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Bearish Global Supply in Sugar


While sugar prices have received inconsistent carryover support from key outside markets this month, there has been little change in what remains a bearish global supply outlook. With global risk sentiment turning negative again, the market could see increased selling. Energy prices gave a back a portion of Wednesday’s rebound while there was a pullback in the Brazilian currency, both of which pressured sugar as it may encourage Center-South mills to continue favoring sugar production over ethanol production over the rest of the season.


Cocoa’s rebound was fueled in large part by stronger outside markets and improved global risk sentiment so it was little surprise that when that carryover support faded, the market fell back on the defensive. With prices on-track for a second negative weekly result, cocoa needs to see a definitive “risk on” mood redevelop in order to avoid additional long liquidation.


Coffee prices continue to hold their ground in close proximity to last Friday’s 8-month high in spite of the negative shift in global risk sentiment. With evidence of improving global demand, coffee has a chance to have a positive weekly result. ICE exchange coffee stocks fell by 18,897 bags on Thursday to reach another multi-decade low, and are more than 100,000 bags lower than their August month-end total in just 7 trading session.


While December cotton closed higher the last two sessions, the market remains vulnerable to a significant break as the longer-term supply fundamentals show burdensome US and world ending stocks. As a result, it will take bullish news for the report today in order to expect a resumption of the uptrend. Ending stocks are expected to drop for the report, but the decline is not enough to cause any tightness concerns. For the USDA report, the average trade estimate for US cotton production is 17.57 million bales (range 16.75-18.08 million) down from 18.08 million estimated in August. Exports are expected to increase to 15.19 million bales from 15.00 million in August.


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