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Bearish Tech Development for Sugar

SUGAR

The lower close after reaching the highest level since April is a bearish technical development. The reversal from a deeply overbought condition may spark selling over the near term. Sugar prices built on early support and reached a new 7-month high yesterday, but lost strength late in the day as weakness in the energy markets and ideas that the market has moved too far, too fast helped to spark profit taking. Increasing concern that several of India’s mills will default on sales contract has ramped up near-term supply anxiety that underpinned sugar prices near their recent highs. India sugar production for the season reached 2 million tonnes, about unchanged from last year which is a negative force. A sharp selloff in energy prices should diminish near-term ethanol demand prospects which could pressure as well. A total of 359,000 tonnes of India white sugar was tendered against the December contract in Europe.

sugar cubes

COCOA

Cocoa prices continue to see coiling action, but were able to overcome a negative shift in global risk sentiment. The market continues to find support from the outlook for smaller production. A 41-year high in UK CPI was further evidence of strong inflation levels in many developed economies that diminish the demand outlook for discretionary items such as chocolates. There were reports that Ivory Coast has resorted to using a negative country discount to stimulate sales of this season’s main crop production, which also weighed on prices. A mild rebound in global risk sentiment can provide cocoa with initial support this morning, but the market will have to face Euro zone CPI which could reach another record high. Major West African growing nations continue to have production issues early this season, and that helped cocoa prices to regain some strength late in the session yesterday.

COFFEE

Coffee prices have been pressured by near-term demand concerns and the build-up of European supplies, but there are signs that the market is close to a positive shift in global demand expectations. US green coffee stocks finished October at 6.320 million bags, which was a decline of over 58,000 from their September month-end total and a second monthly decline in a row, and that provided support to the coffee market. A pullback in the Brazilian currency weighed on coffee prices and sent them into negative territory late in the day as that will encourage Brazilian producers to market their remaining near-term supply. ICE exchange coffee stocks rose by 17,078 bags to reach a new 8-week high. However, the amounts of bags waiting to be graded at the port of Antwerp fell by 21,617 bags, its first daily decline since late October as well as the number of bags that went through the grading process in Antwerp.

COTTON

December cotton looks poised for a short-term pullback. The market closed lower yesterday after rallying to its highest level since September 26 earlier in the session. The market broke out above an eight-day consolidation, but it failed to hold the gains. The market may have been disappointed with the choppy action in the dollar given its steep selloff of the past couple of weeks. The bulls are hoping for an improvement in the US export sales report today. Last week’s report showed net sales of 157,235 bales for the week ending November 3, which was down from 202,931 the previous week but above the four-week average at 131,151.

SUGAR

The lower close after reaching the highest level since April is a bearish technical development. The reversal from a deeply overbought condition may spark selling over the near term. Sugar prices built on early support and reached a new 7-month high yesterday, but lost strength late in the day as weakness in the energy markets and ideas that the market has moved too far, too fast helped to spark profit taking. Increasing concern that several of India’s mills will default on sales contract has ramped up near-term supply anxiety that underpinned sugar prices near their recent highs. India sugar production for the season reached 2 million tonnes, about unchanged from last year which is a negative force. A sharp selloff in energy prices should diminish near-term ethanol demand prospects which could pressure as well. A total of 359,000 tonnes of India white sugar was tendered against the December contract in Europe.

 

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