COTTON
The cotton market got a demand boost late yesterday from the suggestion that the Fed could cut rates in 2024 even if the market does not fall into recession. The market could get a further boost today if US export sales show an improvement over last week. Last week’s report showed net sales of 145,997 bales for the week ending November 30, which was the lowest since October 12. Sales for the 2023/24 crop are off to their slowest start since 2016/17. Crude oil was higher overnight after falling to its lowest level since June 28 yesterday, and this could lend support to cotton. However, ample world cotton supply limits upside potential.
COFFEE
A risk on mood across the commodity sector is providing an additional lift to the coffee market this morning. The US Fed Chairman’s suggestion yesterday that seemed to open the door for rate cuts next year creates a more optimistic tone for demand. Recent dry and very warm weather in Brazil has raised concerns about their 2024/25 crop, and these conditions are expected to continue over the next seven days. The current Brazilian crop is strong, and Colombia is seeing its production recover from back-to-back La Nina events, with the last one ending this past April. Vietnamese robusta exports saw a sharp increase in November, but they were still 10.4% behind last year. Vietnamese farmers are reportedly waiting for higher prices to sell their product, but Rabobank has noted that exports are starting to emerge.
COCOA
March cocoa extended its rally overnight to trade to a new contract (and 46-year) high for the third time in five sessions. The slowdown in inflation and a suggestion by the US Fed chair that the economy does not need to see a slowdown for there to be rate cuts in 2024 presents a bullish demand outlook in the face of high prices. The Fed’s latest quarterly economic projections, which were released yesterday, call for 2.5% in cuts over the next three years. Expectations that the cocoa market will see a third global production deficit in a row in 2023/24 continue to underpin prices. West African growing regions have little to no rain in the forecast through late next week, with many areas expected to see daily high temperatures above 95 degrees Fahrenheit. This could speed up harvest and facilitate the drying of beans, but it could also diminish late main crop output.
SUGAR
March sugar resumed its downtrend overnight following a bounce off oversold levels on Tuesday. The market is deeply oversold, and prices may have fallen far enough to attract buyers. Low inflation data and the US Fed Chairman’s suggestion that he would be willing to cut rates in 2024 even if the economy doesn’t slip into a recession does present a more bullish demand picture. Brazil’s 2023/24 sugar production to be far ahead of last year’s pace. The latest Unica report this week showed Center-South production for the second half of November was 35% ahead of the same period last year. Overall production was the lowest since the start of the marketing year, but the gap from last year continues to widen, as the slow start to the rainy season has extended the harvest window in some areas. India’s decision to not allow mills to use cane juice for ethanol production will increase their sugar output this season by 1.5 to 2.5 million tonnes from previous estimates.
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