Cotton Under Pressure
Cocoa’s demand concerns remain a front-and-center issue for the market, particularly in Europe and North America where coronavirus restrictions are likely to remain in place. Key outside markets and global risk sentiment have taken a positive shift early this week, however, which combined with bullish supply news has helped cocoa prices hold their ground above their recent lows.
Coffee prices remain in close proximity to last week’s contract low. With the market receiving some help on the demand front, coffee may be in position to bounce. The Brazilian currency extended its recovery move with a 1% gain on Monday, and that provided coffee with carryover support as it eases pressure on Brazil’s coffee producers to market their near-term supply. There were dry conditions over Brazil’s key south Minas Gerais growing region over the past week, and there is no rainfall in the forecast until the middle of next week.
With less threatening weather, December cotton came under significant selling pressures overnight but support held and the market has bounced well up from the lows. Much of Texas looks like it could get some rain in the next week. The 5-day forecast calls for an inch or more across roughly two-thirds of the state, with only the far southwestern corner receiving less than 1/2 inch.
Sugar’s coiling price action has kept the market close to its June 10th high, but unable to break out above that level. Sugar has been unable to benefit from carryover support from key outside markets and improving risk sentiment, and remains vulnerable to a near-term pullback. While crude oil reached 2 1/2 month highs, the Brazilian currency gained more than 1% in value and risk appetites turned positive late in the day, sugar prices did not bounce.
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