ADMIS News
COCOA
Cocoa prices have dealt with near-term demand issues for more than 2 years, first from the COVID pandemic and then from multi-decade high inflation in many developed economies. While a new demand concern is developing in a key region, bullish supply developments can help the cocoa market find its footing. A negative shift in global risk sentiment included sharply lower European and US equity markets as well as a new 19 1/2 year low in the Eurocurrency, which put significant carryover pressure on cocoa prices early this week.
COFFEE
Coffee prices have made a significant turnaround on both sides of the weekend and moved to a new 7 1/2 week high this morning. Although demand-side issues are far from being fully resolved, coffee continues to receive bullish supply news that can fuel this recovery move. Very dry weather over Brazil’s major Arabica growing regions during the second half of August have added to drier than normal conditions the region has seen during two separate La Nina weather events since mid-2020.
COTTON
December cotton closed lower yesterday and the market is down sharply this morning. It has been consolidating in a range since putting in a high for the move on August 15. The dollar was up sharply and was threatening to take out last month’s 20-year high, which was negative to cotton, as was a lower stock market. The weekly Crop Progress report showed 31% of the US cotton crop was rated good/excellent as of August 21, down from 34% the previous week, 71% a year ago, and a 10-year average at 51%. Texas was 11% G/E, down from 14% the previous week, 70% a year ago, and a 10-year average of 39%. It was also the lowest on record for this point in the season.
SUGAR
If key outside markets can regain and maintain their strength, sugar prices should be able to regain upside momentum. A sharp selloff in crude oil and RBOB gasoline prices put carryover pressure on the sugar market as that should weaken near-term ethanol demand prospects. After sugar’s close, however, crude oil rallied more than $1 a barrel which may provide early support to sugar. A rebound in the Brazilian currency help sugar prices to regain lost ground late in the day, as that may ease pressure on Center-South mills to produce sugar for export.
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