ADMIS News
SUGAR
The sugar market remains in a steep uptrend and has posted new contract highs in seven of the last eight trading sessions. This leaves the market technical readings in an extreme overbought condition. In addition, the COT report showed Managed Money fund traders net long 215,649 contracts which is historically high. China officials have lowered their production forecast to 9.00 million tonnes from 9.33 previous. The overbought condition has recently been offset by the continued rise in open interest. From a production perspective, the Brazil harvest looks to get more and more active over the near term which could add supply to the world market. Crude oil and RBOB gasoline prices came under pressure following the holiday weekend, and weighed on sugar prices as that may weaken near-term ethanol demand.
COCOA
Cocoa prices have been resilient despite lukewarm global risk sentiment following the holiday weekend. With critical inflation data over the next few days, however, cocoa remains vulnerable to a near-term pullback. With many nations still out on holiday, a focus on near-term demand may have triggered a wave of profit-taking and additional long liquidation. The latest readings for US CPI will come out on Wednesday with results for Canada, the UK and the Euro zone coming out next week. High inflation levels have had a negative impact on demand for discretionary items such as chocolate, so cocoa prices will need to see a continued decline in year-over-year CPI results to shore-up near-term demand prospects.
COFFEE
While coffee has found some benefit from an improving demand outlook, there has been a bearish shift in Brazilian supply prospects. Unless there is significant improvement in global risk sentiment, coffee may see selling over the near-term. Lukewarm global risk sentiment pressured the coffee market as that may weaken out-of-home consumption demand. In addition, a pullback in the Brazilian currency put carryover pressure on the coffee market. Safras & Mercado forecast Brazil’s 2023/24 Arabica production at 43.5 million bags, which would be 21% above last season’s output. This is in-line with recent trade estimates, which strengthens the case for the 2023/24 “off-year” crop to be larger than the 2022/23 “on-year” crop.
COTTON
July cotton closed lower on Monday after a sharp rally last Thursday. The dollar was higher, which was negative to export commodities like cotton. For the USDA supply/demand report today, the average trade expectation for US cotton 2022/23 ending stocks is 4.30 million bales, unchanged from the March report. Expectations range from 4.05 to 4.50 million. World ending stocks are expected to come in around 90.80 million bales (range 89.67-92.00) versus 91.15 million in March.
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