ADMIS News
COTTON
July cotton gapped higher on Friday and rallied sharply, trading to its highest level since April 19. The market has seen choppy action over the past couple of months, and it is back near the top of the two-month trading range. Crude oil and the stock market were higher, and the dollar was lower; all those moves are supportive to cotton. Some traders viewed the move on Friday as a follow through from Thursday’s limit up move off a strong export sales report and a US Drought Monitor that showed conditions had worsened in west Texas from the previous week.
COCOA
After a sluggish start to May, cocoa prices have benefited from a positive turnaround in global risk sentiment. If a “risk on” mood can continue early this week, the cocoa market will be in a good position to resume its longer-term uptrend. For the week, July cocoa finished with a loss of 4 points and a second negative weekly result in a row. Global risk appetites continued to strengthen following US jobs data, and that benefitted cocoa prices as that should help to shore up near-term demand expectations. In addition, sizable rallies in the Eurocurrency and British Pound provided carryover support to the cocoa market. While it is well below levels seen last year, consumer inflation remains stubbornly high in many developed economies. As a result, the cocoa market will take some direction from updated CPI readings from the US, Germany and France this week.
COFFEE
After several weeks of choppy action, coffee prices were able to bounce Friday. While an improving demand outlook has provided support, it may be bullish supply developments that can fuel coffee’s recovery move. For the week, July coffee finished with a gain of 2.10 cents (up 1.1%) which broke a 2-week losing streak. Colombia’s coffee growers federation said that their nation’s April coffee production came in at just 566,000 bags. While April tends to be one of Colombia’s lower months of production during most years, this April’s output was 25% below last year’s total and the lowest production total for any month since September 2012. Brazil’s Arabica harvest will be underway in all major growing areas by the end of next week, and that should lead to their new-crop supply reaching the global export marketplace by the end of June. A rebound in global risk sentiment provided a boost to out of home consumption prospects which provided an additional source of strength to coffee prices.
SUGAR
While it just missed out on a positive weekly reversal, sugar’s turnaround from a 2-week low last Wednesday sets the stage for a new 11-year high early this week. With Brazil’s Center-South cane harvest and crushing underway, sugar prices look to be overvauled at current price levels. For the week, July sugar finished with a loss of 3 ticks that broke a 6-week winning streak. Crude oil and RBOB gasoline were able to extend their recovery move from last Thursday’s spike lows, and that provided significant carryover support to the sugar market as it should strengthen ethanol demand in both Brazil and India. Indications that early season sugar production in Brazil’s Center-South region may run into loading delays at Brazilian ports also gave a boost to sugar prices as that will limit Brazil’s exports during May and June. Brazil’s Center-South sugar production during the last half of March and the first of April was 481% above last year’s total with many mills in the region starting their operations early to process cane that was harvested during the first quarter. Even with the late March/early April rally in energy prices, Center-South mills kept sugar’s share of crushing ahead of last season’s level. As a result, sugar should see an increased crushing share during late April when crude oil and gasoline prices had a sizable pullback.
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