Lowest Cotton Sales Since July
After breaking out on top of an eight-day consolidation pattern on Wednesday, December cotton fell back inside that range on Thursday. The dollar was stronger, stock markets were weaker, and export sales were disappointing. The export sales report showed US cotton sales for the week ending November 10 came at 25,059 bales for the 2022/23 (current) marketing year and 8,096 for 2023/24, for a total of 33,155. This was down from 157,235 the previous week and the lowest since July. Cumulative sales for 2022/23 have reached 8.801 million bales, up from 8.773 million a year ago but the second lowest since 2016/17. Sales have reached 73% of the USDA forecast for the marketing year versus a five-year average of 65%. The largest buyer this week was Mexico at 8,096 bales, followed by Taiwan at 5,807 and China at 5,720.
Cocoa prices have broken out below their 200-day moving average as they continue to be pressured by near-term demand concerns. While there have been bullish developments from the supply side of the market, cocoa may remain on the defensive. While October Euro zone CPI had a surprise downtick, it remains close to September’s record high year-over-year reading. Sizable pullbacks in the Eurocurrency and British Pound were also sources of carryover pressure on cocoa price as that will make it more difficult for Euro zone grinders to acquire near-term supplies. The recent spike in daily new Covid case counts in China has weighed on near-term demand prospects for Asia, a region still considered to be the “engine” for global cocoa demand growth. Flash floods over many Ivory Coast growing areas have resulted in delays in transporting beans to port facilities and could also see soil nutrients washed away. Global risk sentiment has seen some improvement since mid-Thursday, but not enough to strengthen cocoa’s near-term demand outlook.
Coffee prices remain on-track for a sixth negative result over the past 7 weeks as they have lost 31% in value over that timeframe. Although the market is technically oversold and looking cheap, coffee needs to see tangible signs of demand improvement in order to find a low. March coffee fell to a new 18-month low. The Brazilian currency lost more than 1% in value and reached a 3 1/2 month low while the Colombian Peso lost more than 1.5% in value, which encouraged producers in both nations to more aggressively market their near-term coffee supplies. The Euro zone CPI reading came in fractionally below its record high reading, indicating high inflation levels that will diminish European restaurant and retail shop coffee consumption over the rest of this year. While ICE exchange coffee stocks fell by 1,280 bags on Thursday, coffee waiting to be graded rose by more than 7,500 bags. This may be more evidence of lukewarm European demand as the inflow of coffee to ICE warehouses is unlikely to end anytime soon. Technical indicators are showing signs of a loss of downside momentum.
The turn lower from an extreme overbought condition suggests that a short-term peak is in place. Sugar prices followed through on Wednesday’s negative reversal with a gap lower opening as it remained under pressure and finished yesterday with a heavy loss. Sharp downside breakouts in crude oil and RBOB gasoline pressured the sugar market as that should weaken near-term ethanol demand prospects. China imported 520,000 tons of sugar in October, down 35.8% from last year. This brought cumulative imports for the year to 4.02 million tons, down 13.4% from last year’s pace. Out of total deals so far in the year that started last month, sugar mills in India shipped 200,000 tons in October, about half of the volume in the same month a year earlier, according to the Indian Sugar Mills Association. Several contracts for the new season were signed much before the release of export quota in early November. However, mills are renegotiating export contract prices as global sugar prices have gained since the government’s announcement. India’s sugar production fell 4.3% from a year earlier to 1.99 million tonnes for the October to November 15th.
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