ADMIS News
SUGAR
While it received bullish supply news this week, sugar has been unable to sustain upside momentum as it continues to receive carryover pressure from key outside markets. Unless there is a significant recovery in global risk sentiment, sugar may be setting up for a sizable downside move. Disappointing early cane yields have caused several analysts to dial back their forecasts for India’s sugar output and exports this season, which provided support to sugar prices. Energy prices remain under severe pressure with crude oil and RBOB gasoline reaching 10-month lows on Tuesday. There are reports that Brazil’s Petrobras will reduce their wholesale gasoline prices by 6.1% starting today, and that will give their nation’s Center-South mills even more incentive to keep sugar’s share of crushing at current levels through year-end. While there may be fresh delays to harvesting and crushing due to wet weather, the likelihood that Brazil’s 2022/23 sugar production will come in above last season’s total continues to pressure sugar prices. The Petrobras gasoline price cut also reflects a negative shift in Brazilian driving demand, and that could put even more pressure on sugar prices.
COCOA
Cocoa prices appear to have found their footing after Monday’s sizable pullback, and have done so without support from key outside markets. If global risk sentiment can regain a positive tone, cocoa should be able to extend a recovery move. US and Euro zone equity markets have had a rough start to this week while the Eurocurrency and British Pound continue to lose ground, all of which put pressure on cocoa prices. However, there are reports that EU members agreed to a set of rules for the region’s companies that commodities they sell do not come from deforested land. Europe remains the largest cocoa processing region while having no domestic sourcing for cocoa beans. As a result, this EU rule could tighten cocoa’s global near-term supply outlook which in turn provided underlying support to the market. Ivory Coast port arrival have made up for early delays and are now ahead of last season’s pace, but West Africa is now into its “dry” season which is likely to cut into late main crop cocoa production. High inflation levels continue to dampen cocoa’s near-term demand outlook, but West African production issues should help to keep prices above their late November lows.
COFFEE
The market continues to be resilient in the face of negative global risk sentiment as coffee has seen some improvement in its near-term demand outlook. Colombia’s coffee production continues to underperform last year’s output with its annualized output falling to an 8 1/2 year low, and that has provided the market with underlying support. Australia’s Bureau of Meteorology forecast the current La Nina event will last until at least February, which provided additional support as Brazil and Colombia may have coffee production issues until then. Brazil’s upcoming 2023/24 crop is an “off-year” in their biannual cycle, so drier than normal conditions from La Nina increase the chances that output will fall below this season’s levels.
COTTON
March cotton experienced an impressive bounce yesterday as outside market forces carried a bearish tilt. Ideas that less Covid restrictions in China will eventually help improve demand helped to support. A sharp break in the stock market, a significant drop in crude oil prices and strength in the US dollar were all seen as negative forces. In addition, wheat and corn managed to continue to push lower. Some talk of a smaller US crop and talk of somewhat tighter world stocks helped to provide some support. Farmers continue to store and hold supplies, as prices remain elevated. New crop market arrivals are much lower than last year. Mill consumption is seen lower at 23.8 million bales amid weaker textile demand from major export markets. USDA’s Foreign Agricultural Service also indicated that cotton imports to Vietnam, a major clothing manufacturer, are set to decline 5% to 6.3 million bales in the 2022/2023 period.
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