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Traders Looking For Production Increase


Concern over demand destruction has weighed on many commodities during the third quarter, particularly for the cocoa market. With global risk sentiment and key outside markets on the mend, cocoa prices may be able to extend a recovery move, well above its July/September consolidation zone. For the week, December cocoa finished with a loss of 56 points (down 2.3%) which broke a 2-week winning streak.


Coffee prices were unable to complete a positive weekly reversal, but their abrupt turnaround on Friday put firm brakes on their August/September pullback. If global risk sentiment continues to improve, coffee should be able to sustain upside momentum. For the week, however, December coffee finishing with a loss of 0.30 cent (down 0.1%) which was a second negative weekly result in a row. Production issues in Brazil and Colombia due to the La Nina weather event remain a source of strength for the coffee market, with the US Climate Prediction Center now forecasting a 91% chance that the current La Nina will continue through the end of this year.


December cotton closed moderately higher on Friday at the upper end of last week’s range but still down sharply from where it was at the end of August. The dollar broke lower on Friday, which is supportive to US export commodities like cotton and the dollar is sharply lower again today. Crude oil was higher as well, which makes man-made fibers less competitive with cotton. Traders are looking for a slight increase in the US production estimate for today’s USDA supply/demand report, but not much. The average trade expectation for US 2022/23 cotton production is 12.77 million bales, with a range of expectations from 12.20 to 13.50 million.

cotton fields


Sugar prices continue to see coiling action that has gotten tighter in early September, which may be setting the stage for a longer-term trend decision. Although it should receive carryover support from the improvement in key outside markets, sugar remains vulnerable to a near-term pullback. For the week, October sugar finished with a gain of 7 ticks while March sugar closed with a weekly loss of 18 ticks (down 1.0%) which was a third negative weekly result over the past 4 weeks. A rebound in the Brazilian currency provided sugar with carryover support, as that should ease pressure on Brazil’s Center-South mills to produce sugar for the global export marketplace.

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