ADMIS News
COTTON
Declining crop conditions and hot and dry weather in the US and China could lift cotton prices back to their April-May highs. China has announced it will release cotton from state reserves later this month. This is the first announcement of this kind this year. China’s major cotton areas are experiencing extreme heat, with highs reaching 126 degrees Fahrenheit this week, and the government is worried about the crop. This comes on top of lower planting this year due to a cold, wet spring. The spot cotton price in Xinjiang rose to a one-year high of 17,700 yuan ($2,454) per tonne on Wednesday. This could be beneficial for US exports. Monday’s weekly conditions report showed Texas’ good/excellent ratings fell to 26% last week versus a 10-year average of 39%. Poor/very poor increased to 45% versus 40% last year and a 10-year average of 25%. The region is expected to get little or no rain in the next five days, and temperatures are forecast to be hotter than normal. Sowings of cotton and other crops in India have gained momentum over the past two weeks after a slow start, but they are still behind last year. Global cotton demand has been a concern. Last week’s USDA supply/demand report forecasted ample supplies this year, which will likely limit the market’s upside potential unless the crops get much worse, but the demand outlook has improved with the rally in equities.
COCOA
The bull market in cocoa continues, as the tight supply outlook remains a front-and-center issue. Demand concerns may resurface with key grind data due out on Thursday, and traders may become anxious ahead of the reports. September cocoa traded to a new contract high yesterday and finished with a new high close. The nearby futures have reached their highest level in 12 years. Recent news that Ivory Coast has suspended sales of their upcoming 2023/24 main crop continues to underpin prices. Ivory Coast officials have stated they have enough cocoa to fulfill their sales far, but they worry about meeting any additional commitments. While rainfall over West African growing areas has decreased and the mix of sunshine has been described as “ideal” for flowering and pod growth for the upcoming main crop, but there are also concerns about disease in the wake of the heavy rainfall in late June and early July. Growers are also concerned that El Nino will bring drier than normal conditions to west Africa and damage the upcoming main crop. Second quarter Asian grindings data will be released early Thursday, with the North American data coming after Thursday’s close
COFFEE
Coffee prices remain near the bottom end of their June/July downdraft, but the coiling action of the past few weeks has slowed the rate of descent. While it may be difficult to overcome bearish supply developments in Brazil and Central America, improving demand prospects may help the market find its footing. Expectations that out-of-home coffee demand will improve as inflation levels recede continue to underpin the market. There have been reports that Brazilian producers are holding back on selling their new crop due to the sharp drop in prices since early June, and that has provided support this week. There are reports of labor shortages in Brazil growing areas, which could cause in supply bottlenecks later in the season.
SUGAR
Sugar prices managed to find their footing after Monday’s pullback, but the market seems to be lacking the fresh bullish supply news to resume its recent uptrend. Strong gains in crude oil and gasoline yesterday lent some support. Brazil’s Petrobras has cut their wholesale gasoline prices four times since the start of March, but the 28.7-cent rally in RBOB (gasoline) futures over the past three weeks (+12.2%) could cause Petrobras to change course. If gasoline prices get high enough, it could encourage Brazilian crushers to change their processing mix to favor more ethanol at the expense of sugar. Egypt tendered for 50,000 tonnes of sugar for September/October delivery, which shows some improvement in global demand. On the other hand, China’s sugar imports in June came in at only 70,000 tonnes, down 71% from the same period last year. Their total for the year so far is just 1.1 million tonnes, 38% behind last year’s pace. India has received average monsoon rainfall since season started on June 1, but the rains have been uneven, with some key cane-growing areas getting less than normal amounts.
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