Softs Mostly Lower Except Coffee
Cocoa’s whipsaw price action at the end of last week is further evidence that demand concerns will weigh on the market until there is “light at the end of the tunnel” in dealing with the coronavirus pandemic. Cocoa was able to avoid shockingly bad demand-side results last week, however, and that may help to start a longer-term move towards the upside. The 700-point pullback in cocoa prices from late February through early July was fueled by expectations of a heavy decline in global demand.
Since late March, coffee prices have faced headwinds from global demand concerns and from a likely record-high Brazilian 2020/21 crop. While both of those issues will continue to apply pressure to the market, coffee is showing additional signs that a longer-term low was put in during June. For the week, September coffee finished with a gain of 4.90 cents, which was a positive weekly reversal and a third positive weekly result over the past 4 weeks.
The West Texas region does not seem to have enough rain in the short-term model, and this should help offset the negative demand tilt. The market had two major concerns last week, one being the threat to US exports by the ongoing dispute between the US and China, the other being less damage to the Texas crop than was expected from the recent dry weather.
Unless key outside markets regain their strength, sugar may turn back to the downside. October sugar kept within a tight trading range, but could not sustain upside momentum as it finished Friday’s trading session with a modest loss. For the week, October sugar finished with a loss of 3 ticks that was a third negative weekly result over the past 4 weeks. A nearly 1% decline in the Brazilian currency weighed on sugar prices as a weaker currency encourages Brazil’s Center-South mills to produce more sugar instead of ethanol.
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