Cotton Holds Steady Overnight
December cotton closed limit down yesterday and the market held steady overnight. The early rally to above Friday’s high failed to attract new buying interest. Even with the rally in the stock market, the market is finding it difficult to avoid selling from fund traders. Open interest continues to trend higher as more and more money managers seem to want to own short positions in cotton as a hedge against global recession. Cotton harvested as of October 16 was up 8% at 37%. The top producing states report Texas 40%(+5%), Georgia 27%(+8%), Oklahoma 7%(+6%), Arkansas 50%(+16%), Mississippi 63%(+9%). Cotton rated good/excellent as of October 16 was up 1% at 31% and poor/very poor was down 1% at 46%. Current G/EX is down 15% versus the 10 year average and Poor/Very Poor is up 25% versus the 10 year average.
High inflation continues to be a problem for global cocoa demand as Europe and North American third quarter grindings posted negative year-over-year results. Asia was able to have a strong third quarter grindings result in spite of ongoing Chinese COVID lockdowns, however, and that may help to soothe demand concerns. Global equity markets extended their recovery move through the weekend while the Eurocurrency and British Pound posted moderate gains, all of which provided carryover support to the cocoa market as that can help to improve cocoa’s demand outlook during the fourth quarter. A slow start to the West African main crop harvest has also provided a boost to cocoa prices early this week. Heavy rainfall over West African growing areas in recent weeks has led to delays in harvesting, drying beans and transporting beans to port facilities.
While coffee was unable to end its current daily losing streak, Monday saw the first trading session without a “lower low” since October 11th. With production from major growing nations expected to remain at lower levels while global consumption appears to be holding firm, coffee prices look undervalued at current levels and may be in position for a recovery move. Below-normal rainfall over Brazil’s major Arabica-growing areas last week provided the coffee market with early support, as that may extend the drier than normal conditions those areas have seen during the La Nina weather event. A more than 2% decline in the value of the Brazilian currency weighed on coffee prices late in the day as that may encourage Brazil’s farmers to market their remaining near-term supply to foreign customers. Safras and Mercado said that Brazil’s 2022/23 crop was 60% sold as of October 18th, which compares to 68% on that date last year and a long-term average of 58%.
Sugar prices have been unable to find their footing as they are on a 6-session losing streak. Unless it can find significant carryover support from key outside markets, sugar is likely to remain on the defensive. A sharp selloff in the Brazilian currency weighed on sugar prices as that may encourage Brazil’s Center-South mills to produce more sugar for export. Crude oil was unable to sustain a recovery move through the weekend, which also pressured sugar prices. In addition, sugar’s share of crushing is expected to increase from the 45.4% share seen during the second half of September. Expectations for higher production from India and Thailand continue to be a source of pressure on the sugar market early this week. The sugar commissioner for India’s top-producing state of Maharashtra forecast their state’s 2022/23 sugar production will have a slight increase on last season’s record high. 2022/23 sugar exports from Maharashtra were also forecast to reach a record high of 6 million tonnes.
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