ADMIS News
COCOA
In what might be a psychological sign of a softening of demand Lindt has hiked prices and has indicated demand has generally held together. In fact, the Swiss chocolate manufacturer indicated sales declined by 7% in the first half with prices increasing by 6%. Additionally, Nestlé indicated they may increase prices further as costs were weighing heavily on profitability. However, with Sales showing a negative track the company may see more sales declines ahead and that should temper forward buying until the company has a better handle on demand. It should be noted that raising prices into the final quarter (the holiday quarter) is a significant development that could have an outsized negative impact on the most important sales period of the year. On the other hand, there appears to be building consolidation low support in the December cocoa contract beginning at $6712 buying by money managers last week, giving additional credence to support! In fact, money managers posted the largest net long positioning in 1 ½ months showing some commitment to a value zone. It also appears as if the noncommercial and nonreportable traders have seen the early July lows as value after a consolidation pattern in place since September of last year until turning buyers in the second week of May.
COFFEE
The bias in coffee is pointing down with a general pattern of lower highs and lower lows throughout July which is likely the result of a rapidly progressing Brazilian harvest. As of late last week, the Brazilian 24/25 harvest was 81% complete or 7% ahead of year ago levels. Fortunately for the bull camp, the Vietnam July export pace for the first seven months of this year down 13.8% versus last year. Even more importantly the latest monthly export tally (July) showed a whopping 35.7% drop in exports. As opposed to cocoa where money managers have stepped up buying, money managers in coffee have reduced long positioning to the lowest levels since mid-May.
COTTON
In addition to December cotton building consolidation support just above 67.50, COTLOOK reduced the 2024/2025 global cotton surplus from a previous forecast of 1.05 million tons to 760,000 tons. The reduction in supply was primarily the result of lower output from Indian, Pakistani and portions of Africa. The consultancy also lowered global demand estimates by 50,000 tons. With the net spec and fund short in cotton remaining near record levels (within 10,000 contracts) the market is obviously approaching a “mostly sold out condition”. The record net spec and fund short 38,991 contracts back in August 2019 when prices drifted below $0.60 basis weekly continuation charts!
SUGAR
Like the cotton and cocoa markets, however, the sugar market appears to have found a value zone on the charts with the rejection of sub $0.18 pricing last week. Furthermore, cash sugar market have strengthened because of Brazilian crop production concerns following reduced output from the center South region in the first half of this month. The bull camp should continue to derive support from the ongoing dry weather in the center South Brazilian production zone. Tempering the bullish weather conditions in portions of Brazil are predictions from a sugar consultancy that production would not be dramatically lowered. In a longer-term bullish development, US weekly withdrawal stocks have fallen dramatically as is usually the case seasonally in early March and US ethanol has remained at the highest level since November 2021 suggesting the global ethanol market should be encouraging more sugar crushing for ethanol. Managed Money and spec positioning in sugar offers little trading advice with both categories showing nearly flat positioning.
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