Sugar Probes for a Top
While the sugar market started March by reaching a new 6-year high, it continues to have trouble sustaining direction for more than one session in a row. This may be a sign that sugar is getting top-heavy around these current price levels and could need a near-term pullback. The likelihood that many of Brazil’s Center-South mills will restart their operations earlier than normal this year weighed on sugar prices, as that could lead to larger than normal near-term Center-South sugar supplies by mid-April. In addition, a pullback in the Brazilian currency put carryover pressure on the sugar market as that may encourage Center-South mills to keep sugar’s share of crushing close to this season’s 45.9% share. The French firm Tereos estimated that the EU will need to import 3 million tonnes of sugar during the 2023/24 season, and that increased the expectations that next season’s EU sugar production will have a sizable decline from this season.
A positive shift in global risk sentiment can help to shore up near-term demand prospects. The latest Euro zone CPI reading showed a minimal decline from the previous month but came in well above trade forecasts, which diminished the European demand outlook for discretionary items such as chocolates. In addition, sharp selloffs in the Eurocurrency and British Pound later in the day put carryover pressure on the cocoa market as that will make it more difficult for European grinders to acquire near-term supply. There is wet weather in the forecast for most days for many West African growing areas though the end of next week, which pressured cocoa prices as that should benefit the region’s upcoming mid-crop production. Keep in mind that Ivory Coast 2022/23 production was forecast by the ICCO to see a 5.2% increase from last season’s output, while this season’s port arrivals are running behind last season’s pace. While some of this season’s cocoa beans have been smuggled into Ghana, Ivory Coast will still need to have comparatively strong mid-crop production in order to match the ICCO’s production estimates.
Coffee continues to be pressured by near-term demand concerns and is now dealing with a bearish shift in this season’s Central American output. May coffee experienced a sixth negative daily result in a row. Honduran February coffee exports came in at over 662,000 bags which was 32% above last year’s levels. While their full-season export total is still 1% behind last season’s pace, this provides more evidence of the upsurge in Central American exports since the start of this year which continues to weigh on coffee prices. The Brazilian currency posted a moderate daily loss which put carryover pressure on the coffee market, as that may encourage Brazil’s farmers to aggressively market their coffee supplies to foreign customers.
The outside day down and sharply lower close yesterday is a bearish technical development for the cotton market. In addition, the market turned lower after hitting key resistance at 86.09 for May cotton. A little slower export sales news plus a surge higher in the US dollar were seen as bearish forces. The United States is sounding out close allies about the possibility of imposing new sanctions on China if China provides military support to Russia for its war in Ukraine, according to four U.S. officials. China has the most sales on the books for US cotton. Cumulative sales for 2022/23 have reached 10.529 million bales, down from 12.930 million a year ago and the lowest since 2015/16. Sales have reached 94% of the USDA forecast for the marketing year versus a five-year average of 91%.
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