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Cotton Demand Factors Bearish


The market is attempting to hold the October 7 low and has consolidated ever since. Demand factors are still bearish with traders concerned with demand during the period of global recession ahead. India is likely to produce 34.4 million bales this year, up 12% from year ago due to expanded acreage due to high prices last year. December cotton closed higher for the first time in four sessions yesterday on ideas that the US crop is smaller than the current USDA estimate. The dollar was lower as well, which improves prospects for US exports. The stock market was higher, which improves demand prospects. The weekly Crop Progress reports showed 37% of the US cotton crop had been harvested as of October 16, up from 29% the previous week and above the 10-year average at 29%.

cotton field w close up


Cocoa prices continue to see whipsaw price action as bullish supply developments have been balanced against near-term demand concerns. With critical demand-side data later this week, cocoa prices may find their footing. In spite of significant improvement in global risk sentiment and key outside markets, demand concerns remain a front-and-center issue for the cocoa market following disappointing European third quarter grindings.  Asia has been seen as the engine for demand growth over the past few years, and in spite of Chinese economic and COVID difficulties is more likely to have a positive year-over-year result. The latest weekly readings for Ivory Coast port arrivals came in below last year’s comparable total, it also had large weekly increase in Ivory Coast port arrivals that helped to soothe near-term demand concerns.


The market remains in a steep downtrend and reached a new 3-month low for a fourth negative daily result in a row. Positive reports on recent flowering in Brazil’s Arabica-growing regions continue to weigh heavily on coffee prices, as that should help to improve their 2022/23 production outlook. Inflation levels remain high enough to discourage discretionary spending, and that has pressured coffee prices as that may lead to lower restaurant and retail shop consumption. The US Green Coffee Association said that coffee stocks at the end of September were 6.378 million, which were 71,608 below the August month-end total. Although that was 5.9% above year-ago levels, that was the first month decrease for US green coffee stocks since March.


Unless there is significant improvement from key outside markets, sugar could experience a short-term correction. A moderate rebound in the Brazilian currency provided carryover support that kept further losses in check yesterday. There has been a shift in Brazil’s Center-South crushing away from ethanol production since mid-year, and that has boosted expectations for a sizable increase in Brazil’s 2022 exports, and that could spark some selling pressures. India’s Food Secretary indicated that his nation will announce their 2022/23 sugar export policy within a week, with many trade forecasts expecting their full season quotas to be at least 8.0 million tonnes. Energy prices remain below last week’s highs as crude oil and RBOB gasoline both finished Monday in negative territory, which should further weaken ethanol demands prospect and could pressure the sugar market.


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