ADMIS News
COCOA
March cocoa has recovered all its losses from last Thursday’s key reversal lower and is in a good position to form another leg higher. Reports that the Harmattan winds have returned to Ivory Coast and that they are threatening mid-crop production contrast with reports last week that the Harmattan had been moderate and that the crop was doing well. West Africa is in the middle of its dry season. There is no rain in the forecast through late next week, and daily high temperatures could reach 100 degrees Fahrenheit or higher in some regions. January’s combination of improving global risk sentiment and declining inflation have been viewed as positive for demand. Bernstein raised its price target for Hershey, noting strong revenue growth prospects from price increases and improving sales volume. If the Fed’s FOMC commentary is viewed as hawkish, it could make cocoa bulls reluctant to push higher, but we suspect the weather in West Africa will take precedence.
COTTON
Traders are less optimistic about cotton demand than they were a week ago, in the wake of last Thursday’s disappointing export sales report. March cotton has been consolidating since putting in a three-month high on Friday. The recent surge in exports was anticipated to some extent, as cash trades had been looking for China to step up its purchases ahead of the Lunar New Year holiday. However, the amount of purchases from the US may have been better than expected. Disappointing economic data from China overnight could raise new concerns about demand, however. The trade will be looking to this afternoon’s FOMC update, as a hawkish statement could raise additional demand concerns.
COFFEE
Key coffee growing regions in Brazil are expected to see some rain over the next week, which could bring relief to the crop. March coffee was slightly lower overnight after trading to its highest level since December 29 yesterday. The market has drawn support from tight global supply and a generally positive economic tone. The FOMC meeting results due out after today’s close could affect market sentiment and the inflation outlook, and this could impact out-of-home demand expectations for coffee. Daily rainfall is in the forecast for Brazil’s major Arabica growing regions through late next week, which should benefit their upcoming crop. There has been a surge in Vietnamese robusta exports over recent weeks, but global supplies remain tight. Indonesia’s robusta exports totaled 4,705.59 tonnes in December, down from 52,382.60 for the same period in 2022.
SUGAR
Major cane-growing regions in Brazil are forecast to see daily rainfall through late next week, which may slow down this season’s late harvest and crushing activity, but it would also ease concerns about the upcoming crop. If the rains come up short of expectations, it could support a move in March sugar through last week’s highs. India’s sugar production totaled 18.7 million tonnes in the first four months of the season that started on October 11, down from 19.3 million for the same period last year. India has shown no sign of relaxing its sugar export ban. The poor crops in India and Thailand for the 2023/24 marketing year have been offset by record production in Brazil.
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