Softs Mostly Higher
September cocoa shook off early pressure yesterday and climbed to a new 4 1/2 week high, but then had a sizable pullback before finishing Thursday’s trading session with a small gain. A rally in the Eurocurrency to a new multi-year high was a critical factor with cocoa prices finishing the day in positive territory as that currency’s recent strength should benefit Euro zone grinders with acquiring near-term cocoa supplies.
The market is in a steep uptrend and the surge this week leaves futures a bit overbought. The spreading virus situation in Vietnam sparked buying. While the market is vulnerable to some short-term corrections, signs of improving global demand can help coffee to extend the trend. Nestle reported quarterly coffee sales that were above analyst expectations, and that provided underlying support as it followed positive guidance from Starbucks that has helped to soothe near-term demand concerns.
December cotton drew support from a weaker dollar and from as stronger than expected weekly Export Sales report. The rally corresponded closely with the decline in the dollar. Export sales showed US cotton sales for the week ending July 23 at 118,968 bales for the 2019/20 (current) marketing year and 9,475 for 2020/21, for a total of 128,173. This was in contrast to the net cancellations for 2019/20 in each of the previous two weeks and was the largest total for the current marketing year since June 4.
Fears of another drop in Thailand production plus improving demand are factors which have offset the expected big production from Brazil/India. Sugar prices have been resilient this week in spite of carryover pressure from key outside markets and a bearish global supply outlook. The market is on-track for a third monthly gain in a row and seems to be in position to break-out of the June/July consolidation zone.
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