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Choppy 2-Sided Coffee Trade Since March

COCOA

Since the start of April, cocoa prices have now had 4 positive daily reversals from a new low for the move. While the first 3 did not result in a longer-term upside move, cocoa prices look cheap. September finish Tuesday’s trading session with a minimal gain and a positive daily reversal. Huge selloffs in the Eurocurrency and British Pound were source of carryover pressure on the cocoa market, as the slide in both currencies down to multi-year lows will make it more difficult for EU and UK processors to acquire fresh cocoa supply.

COFFEE

Coffee prices have fallen nearly 15 cents below Friday’s high as the market continues to see choppy and two-sided action. While demand prospects have been driven by the ebb and flow of global risk sentiment, coffee continues to have bullish supply factors that should help to underpin prices. A more than 1.2% decline in the Brazilian currency as it reached a 5-month low was a notable source of pressure on the coffee market as that may encourage Brazil’s farmers to more aggressively market their near-term supply to foreign customers.

COTTON

December cotton closed lower for the second straight session on Tuesday as the market is approaching last week’s six-month low. The dollar was sharply higher, and the nearby Dollar Index traded to its highest level since December 2002, which puts pressure on export commodities like cotton. Crude oil was sharply lower, which make polyester more competitive with cotton. Traders are concerned that soaring inflation will affect global cotton demand and that China could stop importing US cotton in retaliation against the US blocking imports from Xinjiang.

SUGAR

Sugar continues to be pressured by lukewarm Brazilian ethanol demand, due in part to the shift in Brazilian state fuel taxes. The market is approaching price levels that provided solid support earlier this year, however, and that should help sugar to find its footing soon. Crude oil prices saw a more than $10 per barrel pullback from their early highs while RBOB gasoline fell more than 40 cents below its early high, which was a notable source of pressure on the sugar market as that may further weaken near-term ethanol demand prospects.

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