Cotton Remains in Downtrend
The market remains in a steep downtrend and seems to be still absorbing a significant shift in the weather pattern. Wet weather in West Texas recently, and in the forecast for the next two weeks should significantly improve the soil conditions in West Texas and help relieve some of the drought condition. The US dollar continues to advance and pushed up to the highest level in two months, and this added to the bearish tone. The weekly export sales report showed that for the week ending May 18, net cotton sales came in at 131,245 bales for the current marketing year and 84,304 for the next marketing year for a total of 215,549. The report was in line with expectations.
Cocoa prices have been resilient in the face of lukewarm global risk sentiment. Cocoa may be able to benefit from improved risk appetites. Continued weakness in the Eurocurrency and British Pound put carryover pressure on cocoa prices. While European equities extended their pullback, a rebound in US stock markets following signs of debt limit deal progress helped to soothe near-term cocoa demand concerns. A slow start to the midcrop harvest has kept near-term West African supply fairly tight, and that provided underlying support to the cocoa market.
With an uncertain near-term demand outlook, coffee needs to receive fresh bullish supply news to avoid further downside price action. London Robusta coffee prices extended their pullback from Monday’s 15-year high, which in turn put carryover pressure on New York Arabica prices as tight near-term Robusta supply had been a source of carryover support over the past few weeks. In addition, a more than 1% decline in the Brazilian currency also weighed on coffee prices as that will increase pressure on Brazil’s farmers to market their remaining old-crop coffee supplies. The Brazilian brokerage firm Pine Agronegocios raised their forecast for Brazil 2023/24 Arabica production by 800,000 bags up to 34.87 million due to good fruit development and positive weather, but they also expect that Brazilian supply will remain very tight.
After threatening for several weeks, sugar prices have made a sizable move to the downside. With key outside markets fairly weak, sugar is vulnerable to further downside action. A sharp selloff in crude oil and RBOB gasoline prices put pressure on the sugar market. The Brazilian trade group Unica released their latest supply reports which said Center-South sugar production during the first half of May came in at 2.526 million tonnes, which was 50.4% above last year’s comparable total and was well above market expectations. One positive note for sugar prices was Center-South domestic ethanol sales during the first half of May which were 6.3% above last year’s total. India’s Farm Ministry said that their 2022/23 cane harvest will come at a record high 494.2 million tonnes, which compares to 439.43 million during the 2021/22 season.
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