldest and largest independent futures brokerage and clearing firm in the United States. A futures commission merchant (FCM), RJO is a full clearing member of: the CME Group (founding member of the Chicago Mercantile Exchange) and all its markets; IntercontinentalExchange (ICE); NYSE Liffe U.S.; and the CBOE Futures Exchange (CFE).

RJO offers the latest in order entry technology coupled with 24-hour execution and clearing on every futures exchange worldwide. Clearing more than 100,000 client accounts, the firm provides a full range of services to the industry’s largest global network of introducing brokers (IBs) and to commercial, institutional, international and individual’s clients. These include more than 400 IBs and many of the world's largest financial, industrial and agricultural institutions. We do not engage in proprietary trading; all of our business focuses on our valued clients.

Founded in 1914, RJO is one of the last 'boutique' futures firms in the industry. It is a privately held business majority owned by the O'Brien family of Chicago. The O'Briens have been instrumental in the development of the futures industry and remain committed to the continued growth of the company and our leadership within the industry.

With client assets of approximately $3.6 billion, RJO is a well-diversified, fully integrated FCM. The firm regularly captures top-tier market share in both agricultural and financial futures products at both the CME and CBOT

Our Place in the Industry

If you have any questions about any of the content in this report, please call me at (888) 535-5525 or e-mail me at [email protected] . Thank you for reading and I hope your future investment decisions turn out to be prosperous ones.

Best Regards,

Shawn Hackett, President

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the hackett money flow commodity report july 8, 2017 · the hackett money flow commodity report ....

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