Cocoa Prices Fall
Cocoa prices have fallen more than 100 points below last Friday’s high (down 4.3%) in front of critical demand data late this week. While the market was pressured by bearish supply news, cocoa may be close to finding a near-term low. While there is daily rainfall in the forecast for many West African growing areas through late next week, the region will see a shift towards drier conditions. This should assist in harvesting, drying and transporting beans to port facilities after heavy rainfall led to significant delays at the start of October. In addition, there were reports that West African nations have larger than normal stocks of last season’s mid-crop cocoa due to buyers being unable to receive adequate financing, and that has been a source of pressure for the cocoa market early this week.
December cotton closed lower yesterday after trading to its lowest level since October 7. Cotton appeared to fall victim to the generally bearish tone across the commodity markets. Crude oil prices fell off sharply, which makes man-made fibers more competitive with cotton. India is expected to produce 34.4 million (170 kg) bales in the 2022/23 season that started on October 1, up 12% from year-ago levels, according to a trade body. Planted area has increased 10% and yields are also expected to rise. Brazilian production is seen rising to 13 million bales for 2022-23 from 12.1 million a year earlier based on improved yields, according to the USDA’s Foreign Agricultural Service. Exports continue to be encouraged by a weak currency and projected at 9.2 million bales, up from 7.7 million this year.
Coffee prices have been unable to sustain upside momentum after losing 22.75 cents over the past week (10.4% in value). December coffee fell to a new 13 1/2 week low and a fifth negative daily result in a row. ICE exchange coffee stocks fell by 600 bags on Tuesday to reach their lowest level since May 1999 and reflects tight near-term European supplies. Reports that Brazilian Arabica growing areas have seen good flowering in recent weeks has weighed on coffee prices, as that should improve the prospects for their upcoming 2023/24 crop.
Sugar prices have been unable to sustain their October rally as they have seen back-to-back negative daily results this week. Unless it can find carryover support from key outside markets, sugar is vulnerable to further downside price action. Crude oil and RBOB gasoline prices continued to slide as they reached 2-week lows, and that was a significant source of pressure on the sugar market. The Brazilian currency posted a second daily gain in a row but remains near the middle of its monthly trading range, and that has limited any carryover support it can give to sugar prices. Ethanol demand in Brazil has been subdued following their government’s moves to cap state fuel taxes, and will need much stronger energy prices in order for Center-South mills to shift some of their crushing from sugar production over to ethanol production.
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