ADMIS News
SUGAR
While the sugar market remains in a very definitive bearish technical structure, the emergence of El Niño should create the potential for expanded volatility and potentially a major low. Unfortunately for the bull camp, developing weakness in energy prices presents a major potential downdraft threat for sugar prices directly ahead. As indicated in other coverage this morning the mere presence of El Niño talk tends to spark significant and sustained speculative interest especially following projections that India could see the lowest rainfall in 11 years which in turn has resulted in comments that India is unlikely to export sugar “for years”. Another major underpin for sugar prices is Indian efforts to expand ethanol production in the face of tightening cane supplies. If millions of tons of Indian sugar are held off the world market, with prices sitting near the bottom of nine month consolidation lows, risk and reward is clearly shifting in favor of the bull camp.
COFFEE
With last Thursday’s aggressive rejection of a one month high followed by a downside extension and failure at the 50 day moving average of 267.10, the technical bias in coffee starts the new trading week in favor of the bear camp. Fortunately, the most recent positioning report showed a nearly flat net spec and fund long in US coffee futures which could reduce long liquidation.
COCOA
Clearly, September cocoa has aggressively rejected the failure/reversal down attempt at the end of last week, with the market this morning posting a 25-day high. With both London and US cocoa posting significant gains over the last two weeks, off El Nino weather concerns, it is clear aggressive long speculation has returned to the trade. However, the threat of El Niño inspired production losses conflict with somewhat favorable near-term weather forecasts in Western Africa. On the other hand, seeing the Indian monsoon start out 40% below normal gives the El Niño cocoa production threat traction and that phenomenon typically trumps internal fundamentals.
COTTON
With December cotton poised to forge an 11 day high and climb above its 50 day moving average at 80.64, the charts favor the bull camp to start the new trading week. While El Nino effects on US cotton are mixed the markets appear to be garnering minimal (likely overstated) impact from El Nino concerns toward Brazilian production. On the other hand, the largest Brazilian exporter has now projected first half exports at a record 3.3 million metric tons from an initial forecast of 3.21 million tons. Furthermore, North American El Niño influences can bring warm/wet in the US Plains which are positive for the US crop. On the other hand, the fuel/fertilizer situation in the US probably has reduced cotton acres and the June 11th US supply and demand report lowered US supply and ending stocks head of this year’s US.
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