Lower Sugar Prices
After seeing wide-sweeping coiling action over the previous 3 sessions, sugar prices have fallen to the lower portion of their recent consolidation zone. Unless the market can find fresh carryover support from its key outside markets, the sugar market may be setting up for a sizable downside move. Another massive selloff in crude oil and RBOB gasoline prices put significant carryover pressure on the sugar market as that may further weaken near-term ethanol demand in Brazil and India. Expectations for production declines in India, China and the EU this season helped to underpin sugar prices above their recent lows. There are reports that French sugar beet planted area will reach a 14-year low, and that should set the stage for a third straight decline in EU sugar production during the 2023/24 season. In contrast, early forecasts show Brazil’s Center-South 2023/24 sugar production having a second sizable increase in a row.
Cocoa’s near-term demand outlook remains an area of concern, but it was able to benefit from a positive shift in global risk sentiment. With one major demand-side hurdle out of the way, cocoa can find additional support from bullish supply developments and extend its recovery move. The latest US CPI and core CPI readings were in-line with trade forecasts and while they continue to pull back from last year’s multi-decade highs, they remain at fairly high levels. A moderate pullback in the Eurocurrency and British Pound also put pressure on the cocoa market, but both currencies remain near 1 1/2-month highs which should make it easier for European grinders to acquire near-term supplies. While they continue to see turbulent action, a significant rebound in European and US equity markets helped cocoa prices to rally as that should help to improve near-term demand prospects in both regions.
If global risk sentiment continues to improve, it should help coffee’s out-of-home consumption prospects and help the market lift further clear of Monday’s 4 1/2 week low. Above normal rainfall last week over Brazil’s major Arabica growing regions pressured the coffee market as that should improve prospects for their upcoming coffee production. The Brazilian currency remains close to Monday’s 1-month low which has been an additional source of pressure on coffee prices as that may encourage their producers to market their remaining 2022/23 coffee supplies to foreign customers.
May cotton closed slightly higher yesterday following Monday’s sharp recovery. The market drew support from moderate gains in equities and bonds. The CPI increased 6.0% in February over the last year, the smallest increase since September 2021, and in line with economist expectations, and this seemed to support the stock market. There were reports of heavy price fixations on the part of mills after the selloff last week. Growers may be anxious to finalize last year’s crop sales ahead of the new planting season.
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