Sugar Receives Bullish Supply News
Sugar prices have seen back-to-back wide-sweeping sessions as the market received bullish supply news from both of its top 2 producing nations. Despite a sizable rebound, sugar will start today below the January monthly close and still on-track for a negative monthly key reversal. The All India Sugar Trade Association reduced their forecast of India’s 2022/23 sugar production by 1 million tonnes down to 33.5 million, which provided early support to the market. There are reports that Brazil’s government will reinstate federal fuel taxes starting this week, with the tax rate on fossil fuels (such as gasoline) higher than the tax rate on biofuels (such as ethanol). This should provide additional incentive for Center-South mills to shift a portion of their 2023/24 crushing from sugar production over to ethanol production.
Cocoa prices will start today on-course for a “triple-digit” monthly gain that would be a fifth positive monthly result in a row. While that may leave the market vulnerable to profit-taking, cocoa has bullish supply factors that should keep the market well supported on a near-term pullback. A rebound in global risk sentiment combined with stronger European and US equity markets helped to provide cocoa with underlying support, as that can help to shore up near-term demand prospects. The latest Ivory Coast weekly port arrivals total came in well below the comparable period last year, and that provided an additional boost to cocoa prices as their full season total is now behind last season’s pace. There is daily rainfall in the forecast for many West African growing areas through the middle of next week, but daily totals will be relatively light as the region will still be in its dry season for several more weeks.
Since reaching a 4 1/2-month high last week, coffee prices have been unable to find their footing and have posted 3 negative daily results in a row. With the market still holding onto a gain for February, coffee remains vulnerable to profit-taking and additional long liquidation. Inflation gauges in Europe and the US remain high, which will diminish out of home consumption and has weighed on coffee prices. A Brazilian university researcher said that recent heavy rainfall over Brazil’s south Minas Gerais growing region has resulted in a 10% to 20% increase in leaf disease that will have a negative impact on their upcoming crop. However, a Bloomberg survey had a median forecast for Brazil’s 2023/24 Arabica production at 40.8 million bags, which would be a 12% increase from this season’s output.
The market is recovering from the oversold condition, and also reacting to a more positive economic tone than traders had anticipated. While demand could turn sour into the summer and later this year, consumer spending, employment and cotton export demand remain strong short-term. The outlook for a 20.8% drop in planted acres this year has helped to provide some underlying support. US Cotton export sales for the week ending February 16 came in at 437,202 bales. This was up from 240,851 the previous week and the highest since last May. Cumulative sales have reached 92% of the USDA forecast for the marketing year versus a five-year average of 89%.
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