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Cotton Prices Watching Weather


The market is well into oversold territory and at bargain price levels, but cocoa will need more that stronger outside markets to improve its near-term demand outlook. For the week, however, September cocoa posted a sizable loss of 207 points (down 8.7%) which was a fourth negative weekly result over the past 5 weeks and was a negative weekly reversal from Monday’s 3 1/2 week high. Stronger European, US and Chinese equity markets provided cocoa with carryover support as they provided some badly-needed help for the near-term demand outlook in several major regions.


Coffee prices have lifted well clear of their June low in spite of record high Brazilian crop. If the global demand outlook can show further improvement, coffee should be able to extend its recovery move. For the week, however, September coffee finished with a gain of 6.55 cents (up 6.8%) and a second positive weekly result in a row. Reports that June Honduran coffee exports were nearly 30% below last year’s total provided the coffee market with early support as that level of shortfall points towards lower supply more than the global downshift in coffee demand. While Costa Rica’s June exports were more than 5% above last year, their 2019/20 full-season exports are 2% behind last season’s pace.


There is a chance of rain for the next 24 hours for the Lubbock, Texas region, and this could ease stress ahead of what looks to be a harsh weather period for the next few weeks. Some isolated areas of the Panhandle are receiving up to 1 1/4 inches, but most areas are expected to see 1/2 inch or less. Traders will monitor the weekly crop progress report closely tonight, and the amount of moisture near Lubbock for signs of short-term direction. The forecast turns hot and dry this week and for the next two weeks. Both the 6-10 and 8-14 day forecast call for above normal temperatures and below normal precipitation across the eastern two-thirds of the nation with the exception of the far north and the Gulf Coast and Florida, which show normal to above normal precipitation.


Sugar prices have been able to retrace their late June selloff, due in large part to carryover support from outside markets. While it should benefit from improvement in global risk sentiment, the global supply outlook remains firmly bearish which should limit upside. For the week, October sugar finished with a gain of 62 ticks (up 5.3%). A rebound in energy prices was a source of carryover support as their extended recovery move may help to shore up Brazilian domestic ethanol demand prospects. In addition, reports of near-term supply bottlenecks at the Brazilian port of Paranagua due to windy conditions provided additional support.

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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