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Cotton Higher, Softs Mixed


The market is consolidating in front of tomorrow’s critical demand-side data. Second quarter grindings results start with the European total several hours before cocoa’s open. Although the Eurocurrency reached a new 4 1/2 week high, recent Euro zone economic data has reflected the negative impact of the coronavirus with Tuesday’s German and Euro zone ZEW surveys well below trade forecasts. On the other hand, Nielsen said US consumers spent $3.7 billion on chocolate from the start of March through late June which was 6.3% above the comparable period last year.


Perhaps a rebound in global risk sentiment may improve the demand outlook. The Brazilian currency rebounded from a 2-week low into positive territory which provided coffee with early carryover support as it eases pressure on Brazil’s farmers to market their near-term supply to foreign customers. However, drier and warmer weather over Brazil’s south Minas Gerais Arabica-growing region is likely to help reduce this year’s harvesting delays and that weighed on coffee prices as it should speed up the near-term supply flow from what is widely expected to be a record high crop.


The market remains in a short-term downtrend and is correcting the overbought condition. There is a little bit of rain moving into the Texas Panhandle, however and with the intense heat, the rain will likely provide little relief. December cotton gapped lower on Tuesday and traded to its lowest level in more than a week as the market reacted negatively to Monday afternoon’s Crop Progress report which showed Texas crop conditions actually improving last week, contrary to expectations based on recent weather in Texas. The trade is also concerned that rising tensions between the US and China could affect US cotton export prospects.


Sugar’s inability to find its footing in spite of a rebound in global risk sentiment indicates that a bearish global supply outlook remains a major source of pressure. The market fell below both its 50-day and 100-day moving averages for the first time since mid-May. While crude oil prices bounced back from early pressure, RBOB gasoline posted sizable losses that were a source of carryover pressure to the sugar market as it will keep Brazilian domestic ethanol subdued. Warm and dry weather in the forecast for Brazil’s Center-South cane-growing areas also weighed on sugar prices as they will keep harvesting and crushing delays to a minimum.

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