Cocoa Prices Rise
Cocoa prices have risen nearly 300 points over the past 3 weeks as a positive longer-term demand outlook has been bolstered by increasing concern with upcoming West African production. While the market may be vulnerable to a near-term pullback if global risk sentiment turns negative, cocoa appears headed for a retest of its 2021 high from early March.
If improving global risk sentiment can help to soothe near-term demand concerns, coffee should be able to extend the recovery move. The Brazilian trade house Comexim forecast that Brazil’s south Minas Gerais region (which has accounted for 37% to 39% of Brazil’s total Arabica output during the past 2 seasons) lost 19% of their crop potential following last month’s frost.
A key reversal for December cotton just ahead of the USDA report is a bearish technical development. The market is extremely overbought, open interest continues to push to higher levels and this leaves the market vulnerable to a large correction if the report is not bullish.
The sugar market consolidated most of Tuesday’s gains and closed slightly lower with a quiet inside trading day. Confirmation of significant damage from Brazil’s freeze conditions helped to support the upside breakout and move to the highest price level in more than four years this week.
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