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Choppy 2-Sided Coffee Trade Since March


Since the start of April, cocoa prices have now had 4 positive daily reversals from a new low for the move. While the first 3 did not result in a longer-term upside move, cocoa prices look cheap. September finish Tuesday’s trading session with a minimal gain and a positive daily reversal. Huge selloffs in the Eurocurrency and British Pound were source of carryover pressure on the cocoa market, as the slide in both currencies down to multi-year lows will make it more difficult for EU and UK processors to acquire fresh cocoa supply.


Coffee prices have fallen nearly 15 cents below Friday’s high as the market continues to see choppy and two-sided action. While demand prospects have been driven by the ebb and flow of global risk sentiment, coffee continues to have bullish supply factors that should help to underpin prices. A more than 1.2% decline in the Brazilian currency as it reached a 5-month low was a notable source of pressure on the coffee market as that may encourage Brazil’s farmers to more aggressively market their near-term supply to foreign customers.


December cotton closed lower for the second straight session on Tuesday as the market is approaching last week’s six-month low. The dollar was sharply higher, and the nearby Dollar Index traded to its highest level since December 2002, which puts pressure on export commodities like cotton. Crude oil was sharply lower, which make polyester more competitive with cotton. Traders are concerned that soaring inflation will affect global cotton demand and that China could stop importing US cotton in retaliation against the US blocking imports from Xinjiang.


Sugar continues to be pressured by lukewarm Brazilian ethanol demand, due in part to the shift in Brazilian state fuel taxes. The market is approaching price levels that provided solid support earlier this year, however, and that should help sugar to find its footing soon. Crude oil prices saw a more than $10 per barrel pullback from their early highs while RBOB gasoline fell more than 40 cents below its early high, which was a notable source of pressure on the sugar market as that may further weaken near-term ethanol demand prospects.

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.

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