Strong Uptrend Continues in Cotton
While cocoa has lifted clear of last Thursday’s 3 1/2 week low, it will deal with near-term demand concerns and will react to the ebb and flow of Brexit negotiations. The longer-term demand outlook should improve by the middle of next year while there are fresh bullish supply developments, however, so cocoa is likely to be fairly well supported on any near-term pullbacks.
The coffee market has been able to overcome negative outside markets and near-term demand concerns to climb back towards the upper portion of its November/December consolidation zone. With a stronger demand outlook for next year and a bullish 2021/22 supply outlook, coffee can extend its recovery move.
The USDA report showed a surprisingly large drop in US production and ending stocks. On top of that, the weekly export sales report came in stronger than expected. The beginning of vaccinations against Covid-19 also offers hope of a renewal in cotton demand. Friday’s Commitments of Traders report showed managed money traders were net sellers of 1,684 contracts of cotton for the week ending December 8, reducing their net long to 58,776 contracts.
While their crushing has slowed down dramatically as many mills shut down their operations for the season, Brazil’s Center-South sugar production this season is more than 11.5 million tonnes ahead of last season’s pace. Most of that increase will be heading out into the global export marketplace and offset supply issues with several producing nations, and that is likely to keep sugar on the defensive.
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