Cocoa Having Hard Time Finding Support
The demand outlook will have a significant hurdle to clear during today’s trading but if there is a positive turnaround in global risk sentiment, cocoa has a decent chance of finding a short-term low. West Africa is finishing its dry season with weather shifting over to a wetter pattern, and that pressured the cocoa market this week as that should benefit the region’s upcoming mid-crop production. A rebound in the Eurocurrency and the British Pound provided cocoa with carryover support as an extended recovery can improve its European near-term demand outlook.
Coffee prices remain on the defensive as bearish near-term supply news has weighed on prices. Unless there is a positive turnaround in global risk sentiment, coffee is likely to extend its pullback. After reaching a 2023 low on Tuesday, ICE exchange coffee stocks had their second daily build in a row on Thursday, which pressured the coffee market as that may indicate stocks level may have an extended increase. While there were 10,400 bags that were graded, coffee waiting to be graded fell by 9,900 bags so this build-up may only last another week or so. Central American exports having been running ahead of last season’s pace since the start of 2023, which has put additional pressure on coffee prices late this week as that offset the recent pullback in Brazilian and Colombian coffee exports.
The lowest close for May cotton since February 23 leaves the market vulnerable to increase selling pressures over the near term unless there is better demand, or a supply concern which develops for the cotton market. Sluggish export sales news plus a sharp break in the stock market and further weakness in crude oil were all seen as negative forces. The bearish tilt to the USDA report this week, especially the jump in world ending stocks, helped to pressure. Weakness in the other grains and talk that the end of La Nina and the potential start of El Nino are factors which might bring good weather for the upcoming growing season added to the negative tone.
Sugar prices were able to overcome slumping global risk sentiment and sluggish outside markets to climb further into new high ground. Indications that China’s upcoming sugar production will reach a 6-year low provided sugar with support. Along with Indonesia, China is one of the world’s top 2 sugar importing nations so a drop in their domestic production opens the door for more imports. Expectations that India will not allow additional exports this season have provided an additional boost to sugar prices.
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