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Bearish Cotton Prices


Global cocoa demand is likely to remain subdued while European nations go through this round of COVID-19 lockdowns, but demand concerns have been soothed by a notable rebound in global risk sentiment. With West African political tensions continuing to simmer, cocoa may be able to lift clear of its current consolidation one.


Coffee is slowly grinding its way towards a retest of its 2020 lows from mid-June as it continues to be pressured by increasing global demand concerns. With global risk sentiment on the mend now that the US election is in its end-stages, coffee may be one sharp selloff away from posting a longer-term low. December coffee kept within a fairly tight trading range, but did fall to a new 15-week low yesterday before finishing with a mild loss.


Even with the massive rally in the stock market, the lower US dollar and higher energy prices, the lower close for December cotton yesterday is bearish. Traders cited overbought technical conditions and harvest pressure as reasons for the relative lack of strength. The 6-10 day forecast calls for above normal precipitation across the Delta and southeastern US, but the 1-5 day looks dry across most of the cotton belt, and this should allow the harvest to gain some ground.


The market seems to have put in a near term top with the reversal action on Tuesday, but is finding some support this morning from positive outside market forces. Sugar’s volatile price action near multi-year highs is more evidence that the market is top-heavy at current price levels. It is also likely to still have a very large net spec long position after a week of whipsaw price action, so sugar remains vulnerable to long liquidation selling if support levels are violated.

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