Dryness Fears in Brazil Supports Sugar Prices
While global risk sentiment took a positive shift at the end of last week, cocoa will continue to face global demand concerns while COVID-19 cases are on the rise and many locations are instituting fresh shutdown measures again. There has been an uptick in supply-side anxiety over the past few weeks, however, and that should provide underlying support for cocoa prices.
With near-term supply issues continuing to provide underlying support, coffee is in a good position to extend its recovery move. For the week March coffee finished with a gain of 2.75 (2.5%) and a second positive weekly result in a row. Near-term supply concerns from storm damage and flooding in Vietnam and Central America continue to underpin coffee prices.
The market remains in a short-term downtrend as traders continue to absorb the bearish news from the USDA last week. The technical action is also weak as the market appears to be breaking out to the downside of a bear flag formation, with 66.96 as the next downside target for December cotton.
Since the start of the fourth quarter, sugar prices have rebounded from four sizable pullbacks, three of those occurring during the past 3 weeks. The upside break-out this morning is impressive and leaves 15.59 as next upside target. While the market has been resilient in the face of uncertain global risk sentiment and volatile key outside markets, it has been unable to close above the 15.00 cent level. Longer-term dryness fears in Brazil continues to support.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.