Consolidation For Coffee Since Early Nov
It is impressive that the market experienced an upside break-out with little to no carryover support from key outside markets. If there is any pre-holiday improvement in global risk sentiment, cocoa should see a sizable extension to this week’s rally. Harmattan winds over West African growing areas have been strengthening in recent weeks, and that should have a negative impact on the region’s late main crop and mid-crop cocoa production. West Africa is well into its “dry” season that will continue until early March.
The market remains in a short-term consolidation. If global risk sentiment can show some pre-holiday improvement, the market may bounce. A sharp pullback in global risk sentiment pressured the coffee market yesterday as that may weaken out-of-home consumption prospects during the first quarter. The Brazilian currency remained well supported and is in close proximity to 6-week highs, which provided carryover support to the coffee market as that should ease pressure on Brazilian producers to market their remaining near-term supply.
The strong rally in the past week to challenge the November 16 peak occurred as open interest dropped, and this suggests short covering was the primary supportive force for the 4-day rally. March cotton pushed down the four cent limit yesterday as very weak export sales news, and increasing global economic fears helped to spark the selling. News of China canceled 144,400 bales of previously purchased US cotton helped to pressure. This was the biggest weekly cancellation since June 2012.
Sugar prices are on a 5-session winning streak as they reached multi-year price highs, and have done so in spite of global production expected to reach a record high this season. While it has found carryover support from key outside markets, sugar may have difficulty extending its fourth quarter rally unless the market can find fresh bullish supply news. Harvest delays in Thailand and Brazil have underpinned sugar prices during the late-December rally, as they should result in delays in sugar reaching the global export marketplace.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.