Sugar Could Turn Lower

SUGAR

Sugar prices continue to hold within their recent consolidation zone following choppy action, but unless there is a significant turnaround in global risk sentiment and key outside markets, sugar could turn lower. Expectations that India’s production this season will exceed last season’s record high have pressured the sugar market this week. Thailand is also expected to see an uptick in their production as well, and that has weighed on sugar prices as most of their output goes into the global export marketplace. While the Brazilian currency reached a 1-week high, crude oil and RBOB gasoline prices fell back from sizable gains into negative territory which will dampen near-term ethanol demand. While sugar’s share of Brazil’s Center-South crushing this season is slightly behind last season’s pace, both the first half and second half September Unica supply reports showed sugar’s share of crushing above the comparable period last year. Energy prices will need to be at much higher levels to shift a sizable portion of crushing from sugar production over to ethanol production.

COCOA

Third quarter North American grindings came in at 119,224 tonnes, which was 3.37% below last year’s result but was slightly above the 2019 and 2020 third quarter grindings totals and this helped to pressure. As with Europe, North America has very little domestic sourcing for cocoa beans so their recent quarterly grindings results have been impacted by the rise in “origin” cocoa grindings. Cocoa prices were able to climb well clear of Wednesday’s low in spite of sluggish global risk sentiment. Short-covering in front of quarterly grindings results released after Thursday’s close and before Friday’s opening supported the market on Thursday. The Cocoa Association of Asia showed third quarter Asian grindings total at 231,080 tonnes, up 9.5% from last year. This failed to provide much in the way of support. In addition, Ivory Coast and Ghana cocoa regulators will boycott industry meetings in Brussels next week due to a dispute over the origin differential. These two countries produce more than 60% of the world’s cocoa have raised their premiums for the coming season in a stepped-up effort to tackle producer poverty.

COTTON

December cotton closed lower for the seventh session in a row yesterday as the market continues to see a bearish outlook for demand. Continued harvest selling pressure has added to the bearish tone. While extremely oversold technically, there is no sign of a short-term low with open interest remaining in a steady uptrend. World money managers want to be short cotton. There are some production concerns with a stunted growth situation for cotton in parts of India. Sales have reached 69.3% of the USDA’s forecast for the marketing year versus a 5-year average of 59.5%. A private forecast showing mostly higher expectations for next year’s grain crops but cotton acreage is expected to decline by 9.4% due to declining prices as well as high production costs.

COFFEE

Coffee prices have been unable to put any brakes on their October downdraft and are on-track for a third weekly loss in a row. With the market close to 13-month lows with some growing nations continuing to have production issues, the market may be considered cheap with the market down for the eight session in a row. A more than 1% rally in the Brazilian currency up to a 1-week high provided carryover support to the coffee market, as that may ease pressure on Brazil’s farmers to market their remaining near-term supply. There is rainfall in the forecast for Brazil’s major Arabica growing regions this weekend that may encourage additional flowering, and that has pressured coffee prices. Indications that Vietnam’s upcoming 2022/23 crop will have an increase from last season also weighed on coffee prices late this week.

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