Cotton Market Up

COTTON

March cotton closed higher yesterday, taking back all of Monday’s losses and then some and the market is up this morning. Global markets were soothed by reports that China was quietly pulling back on some of their Covid restrictions, and this raised hopes that US exports could improve. Last week’s export sales report showed China had cancelled 110,000 bales, but they are still the largest buyer of US cotton for the 2022/23 marketing year at 1.860 million bales. Pakistan is number two at 1.731 million. The weekly crop progress report showed 84% of the US crop had been harvested as of Sunday, up from 79% a week ago, steady with last year, and above the five-year average of 79%.

COCOA

Cocoa prices continue to face pressure from near-term demand concerns with Asia’s demand outlook put in further jeopardy after recent events in China. West African growing nations continue to have production issues this season, and that should underpin cocoa prices well above last week’s low. Reports that heavy rainfall may cause further delays with the West African main crop harvest provided support, as Ivory Coast port arrivals have just recently caught up to last season’s pace following delays seen at the start of the harvest in early October. In addition, there are reports that Nigeria’s cocoa-producing regions have a shortage of gasoline that will disrupt the flow of cocoa beans to their port facilities, while their October cocoa exports came in 21% below last year’s total. Cocoa farmers across West Africa have been unable to use adequate fertilizer and pesticide for this season’s main crop, and that will limit their ability to improve on last season’s production totals. A negative shift in global risk sentiment weakened cocoa’s near-term demand output, which in turn sent prices down into negative territory. Cocoa still has a sizable monthly gain, and that could lead to end-of-month profit-taking and long liquidation.

COFFEE

Coffee prices continue to see volatile action and will go into the final session of November within striking distance of a positive monthly reversal. With near-term demand concerns starting to fade, coffee should maintain an uptrend short-term. There are reports that a hailstorm late last week may have damaged coffee trees in Brazil’s Minas Gerais growing regions, and that provided the market with support. The Brazilian currency rallied more than 1.5% and reached a 2-week high, which provided coffee with carryover support as that will ease pressure on Brazil’s coffee producers to market their near-term supply to foreign customers. ICE exchange coffee stocks rose by 10,054 bags on Tuesday and are on-track for their first monthly increase since April. Coffee waiting to be graded declined by over 22,000 bags, which indicates the surge of coffee towards ICE exchange warehouses has ended.

SUGAR

While the market longer-term fundamentals still show enough surplus sugar to pressure world prices, the technical action remains positive, and the market acts like a short-term low might be in place. This clash might spark some volatile action over the near term. Sugar prices came under early pressure yesterday and retested Monday’s 2 1/2 week low, but then pivoted sharply to the upside. A sizable rebound in the Brazilian currency helped sugar to regain upside momentum as that will ease pressure on Center-South mills to produce sugar for export. Crude oil and RBOB gasoline were able to extend Monday’s recovery move with sizable gains, which provided carryover support to the sugar market as that may help to soothe ethanol demand concerns in Brazil and India. The global surplus for the 2022/23 season is seen at 5.2 million tonnes which is higher than the 3.9 million tonnes from a previous estimate released in September, according to StoneX.

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