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Sugar Might Be Top Heavy


While the sugar market avoided a negative key weekly reversal, it is starting to show signs of being top heavy at current price levels. With a bearish shift in the Brazilian supply outlook, sugar prices may remain on the defensive over the near-term. The Brazilian trade group Unica released their latest supply report which showed Brazil’s Center-South cane crush during the first half of March at 608,000 tonnes, which was over 3 times the size of last year’s total. While most of that crushing was allocated to ethanol, there was an additional 16,000 tonnes of sugar produced during that timeframe. Unica also said that Center-South domestic ethanol sales during the first half of March were 12.6% lower than last year’s total. As a result, a sizable pullback in energy prices put carryover pressure on the sugar market as that could further weaken near-term ethanol demand in Brazil and India.

sugar cubes


Cocoa prices have maintained their strength through turbulent action in global markets as they continue to find support from bullish West African supply developments. With the market on-track for a sixth monthly gain in a row and a second sizable quarterly gain in a row, cocoa may be increasingly vulnerable to profit-taking. After the steep rally this month, a negative shift in global risk sentiment weighed on cocoa prices as that may weaken near-term demand prospects for discretionary items such as chocolate. A sharp selloff in the Eurocurrency was another source of pressure as that will make it more difficult for European grinders to acquire near-term supplies. The International Cocoa Association said that this season’s Ivory Coast cocoa exports through January were 9.3% behind last season’s pace, due in part to outbreaks of swollen shoot disease, and may account for the early pullback in main crop production as well as increased domestic grindings.


With the market receiving some bullish supply news, coffee may turn higher from the recent consolidation. A sizable daily decline in ICE exchange coffee stocks Thursday was followed by a decline of 2,355 bags on Friday, while no grading took place and only 1,135 bags are waiting to be graded. With ICE exchange coffee stocks nearly 40,000 bags below their February month-end total with one week to go, this makes more likely that they will have a monthly decline for March. Colombia’s production pace remains close to 9-year lows which also provided support to the market as they continue to be a large portion of global Arabica output.


May cotton closed lower on Friday after trading to its lowest level since November 2. The dollar was higher and crude oil was lower, and both of these moves were negative to cotton. A strong dollar makes US export commodities like cotton less competitive on the world market, and cheaper crude oil makes man-made fibers less expensive. Traders remain concerned that there is too much unsold cotton from last year. For the USDA prospective plantings report, the average trade expectation for US cotton planted area is 11.0 million acres, with a range of expectations from 10.5 to 12.7 million.


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