Cotton Futures Higher
Even after falling 200 points over the past 3 sessions (down 8.3%), cocoa prices will have trouble finding their footing if increasing US coronavirus cases dominate news headlines. Cocoa’s demand concerns have found little relief from improving global risk sentiment and strength seen in key outside markets. September cocoa finished the month and quarter by reaching a new multi-year low before closing with a third heavy loss in a row.
Weather issues for Brazil’s key Arabica growing regions remain a major source of support for the coffee market as heavier than normal rainfall will be followed by much cooler than normal temperatures. While the potential for frost is remote, the wet and cool weather is likely to cause drying and quality issues with newly harvested beans. Coffee has been dealing with global demand concerns during the second quarter as the surge in supermarket and online sales have not made up for the loss of restaurant and retail shop sales.
The market took off to the upside after the release of the USDA Acreage report, which came in much lower than expected. In the report, the USDA put US cotton acreage for 2020/21 at 12.2 million acres, down from 13.70 million estimated in June and down 11% from last year. The number was not only below the average trade estimate of 13.153 million, it was below the low end of the range of expectations (12.50-13.75 million).
Sugar was able to climb back into their recent consolidation zone following last week’s downside breakout as the market has received some fresh bullish supply news. With the market still looking at a sizable 2020/21 global production surplus, however, sugar may need a positive turnaround in key outside markets to prevent this recovery move from running out of steam. A pullback in the Brazilian currency and weaker crude oil prices kept further gains in check as they encourage Brazil’s Center-South mills to produce more sugar instead of ethanol.
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.