Limited Cotton Damage
It appears that Hurricane Laura went through without causing much damage to the US cotton crop, and so far the rains do not appear heavy enough to cause widespread flooding in cotton fields. Cotton export business is showing some life. The weekly export sales report showed sales for the week ending August 20 at 156,257 bales for the 2020/21 (current) marketing year and 7,920 for 2021/22 for a total of 164,547. This was up from 132,973 the previous week and was the highest weekly total since June 25.
Dry conditions in West Africa, tightening exchange stocks and renewed political instability in Ivory Coast are bullish factors for the cocoa market. December cocoa experienced and upside break-out and traded to its highest level since March 5. As reported on Wednesday, Nigeria’s cocoa output is expected to
drop 20% in 2020/21 due in part to limits on inputs resulting from measures aimed at curbing the spread of coronavirus and also due to weather at harvest. Nigeria is the world’s fifth-largest cocoa producer.
The market remains in a volatile and choppy uptrend and has seen some recent consolidation near the 122.80 level basis the December contract. This is the 50% mark of the December to June break. December coffee closed slightly higher yesterday but only after it sold off to its lowest level since August 21st. This followed the market’s failed attempt to take out its August 5th high on Wednesday.
The market managed to hold some important support levels and turned up yesterday but the upside does appear limited without some change in the supply outlook from either Brazil or India. Brazil Center-South sugar production is running more than 48% ahead of last season’s pace and while that is unlikely to last, it makes a strong case that Brazil will see record high production this year. For now, there appears to be plenty of sugar supply to fill the world’s needs, and many traders expect ending stocks to come in near the highest level in eight years.
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