ADMIS News
SUGAR
Sugar prices continue to drive further to the upside and are at their highest levels since late 2016. While the new Brazilian season will start out Saturday, it has been production issues in other major growing nations that have fueled sugar’s rally. The Brazilian currency extended its recovery move to a new 8-week high, which provided carryover support to the sugar market as that eases pressure on Center-South mills to produce sugar for export. Crude oil extended its late March rally, which also benefited sugar prices as that should strengthen near-term ethanol demand in Brazil and India. The European Commission said that 2023/24 EU sugar beet planted area will be 3% below their 5-year average, due in large part to a court ruling that prevents any exemptions to the EU’s ban on neonicotinoid pesticides. With India unlikely to have any further exports this season and China also cutting their production estimates, the sugar market has bullish supply developments to fuel this rally.
COCOA
Cocoa prices have benefited from improving demand prospects that are making it more likely that it will have a second sizable global production deficit in a row this season. As a result, cocoa prices should remain well supported on near-term pullbacks. The corrective break this week was shallow as open interest continue to trend sharply higher as fund traders continue to buy. Europe accounts for more than one-third of global cocoa processing without having a domestic source for beans, so their grindings totals are driven mostly by regional demand. The sustained pullback with inflation levels will strengthen demand for discretionary items such as chocolates. As a result, sizable pullback in the latest year-over-year readings for German CPI and Spanish CPI gave cocoa prices a notable boost.
COFFEE
Coffee prices will start today below their March consolidation zone, but once again have found trouble sustaining a breakout move in either direction. The Brazilian currency extended its recovery move to an 8-week high which provided carryover support to the coffee market, as that should ease pressure on Brazil’s farmer to market their coffee to foreign customers. Ongoing production issues in Colombia from the La Nina weather event have underpinned coffee prices since the start of this year, as they account for a sizable portion of global Arabica production. There is light daily rainfall in the forecast for Brazil’s major Arabica growing regions through the end of the next week that should benefit their upcoming 2023/24 crop. Although near-term demand concerns may not be fully soothed, lower inflation should help to shore up restaurant and retail shop demand during the second quarter.
COTTON
The market has seen a solid four day recovery bounce into the key USDA report and the rally has helped correct the oversold condition. China was the largest buyer in the weekly export sales report, and cumulative sales are above the pace to reach the USDA projection. For the USDA prospective plantings report today, the average trade expectation for US cotton planted area is 11.0 million acres, with a range of expectations from 10.5 to 12.7 million. This compares to 10.9 million in the USDA Outlook Forum and 13.8 million last year. US cotton export sales for the week ending March 23 came in at 281,281 bales for the 2022/23 (current) marketing year and 12,320 for 2023/24 for a total of 293,601. This was down from 335,532 the previous week but above the four-week average of 227,403. Cumulative sales have reached 11.460 million bales, down from 14.197 million a year ago and the lowest since 2015/16.
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