Sugar Prices High & Overbought
With prices at 11-year highs and at extreme overbought levels, the sugar market was especially vulnerable to a near-term pullback. The key reversal with a big range is a bearish technical development. Stronger energy markets provided sugar prices with early carryover support. The Brazilian trade group Unica released their Center-South supply report for the second half of March, which also reflected the region’s full-season 2022/23 totals. The Center-South cane crush came in at 4.386 million tonnes, which was lower than trade forecasts expecting 5 million tonnes.
Cocoa received signs of lower inflation and carryover support from key outside markets, but could not climb above its late March high. As a result, cocoa may be vulnerable to a near-term pullback. A rally in the Eurocurrency and British Pound were seen as positive forces. There was a sizable decline in year-over-year US CPI which should benefit demand for discretionary items such as chocolate. Global risk sentiment stayed subdued after the US data and turned negative later in the day, which may have fueled profit-taking in the cocoa market. While the latest Ivory Coast port arrivals total was a fraction of last year’s comparable total, the likelihood that West African mid-crop cocoa supply will reach West African ports by the end of this month may have put additional pressure on cocoa prices.
Coffee prices have climbed further above the 200-day moving average. If global risk sentiment continues to deteriorate, coffee prices could see a near-term pullback. July coffee was able to come through choppy action to reach a new 7-week high this week. The Brazilian currency had a second sizable daily gain in a row as it reached a 10-month high, which provided coffee with carryover support as it will ease pressure on Brazil’s farmers to market their coffee to foreign customers. The latest US CPI reading came in lower than trade forecasts, and that can help to improve out-of-home consumption in North America.
July cotton drifted lower on Wednesday. The dollar was sharply lower in the wake of a soft CPI report and crude oil was higher, and both of those moves should have been supportive to cotton. However, after an initial rally, the stock market reversed and traded sharply lower, which was negative for cotton. One item from Tuesday’s USDA supply/demand report that has captured some people’s attention was a reduction in the cotton export forecast for India for 2022/23 to 1.80 million bales from 2.20 million estimated in March. With imports forecasted at 1.75 million bales, this would put their net exports at only 50,000 bales. This would be the lowest since 2004/05, when they were net importers of 378,000 bales.
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