Sugar Prices On Losing Streak
After an early October rally to a 3-month high, sugar prices are now on a 8-session losing streak. Until there is significant improvement in the ethanol demand outlook, sugar prices are likely to head further to the downside. Expectations that Brazil’s Center-South mills will continue to favor sugar production over ethanol production in this season’s remaining crushing have weighed on sugar prices this week, a continued pullback in the Brazilian currency was another source of pressure on sugar prices. In spite of a slow start to this season’s harvesting and crushing, there are increasing signs that Brazil’s Center-South 2022/23 sugar production will come in above last season’s total. The International Sugar Organization forecast global 2022/23 sugar production at 181.9 million tonnes which would be a 5-year high, and estimated 2022/23 global sugar consumption at 176.3 million tonnes.
Cocoa’s choppy price action over the past few weeks has left the market at the bottom end of its October trading range. Recent rainfall over West African growing areas has slowed down the pace of their 2022/23 main crop harvest. When combined with a lack of pesticides in many areas, that could lead to the spread of diseases and mold, and that may underpin prices. Europe continues to be the region with the largest annual cocoa processing totals each season, even with the increase in “origin” grindings over the past few years. While fears of EU winter natural gas shortages have eased, energy prices are likely to be very expensive through the first quarter of 2023.
After the recent sharp break and with the oversold condition, traders are hopeful that prices are cheap enough to attract better demand. December cotton closed lower yesterday, but it held above the previous day’s low, as well as last week’s 17-month low. The dollar was down sharply for the second straight day and fell to its lowest level since September 21, which should improve the US export outlook. However, concerns over global demand continue to pervade the market. Traders will be looking to today’s weekly export sales report for any clue that demand has strengthened.
Coffee’s losing streak has stretched to 11 sessions in a row with a loss of 17.5% in value. While the market has received bearish supply/demand developments in recent days, the market is now oversold and is increasingly vulnerable to a sharp short-covering rally. There is increasing optimism towards Brazil’s upcoming 2023/24 crop after recent flowering, and that remains a major source of pressure on coffee prices. While unlikely to match or exceed their 2022/23 production, recent flowering in Brazil’s major Arabica-growing regions has fueled significant long liquidation this month. Costa Rica’s coffee institute forecast their nation’s 2022/23 coffee production will come in 11.5% above last season’s total, which also weighed on coffee prices as that may bode well for Central American production prospects. The Brazilian currency reached a 2-week low, which put additional carryover pressure on the coffee market.
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