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Cotton Remains In Steep Downtrend


December cotton remains in a steep downtrend and fell to its lowest level since April 14, 2021 yesterday. Traders blamed harvest pressure, a disappointing export sales report, and possible reluctance on the part of Chinese importers to commit to US cotton because of the US ban on imports of from China because of alleged forced labor in Chinas Xinjiang region. US cotton exports for the week ending October 20 came in at 64,437 bales for the 2022/23 marketing year and 7,128 for 2023/24 for a total of 75,565. This was down from 88,871 the previous week and the lowest since September 22. Cumulative sales for 2022/23 have reached 8.438 million bales, up from 8.370 million a year ago but the second lowest for this time of year since 2017/18. Sales have reached 70% of the USDA’s forecast for the marketing year versus a five-year average of 61. China cancelled 49,917 bales, all for 2022/23.


While cocoa has been unable to shake off wide-sweeping coiling price action, the market will start today’s action on-track for a positive weekly result. If global risk sentiment can avoid further deterioration, cocoa can go into the weekend on an upbeat note. The European Central Bank signaled that they will be pulling back on future rate hikes, which may reflect expectations of lower EU inflation that should benefit cocoa’s near-term demand outlook. In addition, a better than expected US GDP reading helped to soothe market concern with North American demand prospects. As a result, cocoa was able to overcome a sizable pullback in the Eurocurrency that normally would put carryover pressure on prices. Indications that this season’s production from major West African growing nations will see little improvement from last season provided the cocoa market with additional support. A negative shift in global risk sentiment that may pressure cocoa prices early in today’s action, but the market continues to hold its ground above last week’s low.


While a negative shift in global risk sentiment may keep the market on the defensive, coffee’s longer-term supply/demand outlook and the extreme oversold condition should have prices close to finding a near-term floor. December coffee reached a new 15-month low before finishing Thursday’s trading session with a moderate loss and an eleventh negative daily result in a row. A recovery move from a 3-week low in the Brazilian currency provided coffee prices with early carryover support, as that should ease pressure on Brazil’s farmers to market their remaining near-term supplies. There is increasing optimism that recent rainfall and flowering will improve the prospects for Brazil’s upcoming 2023/24 “off-year” crop, and that continues to be a source of pressure on the coffee market. Another negative factor for coffee prices has been forecasts for Vietnam’s 2022/23 coffee production to have a moderate increase from last season.


Sugar prices continue to slide further to the downside and have given back most of the early October rally. While it has received fresh support from key outside markets this week, a still-bearish supply outlook may keep sugar prices on the defensive. A sizable rebound in the Brazilian currency as well as continued strength in crude oil and RBOB gasoline prices combined to provide the sugar market with carryover support. While Brazilian ethanol demand has shown signs of improving in recent months, Center-South mills may be waiting on Sunday’s Presidential election runoff before they make any sizable adjustments to sugar’s share of crushing. As a result, expectations that Brazil, India and Thailand would all have their 2022/23 production exceed last season’s output total remains a major source of pressure on the sugar market.


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