COTTON
March cotton is correcting an oversold condition following a steep selloff from September, and it has drawn support from a more optimistic demand tone recently. US export sales have picked up over the past few weeks. Strength in US equity and bond markets last week lent support, and the dollar fell to its lowest level since early September. The cheaper dollar makes US cotton more competitive on the world market. However, a turn lower in equity markets today could pull support from cotton. We hear reports that some Brazilian farmers are replacing soy planted area with cotton in Mato Grosso due to hot and dry conditions there. Typically, cotton represents 10% to 13% of the planted area in the region, and Brazilian analysts are now saying that number could rise to 20%. This could boost Brazilian exports in 2024, but it could also encourage more selling of old crop supplies.
SUGAR
Sugar prices have been in an uptrend for most of the year and have increased 61% from their low in January, but the market appears to have lost upside momentum this month and could be vulnerable to a selloff. March sugar finished last week with a loss of 0.11 cents for a second negative week in a row. India and Thailand are both expected to see sharp declines in 2023/24, but Brazil is producing a record crop. The market has found support in recent weeks from congestion at Brazil’s ports, which has slowed the arrival of their record output to international markets, but hot and dry weather recently has been conducive to loading sugar onto ships, which may help increase the flow of exports. Despite the export bottleneck, Brazil’s Center-South mills to not appear to have diverted more of their crushing activity to ethanol, which is consumed domestically. The Egyptian state buyers ESIIC is believed to have purchased around 50,000 tonnes of raw sugar in an international tender that closed on Friday, an independent trader told Reuters. China imported 920,000 tonnes of sugar in October, up 79% from year-ago. Their purchases year to date have reached 3.04 million tonnes, down 24% from a year ago.
COCOA
ICE exchange coffee stock levels have held steady for the past several sessions, but there are now 14,000+ bags waiting to be graded, which suggests that stock levels are close to a bottom. It could also be the result of holders of coffee retendering older beans ahead to the change in regulations at the end of the month that are designed to prevent that from happening in the future. The threat of increasing stock levels and disappointment that the market did not follow through with a breakout rally last week after trading to its highest level since June may have encouraged longs to exit on Thursday and Friday. Safras and Mercado said that Brazil’s producers have sold 64% of their current-crop coffee production as of last Monday versus 65% for the same time last year and a 5-year average of 66%. They noted that producers have become more aggressive sellers in recent weeks and that it could last through the end of the month, and this action could be pressuring the market as well. Optimism that Brazil’s upcoming 2024/25 Arabica crop will exceed the current season’s output also weighed on prices going into the weekend. There are reports that Brazil’s coffee regions received some rain in the past few days but that it was poorly distributed. There is not a lot of rain in the forecast over the next 10 days.
COFFEE
ICE exchange coffee stock levels have held steady for the past several sessions, but there are now 14,000+ bags waiting to be graded, which suggests that stock levels are close to a bottom. It could also be the result of holders of coffee retendering older beans ahead to the change in regulations at the end of the month that are designed to prevent that from happening in the future. The threat of increasing stock levels and disappointment that the market did not follow through with a breakout rally last week after trading to its highest level since June may have encouraged longs to exit on Thursday and Friday. Safras and Mercado said that Brazil’s producers have sold 64% of their current-crop coffee production as of last Monday versus 65% for the same time last year and a 5-year average of 66%. They noted that producers have become more aggressive sellers in recent weeks and that it could last through the end of the month, and this action could be pressuring the market as well. Optimism that Brazil’s upcoming 2024/25 Arabica crop will exceed the current season’s output also weighed on prices going into the weekend. There are reports that Brazil’s coffee regions received some rain in the past few days but that it was poorly distributed. There is not a lot of rain in the forecast over the next 10 days.
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