ADMIS News
COTTON
The cotton market faces demand concerns and apparently has no desire to build a weather premium. December cotton was lower on Friday on disappointing export sales, a stronger dollar, lower equity markets, and a general risk-off attitude, and it is close to breaking below a six-month trading range. US cotton export sales for the week ending June 15 came in at 42,721 bales for the 2022/23 (current) marketing year and 187,615 for 2023/24 for a total of 230,336. This was up from 164,651 the previous week but below the four-week average of 312,600. Two weeks ago, sales were above 500,000 bales and the highest they had been since January 2022. Cumulative sales for 2022/23 have reached 13.653 million bales, down from 15.555 million a year ago and the lowest for this point in the marketing year since 2015/16. The trade has not been showing much concern about the weather in Texas, with the crop conditions so far being well ahead of last year and the overall US crop right around average. However, West Texas has received little or no rain over the past seven days and the state has suffered an intense heat wave, and this may start to draw attention.
SUGAR
Sugar prices have failed to take out their late April high twice, the first time in early May and the second time at the start of last week. While in both cases they fell back to similar price levels, the severity of their Thursday/Friday downdraft suggests that sugar has further downside left. October sugar fell finished last week with a loss of 180 ticks (down 6.9%), breaking a two-week winning streak and forming a negative weekly reversal. Brazil’s Center-South production continues to outpace last year, and the forecast for the region calls for mostly dry conditions through early July, which should minimize delays and keep operations near full speed. The slow start to the Indian monsoon has slowed the planting pace for several crops, but apparently not sugar cane, which was slightly ahead of last year’s pace as of last Friday. The monsoon regained momentum over the past few days, reaching cane growing regions in west Uttar Pradesh ahead of normal.
COFFEE
The coffee market continues to be pressured by a bearish Brazilian production outlook, but other major producing nations have supply issues that could help it find its footing. September coffee has fallen for five straight sessions to their lowest level in 4 1/2 months, and it finished last week with a decline of 15.90 cents (8.8%). This was the fourth negative week of the past five. Brazil’s Arabica harvest has reached full speed, which has kept pressure on prices, and there is a strong chance that the “off-year” Arabica crop this year will be larger than last year’s “on-year” crop. Safras and Mercado estimated Brazil’s 2023/24 harvest was 39% complete as of last Tuesday versus 35% last year and a five-year average of 42%. The 12-month production total (June 2022-May 2023) was 10.771 million bags, which would be their lowest annualized total since November 2013. The negative shift in global risk sentiment has sparked concerns that restaurant and retail shop consumption could weaken.
COCOA
Cocoa is on-track for a ninth monthly gain in row, with prices having risen 38% since the contract low last September. Recent Commitments of Traders reports have shown speculators holding a near record net long position, which leaves the market vulnerable to heavy selling if support levels are taken out. September cocoa finished last week with a loss of $33 (down 1.0%) which broke a three-week winning streak. However, production issues in several West African nations continue to provide support. At the end of May, the International Cocoa Organization (ICCO) increased its forecast for the 2022/23 global production deficit to 142,000 tonnes from their previous forecast of 60,000. This would be the second large annual deficit in a row. They also projected the 2022/23 global stocks/usage ratio to fall to 32.2%, which would be the lowest since the 1984/85 season. The recent negative shift in global risk sentiment may pressure cocoa prices over the near term, but with El Nino setting the stage for another global production deficit for the 2023/24 season, cocoa could have further upside potential.
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