ADMIS News
COCOA
Cocoa prices continue to deal with near-term demand concerns that will return to a front and center status with key inflation readings later this week. With the market continuing to receive bullish supply news, cocoa prices should be able to maintain upside momentum this week. Global risk sentiment continues to improve which has helped to strengthen cocoa’s near-term demand outlook. The US, Germany and France, some of the world’s largest cocoa grinding nations, and all 3 will have updated CPI data later this week. If year-over-year CPI readings show upticks, it will diminish the demand outlook for discretionary items such as chocolates. Even if demand improvement remains lukewarm, cocoa remains on-track for a global production deficit this season which has underpinned the market early this week.
COFFEE
Coffee remains oversold but has seen seven days of consolidation. The market continues to be pressured by fresh Brazilian supply and out-of-home demand concerns. If the market can see continued improvement in global risk sentiment, coffee may be able to regain and sustain upside momentum. There was below-normal rainfall over Brazil’s major Arabica growing areas last week as the region has shifted to a more normal weather pattern, and that has pressured coffee prices as it should minimalize early harvest delays. Coffee has seen choppy price action this month and will be dealing with the early Brazilian Arabica harvest.
COTTON
The market experienced a successful test of the April highs. After a sharp rally to end last week, cotton sold off yesterday. A short-term overbought condition coupled with a forecast for rainfall in west Texas invited sellers. Traders are looking ahead to the monthly USDA supply/demand report at the end of this week, which will provide the first full look at the 2023/24 marketing year. The weather forecast has improved for west Texas, which is seeing heavier rain amounts than it did 24 hours ago. The 1-5-day forecast has 1 1/4 to 4 inches across west Texas, with some areas seeing as much as 5 inches.
SUGAR
Sugar prices were unable to sustain their recovery move into the new trading week in spite of a continued recovery in energy prices. With market focus shifting towards the new Brazil Center-South season, sugar prices remain vulnerable to an extended pullback. Crude oil is nearly $10 a barrel and RBOB gasoline over 20 cent a gallon above last week’s lows, and that provided the sugar market with early carryover support as that should give a boost to near-term ethanol demand. The market will have the latest Unica Center-South supply report later this week which should show this season’s production well ahead of last season’s pace.
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