Potential Demand Shift For Cotton
With ample near-term supply meeting lukewarm near-term demand, cocoa is likely to remain on the defensive over the near-term. The latest supply/demand estimates from the International Cocoa Organization remain a major source of pressure as they have forecast the 2020/21 season will have the fifth largest global production surplus on record at 230,000 tonnes.
Bullish supply developments in several areas should continue to provide underlying support, so coffee is unlikely to fall sharply from its current price levels in front of the holiday weekend. A weaker Brazilian currency played a key role in coffee finishing the day in negative territory as that may encourage Brazil’s farmers to market their remaining near-term supply to foreign customers.
The technical action for December cotton has turned more bearish and the market looks vulnerable to significant long liquidation selling over the near term. Open interest remains a very high and this leaves the market vulnerable to increased selling if support levels are violated. Very weak consumer confidence readings for August are seen as negative demand factors, and with the port at New Orleans closed, exports could suffer.
Sugar prices have held within a 1.20 cent range since August 11th as the market has had trouble maintaining upside momentum over the past few weeks. While key outside markets have lost some strength, sugar continues to have bullish supply developments that are providing underlying support. Crude oil and RBOB gasoline prices continued their post-Hurricane Ida pullback, which has been a source of carryover pressure on the sugar market as that may weaken Brazilian domestic ethanol demand.
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