ADMIS News
COCOA
Cocoa’s net spec long position should continue to grow during its March/April rally, and that leaves the market increasingly vulnerable to a near-term pullback. With key inflation data early in today’s trading, cocoa may run out of upside momentum. July cocoa reached a new 6 1/2 year high yesterday and again today before trading moderately lower early this morning. Concern that near-term West African supply may remain tight for the next several weeks has underpinned cocoa prices early in the second quarter. Recent data continues to show inflation in a longer-term decline which should benefit the demand outlook for discretionary items such as chocolate.
COFFEE
Coffee’s April rally has been fueled in part by signs of improving global demand. ICE exchange coffee stocks continued their April pullback as they fell by 1,300 bags on Tuesday and are more than 34,000 below their March month-end total. While recent daily stocks declines have been relatively small, there has been no coffee going through the ICE exchange grading process this month, so expectations that their coffee stocks will decline further have underpinned prices this month. Several recent trade forecasts have their 2023/24 Arabica crop coming in above last year’s output, which is in contrast to Colombia where production remains near 9-year lows. As a result, Brazilian weather this week could have an impact on both 2023/24 global production and global exports.
COTTON
July and December cotton broke out of a three-week trading range yesterday and traded to its highest level since March 7, this is a bullish technical indicator. The dollar was weaker on Tuesday, which may have lent some support, but crude oil and equities were close to unchanged, so outside markets seemed to have a limited effect. Lingering drought in west Texas is also providing support. Conditions have improved from last year, but there are still significant areas of moderate to severe drought.
SUGAR
The sugar market continues to receive bullish supply news from Asia and will start today within striking distance of a new 11-year high. With Brazil’s cane harvest and crushing underway, sugar may need more carryover support from key outside markets to climb above last Wednesday’s high. The India Sugar Mills Association said that their nation’s sugar production this season through Saturday was running 5.3% behind last season’s pace. Crude oil and RBOB gasoline were able to bounce back from sizable early losses which was an additional source of strength to the sugar market as an extended recovery can boost ethanol demand.
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