ADMIS News
COFFEE
Coffee has made a strong start to the second quarter. If global risk sentiment continues to recover from this weekend’s events, coffee should be able to extend this recovery move. The Brazilian currency reached a 2-month high which provided coffee with early carryover support. Below normal rainfall over Brazil’s major Arabica growing regions last week may have helped support. Honduran coffee exports during March were 14% above last year’s total, which is a third month in a row that exceeded 2022’s results. However, Brazil’s March coffee exports came in at 163,444 tonnes, which was 20% below last year’s total. While early forecasts have Brazil’s 2023/24 production coming in above this season, their harvest will not reach full speed until mid-May.
COCOA
While weekend events made it likely that cocoa prices would lose ground early this week, there were also bearish supply developments that put pressure on the market. There may be further downside action over the next few days, but a positive longer-term supply/demand outlook should help cocoa prices find their footing. OPEC’s oil production cut weighed on cocoa prices as higher fuel prices are likely to weaken demand for discretionary items such as chocolates. After posting sizable gains for March and the first quarter, cocoa is vulnerable to profit-taking and long liquidation. However, the strong rise in open interest is a positive force.
COTTON
December cotton experienced an outside day down after trading up to the highest level since March 9th yesterday and this is a negative technical development. Demand factors remain a bearish concern for the market, and the higher than expected planted area might be considered a negative factor as well. Outside market forces were very supportive on the session so the weak technical action is a surprise. May crude oil was sharply higher after OPEC decided to cut production, but this did not seem to have much of an impact on cotton, even though high crude oil prices make man-made fibers more expensive to produce.
SUGAR
While there are bullish supply factors that are providing support, sugar may have climbed “too far and too fast” and looks to be vulnerable to a near-term pullback. OPEC’s oil production cut gave sugar prices significant early support as that should help to strengthen near-term ethanol demand in Brazil and India. India has been ramping up their ethanol industry, and that may get more momentum with higher energy prices. Brazil’s Center-South mills started their 2023/24 crushing and normally allocate a large portion to ethanol very early in the season.
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