Demand Tone For Cocoa to Surge Higher
The turn higher after reaching a key support level yesterday plus strong follow-through buying today is a strong sign that a low is in place for cocoa. The British Pound lost more than 1.00 cent in value due to negative developments with Brexit negotiations and while their “deadline” continues to see extensions, that selloff put cocoa under early pressure as it fueled arbitrage selling of New York cocoa vs the London.
Coffee prices have seen coiling price action since the start of December, but the market is starting to show signs that the late November lows will be a near-term floor. As focus shifts away from this season’s Brazilian crop and toward supply issues with other major producers, coffee may extend higher.
Nearby cotton traded to its highest level since April 2019 after the monthly USDA supply/demand report came in bullish. In the report, US cotton production for 2020/21 was lowered to 15.95 million bales from 17.09 million estimated in November. This was lower than the average trade estimate of 16.74 million and below the low end of the range of expectations from 16.30 to 17.09 million.
Sugar’s whipsaw price action has kept it within its recent consolidation range, but once again was unable to benefit from considerable carryover strength from its key outside markets. With the market receiving fresh bearish supply news, sugar is vulnerable to end-of-week long liquidation and profit-taking.
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