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Cocoa Poised for Resumption of Uptrend


With bullish West African supply developments providing underlying support, the market looks poised for a resumption of the uptrend. A tight near-term West African supply situation is expected to continue until the region’s mid-crop harvest reaches full speed in early April, and that provided underlying support to cocoa prices. Ivory Coast cocoa bean exports over the first four months of the 2022/23 season were 9.3% behind last season’s pace, while Ivory Coast cocoa products over that same timeframe were 5.2% of last season’s pace. This data reflects both tight near-term supply and the shift towards processing cocoa in the nation it was produced (“origin” grindings) which is likely to reduce grindings totals in Europe and North America going forwards. Early on Tuesday, February readings for French CPI and Spanish CPI came in well above trade forecasts which may have added to market concern over European inflation.

Cocoa pods and beans


Coffee prices finished February with four negative daily results in a row as the market continues to find pressure by near-term demand concerns. This month’s drawdown in ICE exchange coffee stocks provided the market with early support as that reflects some improvement with global demand. ICE exchange coffee stocks fell by 7,245 bags on Tuesday and finished February at 787,345 bags, which is 74,150 below their January month-end total. This is the first monthly decline in ICE exchange coffee stocks since October and the largest monthly decline since September. There are now more than 54,000 bags of coffee waiting to be graded, however, and that could signal that ICE exchange coffee stocks are very close to a near-term low. The Brazilian currency fell to a 1 1/2 week low, which put carryover pressure on the coffee market as that may encourage Brazil’s farmers to market their remaining supply to foreign customers.


May cotton closed lower yesterday with a quiet trade and a similar range to Monday. The market remains in a consolidation and has traded at the same priced now as we were at on November 4. A strong US dollar and choppy lower trade in the stock market were seen as negative forces. Weakness in grain markets added to the bearish tone. Traders already see a 20.8% drop in planted area for the new crop season, but continued weakness in the other grains might be seen as a negative force for December cotton. December cotton also closed lower on the session and while traders expected a big drop in plantings, production is expected to be up significantly if yield is normal. There were reports suggesting that China may well resume a standard level of cotton purchases from Australia, which is a negative development. Chinese cotton buyers are importing Australian product in anticipation that the unofficial ban will be lifted.


The sugar market finished February with four sessions in a row with wide-sweeping price action, each of which was larger than 50 ticks in size. The May contract was only able to gain 17 ticks in value over that timeframe, and that resulted in sugar posting a monthly negative key reversal. A weaker Brazilian currency weighed on sugar prices as that may keep Center-South mills from switching some of their crushing from sugar production over to ethanol production. There is a general consensus in the market that sugar will have a 2022/23 global production surplus this season even with downward revisions to India’s production, and that continues to pressure sugar prices.


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