ADMIS News
SUGAR
May Sugar sold off in the wake of the Trump announcement that he was postponing attacks on Iranian power plants but bounced off its lowest levels. The reversal lower in the crude oil complex following the initial announcement undermines the ethanol market, which lowers the incentive for Brazilian cane crushers to favor ethanol production at the expense of sugar. The possibility of a reopening of the Strait of Hormuz also pressures fertilizer prices. However, markets are bouncing back and forth in the wake of some contradictory reports out of Iran. The rally in global sugar prices last week improved the economic for Indian exports, and sugar mills there have reported sales of 100,000 metric tons. The US NWS Climate Prediction Center said last week it expects La Nina to transition to neutral next month and that those conditions will likely persist from May through July. They look for El Nino to emerge in June-August and persist at least through the end of 2026. A strong El Nino could lead to reduced rainfall for India’s monsoon, which could effect next year’s production,; depending on the timing and intensity of the event. At this point it looks like the latter part of the monsoon would be affected.
COFFEE
May Coffee turned lower on Monday following the Trump announcement that was postponing strikes on Iranian power infrastructure in the wake of “productive talks” with Iranian government officials over the weekend. Prior to the announcement, coffee had edged above Friday high to reach its highest level since February 3. There were reports last week that growers in Brazil and Vietnam farmers were reluctant to commit to sales because of concerns about logistics risks linked to the Iran war. Brazil is expected to see a strong crop this season. The Brazilian real was sharply lower on Friday, which increases the incentive to sell coffee for export, but the dollar is under pressure today, which may lend support to the real. A re-opening of the Strait of Hormuz would also ease concerns about fertilizer supply.
COCOA
May cocoa remains inside the narrow, sideways pattern that has held it for two weeks. Last week, sources at some of Ghana’s licensed cocoa buyers (LBCs) told Reuters that they lack the funds to buy beans from farmers despite the cut in the fixed price. This suggests there could be renewed pressure on the government regulator, Cocobod, to lower the official price again. The current official price is 41,392 cedis ($3,797) per metric ton versus the May futures trading around $3,200-$3,500. On the supportive side, higher fertilizer costs could lower production this year in the face of what appears to be good weather for growing. World Weather Inc. said a few showers and thunderstorms were noted in cocoa areas from Ivory coast through southern Benin to coastal Nigeria and western Cameroon over the weekend. Most of the rain was light and failed to counter evaporation. Slowly increasing shower and thunderstorm activity is predicted for the coming week to ten days
COTTON
May cotton fell off sharply in the wake of the Trump announcement but recovered to higher on the day almost as quickly. Crude oil prices reversed lower on the announcement, and lower oil prices reduce the cost of man made fibers that compete with cotton. The prospect of opening the Strait of Hormuz also puts downward pressure on fertilizer prices. Dry conditions in US growing areas at the start of the season lends support. As of last week, roughly an area representing 89% of US cotton production was experiencing drought. World Weather Inc. said on Sunday that Texas and northeastern Mexico still need rain to support planting this month and in April. A few showers are possible in early April. West Texas also needs rain, and only light amounts are expected, mostly in the first days of April. Timely rain has occurred in recent weeks in the US Delta and southeastern states. The rally has corrected a deeply oversold condition on the part of the funds.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
