COT Shows Sugar Overbought
While sugar prices have been unable to take out their mid-August high, they have been resilient in the face of negative global risk sentiment, sluggish key outside markets and what continues to be a bearish global supply outlook. There have been bullish supply-side developments that can help sugar extend its recovery move into early October, but the Cotton market may have limited upside and remains increasingly vulnerable to a long liquidation selloff.
With demand concerns likely to be a front and center issue over the next month, cocoa will need to find fresh supply-side support in order to find its footing. For the week, December cocoa finished with a loss of 86 points (down 3.3%). A significant negative shift in global risk sentiment weighed on global equity markets as well as the Eurocurrency, and that in turn put carryover on cocoa prices as that further dampens an already subdued near-term demand outlook.
Coffee’s 3-week slide resulted in an over 20% loss in value, but the market was able to find its footing in a price areas that has provided support this year. A shift in focus towards next season’s crop may help support. For the week, December coffee finished with a loss of 4.70 cents (down 4.1%) which was a third weekly loss over the past 4 weeks. Safras and Mercado forecast Brazilian 2020/21 coffee exports would reach a record high 41.8 million bags, and that put early pressure on the market as that underscores their near-record 2020/21 production.
Demand has stayed stronger than traders have expected, and the focus of attention is shifting to the October 9 USDA crop production and supply/demand report. With several hurricanes and some dry weather periods, traders are likely looking at smaller yield and tighter ending stocks for the report. The market remains in a choppy consolidation pattern and December cotton closed only slightly lower on Friday after falling sharply earlier in the session.
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