ADMIS News
SUGAR
An improvement in India’s weather outlook leaves the sugar market vulnerable to a pullback, and the October contract expired Friday with a record delivery of 2.87 million tonnes, which is usually seen as a bearish signal. The India Meteorology Department said that India’s 2023 monsoon rainfall came in at 6% below the long-period average, which would put this year in the “below average” category. However, September’s rainfall was 13% above the long-period average, which was a significant improvement from August, and this has allowed reservoirs to reach 73% of storage capacity. The withdrawal of this year’s monsoon is running more than a week later than normal, which should bring heavier than normal rainfall in early October, particularly in south peninsular India. This would benefit cane crops in Maharashtra and Karnataka, two of India’s largest sugar producing states. Despite the selling last week, the managed money net long is still historically large, leaving the market vulnerable to heavy selling if support levels are taken out. It does not appear that the recent gains in oil prices have triggered a shift in the use of cane in center-south Brazil, which is not surprising given that sugar prices are nearly double where they were a year ago.
COFFEE
Coffee prices have fallen for seven of the past eight sessions and are this/close to the January low. While the market is well into bargain territory, it probably needs a bullish supply development to sustain any sort of recovery move. Brazil’s harvest is basically complete, but exports are likely to continue to be strong through the rest of the year. Concerns that the negative shift in global risk sentiment would weaken out-of-home consumption also weighed on prices last week. Vietnam’s coffee exports in September were down 32.7% from last year, and their 2023 total so far was 7.3% lower. The ICE exchange also said that they will not allow coffee that has been decertified to be resubmitted for grading, which is likely to reduce the flow of coffee into exchange warehouses in the fourth quarter.
COCOA
Cocoa prices have fallen 9.4% in the past two weeks and have traded below the 50-day moving average for the first time since mid-March. This has alleviated an overbought technical condition and has even made the market short-term oversold. Prices have stayed above the 100-day moving average and far above the 200-day. A negative shift in global risk sentiment has weighed on prices recently, as traders worry about demand implications, especially with prices as high as they are. Renewed weakness in the euro and the British pound today can also put pressure on cocoa, as it makes it more expensive to for European grinders to buy. A shift towards rainy weather over West African growing areas could benefit upcoming production, and this is especially important given expectations that El Nino will drier than normal conditions the region later this season.
COTTON
December cotton is back in the middle of its month-long range after a steep selloff on Friday and subsequent selling overnight. Steep declines in the corn, wheat, and soybean markets in the wake of the USDA’s quarterly grain stocks report appeared to encourage selling in cotton. Growers in Brazil are expected to export a record amount of cotton between July 2023 and June 2024, with the president of a growers’ group forecasting shipments of 2.5 million tonnes. Shipments in September hit an unprecedented 200,000 tonnes. The most recent USDA supply/demand report put their 2023/24 exports at 11.8 million bales, up from 6.66 million last year. The strong export pace is eating into US sales. High US prices brought on by lower US production is likely one reason for the low sales, but the strong dollar plays a part as well. US crop conditions are near record low levels, which suggests the USDA will lower its production estimates and tighten ending stocks in upcoming supply/demand reports, but lower exports will mitigate the effect. There seems to be enough cotton around the world to fill in for the loss of the US crop.
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