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Cocoa May Regain Upside Momentum


While the cocoa market lost more than 80 points in value over the past 2 sessions (down 2.8%), it held above its late February lows and avoided a weekly reversal. If global risk sentiment and key outside markets continue to improve, cocoa may be able to regain upside momentum. For the week, May cocoa finished with a gain of 12 points (0.4%) which was a second positive weekly result over the past 3 weeks. Updated forecasts call for daily rainfall over West African growing areas through the end of next week may signal the finish for the region’s dry season, which pressured cocoa prices going into the weekend. Recent inflation readings in Europe and North American remain at historically high levels, which may diminish demand for discretionary items such as chocolate and continue to weigh on cocoa prices. Although Ivory Coast and Ghana are both expected to have increased production this season, Ivory Coast port arrivals are running behind last season’s pace. While part of that deficit is due to more beans being processed by domestic grinders, a portion of this season’s production has been smuggled to Ghana due to higher farmgate prices.


Coffee prices have lost 15.5 cents in value (down 8%) during the past 7 sessions as market concern over Brazil’s upcoming crop have eased. For the week, May coffee finished with a loss of 9.85 cents (down 6.2%) which broke a 6-week winning streak. There is a wide range of forecasts for Brazil’s 2023/24 Arabica production, but improved weather since the start of this year have led to a growing consensus of opinion that Brazil will avoid the normal output decline that occurs with an “off-year” crop. A significant increase in Central American coffee exports since the start of this year continues to pressure coffee prices. Indications that Brazil’s 2022 consumption fell 1% from the previous year was further evidence of demand issues that continue to weigh on coffee prices.


May cotton closed moderately higher on Friday but down 73 for the week. The dollar was lower, and the stock market and crude oil were higher on Friday, all of which was supportive to cotton. The trade was disappointed with last week’s export sales report, which showed net sales of 267,823 bales for the week ending February 23, down from 437,202 the previous week. To keep things in perspective, the previous week’s number was the highest since last May, and last week’s number was the second highest since September. For this week’s USDA supply/demand report, the average trade expectation for US 2022/23 ending stocks is 4.26 million bales, with a range of expectations from 4.05 to 4.50 million. This would be down from 4.30 million in the February update.


Sugar prices have been unable to shake off recent whipsaw price action, but finished last week with an upside breakout to a new 6-year high. For the week, May sugar finished with a gain of 125 ticks (up 6.4%) which broke a 2-week losing streak. Indonesia announced that they will import 215,000 tonnes of sugar to control costs, which provided the market with early support. The India Sugar Mills Association (ISMA) reported that their nation’s 2022/23 sugar production through the end of February was only 1.8% ahead of last season’s pace, and also reported that there were 467 mills processing cane on February 28th versus 484 on that date last year. This followed reports last week that more than two dozen mills in India’s top-producing state of Maharashtra had already finished their operations for the season by February 28th. If more mills finish their operations due to a lack of cane to crush, India’s 2022/23 output is more likely to come in below last season’s production total. Indonesia ordered 2 state-owned food companies to import 215,000 tonnes of white sugar through the end of May to control rising food costs.


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