Mixed Softs Led By Coffee
With a nearly 350 point rally (up 16%) over the past 3 weeks, cocoa is likely to be a prime candidate for some profit-taking if global risk sentiment takes a negative shift. There may be a “wild card” factor developing on the supply side of the market, however, and that can help cocoa remain fairly well supported on pullbacks.
The market turned lower from an overbought condition this week from the key resistance level of 127.15 and is now well into a correction. An improving global demand outlook provided support following positive guidance from Starbucks and Nestle. In addition, ICE exchange coffee stocks fell by 20,797 bags on Thursday and are close to falling below 1.5 million bags for the first time since mid-2017.
December cotton pushed through the July 9 high yesterday and traded to its highest level since March 5th finding support from weather and export sales. China was an active buyer. The report showed US cotton export sales for the week ending July 30 coming in with net cancellations of 68,537 bales for the 2019/20 (current) marketing year and net sales of 130,762 for 2020/21 for a total of 62,225.
While it has benefited from improving global risk sentiment and recent strength in key outside markets, sugar will continue to face headwinds from increasing production both in Brazil and India. October sugar rallied to a new 4 1/2 month high yesterday. While there was significant rainfall this week, increasing concern that Thailand’s 2020/21 production will stay near multi-decade lows has given the market an early source of strength.
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.