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Cotton Remains in Choppy Trading Range


The market experienced an impressive rally yesterday but remains in a choppy trading range since early November. Talk that China will be a more active importer of US cotton over the near term helped to support. The US is the cheapest cotton on the world market but US economic news turned sour and outside market forces started the day with a bullish tilt and ended with a sharp break in the US stock market, weakness in energy markets and a strong recovery in the US dollar. Weak US retail sales data and manufacturing data was seen as a bearish force for the US economy, but traders remain bullish over the potential jump in the China economy over the near term. China prices for cotton have pushed higher recently. The US dollar fell to a near eight-month low, making cotton less expensive for other currency holders.

cotton pod on blue sky


The Cocoa Association of Asia said that fourth quarter Asian grindings came in at 230,806 tonnes, which was 0.22% below last year’s total and 0.12% below their third quarter total. Even though this was their second largest quarterly total on record, the quarterly and year-over-year declines fueled profit-taking and additional long liquidation. While the first and fourth quarters saw negative year-over-year results, the Asian 2022 full-year grindings total of 904,094 tonnes was a record high total which came in spite of extended periods with COVID lockdowns in China.


With fresh signs of improving global demand, coffee may be able to sustain this recovery move. US green coffee stocks finished December at 6.378 million bags, which was a decline of 12,573 bags from their November month-end total and reflects stronger North American demand at year-end. With just over 100,000 bags waiting to be graded and a failure rate this month of over 62%, ICE exchange coffee stocks are showing clear signs of approaching a near-term peak. Brazil’s Cecafe said that their 2022 green coffee exports came in at 35.57 million bags, which was 2.6% below their 2021 total despite this season’s Arabica production being an “on-year” crop. Colombia’s 2022 coffee production saw their lowest annual total since 2013, while several Central American growing nations saw fourth quarter export totals well below last year.


Sugar’s abrupt change in fortune was due in large part to a negative shift in key outside markets. With bearish supply news also weighing on prices, sugar could see downside follow-through. Crude oil and RBOB gasoline fell back from early highs which in turn put carryover pressure on the sugar market. In addition, a more than one percent decline in the Brazilian currency also weighed on sugar prices as that may encourage Center-South mills to produce sugar for export. Indications that Brazil’s Center-South 2022/23 production will come in above last season’s total also weighed on sugar prices.


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