ADMIS News
SUGAR
While sugar lost upside momentum on Tuesday, the market remains on course for a weekly gain. Futures have bounced back from early pressure and are posting moderate gains this morning. Flooding in Queensland, Australia, their major cane-growing region, following a tropical cyclone should result in lower Australian sugar production and exports during their upcoming 2024/25 season. There is a court case challenging the Indian government’s decision to ban the use of cane juice for ethanol production. Although this was relaxed to allow 1.7 million tonnes of sugar production to be diverted to ethanol production this season, that amount could increase significantly if the Bombay High Court decides against the government and in favor of a Maharashtra-based factory.
COFFEE
Coffee prices have had a mixed supply outlook as bearish developments from major Arabica growing regions have been balanced against bullish news from major Robusta growing areas. The market is starting to receive positive demand news, however, and that may help coffee prices move higher. News that Starbucks will double the number of stores they have in India during the next four years is further evidence of an improving Asian demand outlook. Costa Rica’s coffee institute said that their 2023/24 coffee production will come in around 1.3 million bags, which compares to 1.485 million bags during the 2022/23 season and is due in large part to irregular rains and a lack of labor. Vietnam’s 2023 coffee exports came in at 26.767 million bags (9.6% below their 2022 total), which shows tightening near-term global Robusta supply which has given an additional boost to coffee prices.
COCOA
While cocoa was able to make a quick turnaround from Monday’s downdraft, it has not traded above last Friday’s closing price and it is on track for a weekly loss. With key outside markets and global risk sentiment unable to sustain a positive tone, cocoa remains vulnerable to further profit-taking and additional long liquidation. Global cocoa demand has remained resilient as prices remain relatively close to their 46-year high in December. A group of major Ivory Coast cocoa processors said that their December grindings came in at 62,682 tonnes which was 7% above last year’s 58,554 tonnes. This put their fourth quarter grinding total at 169,953 tonnes, which was 1.5% below last year’s total of 172,605 tonnes. The negative shift in risk appetites could negatively impact near-term demand outlook for discretionary items such as chocolate, and that could become an additional source of headwinds for the cocoa prices.
COTTON
Cotton finally closed above the 50-Day moving average yesterday, the first time since mid-October, and is holding above there so far this morning. The Shanghai Composite broke a 3-session losing streak with a mild gain on Tuesday and a potential for a continued rebound in Chinese equity markets could give a boost to US cotton export sales to China in front of their Lunar New Year holiday. Brazil’s cotton exports during the first 4 working days of January were 47,330 tonnes which is 109.9% above the 22,560 tonnes exported during the comparable period last year.
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