ADMIS News
COFFEE
Coffee has extended its winning streak to five sessions with little to no help from any fresh bullish supply news except for the slowdown in the shipping of Robusta beans through the Red Sea. If global markets stay in a “risk on” mood, an improving demand outlook could help coffee maintain its upside momentum. The long-term decline in inflation can also support retail-shop and restaurant consumption. The Brazilian real rebounded from a 12-week low yesterday to close higher on the day, and that was viewed as supportive to coffee prices on ideas it would ease pressure on Brazilian farmers to market their remaining supply to foreign customers. The attacks on cargo ships in the Red Sea have continued despite counter attacks by the US and UK, and this has slowed shipment of robusta beans from Asia to Europe.
COCOA
It is possible that yesterday’s wild action was an indicator of an exhaustion top. March cocoa closed higher, but it was $201 below the high of the day. The market was higher overnight, but it stayed inside yesterday’s range. West Africa production remains far behind last season’s pace, and the cocoa market is expected to see a third global production deficit in a row for the 2023/24 marketing year. Nigeria reported their December cocoa exports at 24,921 tonnes versus 36,571 in December 2022, another indicator of the disappointing crop out of West Africa. We have yet to see demand destruction emerge, despite prices reaching 46-year highs. Sales from the world’s biggest chocolate market Barry Callebaut increased 0.4% from year-ago levels during September-November, as it was able to pass on higher cocoa prices to customers. Last week’s 4th quarter grind numbers from Europe and North America were down from last year, but not as much as expected.
SUGAR
Tropical cyclone Kirrily has formed off Australia and is expected to cross the coast into Queensland late Thursday. Heavy to intense rainfall is expected Friday and into the weekend. Queensland accounts for 95% of Australia’s sugar output, and excess flooding could damage the 2024 crop that will be harvested later this year. The Brazilian real rebounded from a 12-week low to post a decent gain yesterday, and that was viewed as supportive to sugar on ideas it eases pressure on mills to produce sugar for export. Unica is expected to release its bimonthly report on Brazilian sugar production this week. Traders are growing concerned that the below average rainfall in Brazil will affect the upcoming crop, but that same dry weather could have encouraged more late-season harvest activity.
COTTON
March cotton is finding support from a recent turnaround in demand expectations. Last week’s export sales report came in strong, and traders are hoping that China will continue to be an active buyer ahead of the Lunar New Year, which starts next month. Strength in the US stock market is viewed as bullish for cotton consumption. A Bloomberg report that Chinese authorities are considering a package of measures to stabilize the slumping stock market may boost expectations China’s cotton demand. A wetter trend in the forecast for Texas could help recharge soils in areas that are still on the dry side after last year’s drought. However, the Delta is too wet, and the 8-14-day forecast has above average chances of rain.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
