Cotton Six-Day Surge Up
While cocoa prices saw a negative shift in global risk sentiment at the start of this week, they still managed to hold ground in positive territory. If the market continues to receive bullish supply developments, cocoa prices may head higher. Sharp selloffs in the Eurocurrency and British Pound put carryover pressure on the cocoa market, while sluggish Chinese economic data cast a shadow over Asian near-term demand prospects.
While coffee prices could not extend their winning streak to a sixth session in a row, the market will start today’s action in close proximity to last Friday’s 6 1/2 week high. If global risk sentiment continues to improve, coffee should extend its July/August recovery move above and beyond its 200-day moving average. While global risk sentiment took a negative shift following Chinese economic data, risk appetites continue to improve.
December cotton gapped higher on Monday and quickly moved to limit-up for the second session in a row. The market left another gap this morning. Friday’s USDA supply/demand report showed a sharp reduction in US output, and the market is seeing a wave of short covering. The report put US cotton production at its lowest level since the 2009/10 marketing year and ending stocks the tightest on record going back to 1960/61. World ending stocks are projected to be the lowest since 2017/18. The weekly crop progress report showed 34% of the US cotton crop in good/excellent condition as of Sunday, up from 31% the previous week but below the 10-year average of 51%. Several states improved, including Georgia, Mississippi, and Arkansas, but the biggest state of them all, Texas was unchanged.
A huge setback for key outside markets drove sugar down into negative territory. October sugar initially rallied to a new 3 1/2 week high, but came under pressure late in the day to finish Monday’s trading session with a minor loss. A severe pullback in crude oil and RBOB gasoline prices put significant carryover pressure on the sugar market.
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