Softs Outlook for June 3
Cocoa prices saw an abrupt change in fortune yesterday and the market gave back most of its upside breakout. Although there have been bullish developments from the supply front, concerns over global demand continue to limit cocoa’s ability to sustain upside momentum.
While the market has received some recent bullish supply/demand news, an “on-year” Brazilian crop continues to be a major source of pressure on Coffee prices. Coffee was unable to take advantage of stronger global equity markets, as well as a 2.5% gain in the Brazilian currency as it rallied to a new 7-week high.
While the market managed to close a bit higher on the day, July Cotton turn down and closed well off of the highs after reaching the 50% retracement of the January-April decline. This leaves the appearance that a short-term peak may be in place.
Sugar found carryover support from its key outside markets to extend its winning streak to 3 sessions and the market is trading higher this morning. While strength in those outside markets can change the near-term supply outlook, sugar’s top 2 producing nations remain on-track for sizable upticks in output that should limit the market’s upside.
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