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Cocoa Two-Sided Action


Cocoa prices have seen wide daily ranges as bullish supply developments and bearish demand prospects are fueling volatile two-sided action. With global markets shifting into a “risk off” mood 7 sessions from the end of the month and quarter, cocoa remains vulnerable to additional long liquidation before prices find their footing. Simmering political tensions in Ivory Coast in front of next month’s election provided the cocoa market with early support.


Coffee prices have now seen a key retracement of the July/September upmove with the market losing more than 20.00 cents in value (down 15.4%) over the past 6 sessions. While negative global risk sentiment and bearish near-term supply developments may lead to further downside action this week, coffee may be closing in on a near-term low. Reports that new coronavirus lockdowns in Europe weighed on the coffee market as that region’s demand growth over the past few month has been a key source of strength for the market.


The short-term tone in the market has turned negative again with an outside day lower close, and a lower close for the fifth session in a row. The selling pushed the market down to the lowest level since September 11th. A sharp drop in the equity markets put pressure on cotton, as suddenly the economic outlook seemed to take a darker turn. Recent increases COVID-19 cases in the US and Europe have renewed trader concerns about consumer confidence and potential damage to cotton demand.


Sugar’s recent upmove appears to have run out of near-term steam before it was able to retest the mid-August highs. With global markets in a “risk off” mood going into month-end and quarter-end, sugar needs to find fresh bullish supply/demand news in order to regain upside momentum. The negative shift in global risk sentiment fueled additional long liquidation in many commodity markets, and a sharp selloff in energy prices was a notable source of carryover pressure as that may weaken Brazilian domestic ethanol 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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