ADMIS News
COTTON
May cotton has traded to its highest level since August 2022, but it has seen heavy volatility and wide ranges over the past two sessions. US cotton mill use is expected to be the lowest since 1885 this year, nearly 15% lower than last year. One factor in the decline is the tight supply of available cotton after US production fell last year due to drought. Exports are down from last year as well, but they were revised higher in this month’s USDA supply/demand report. Ending stocks are down from last year too. The surprisingly strong pace for US exports has been a key driver behind the rally. The annual USDA Outlook Forum is this week, and on Thursday USDA will release its long-term forecasts for US production, including a look at the 2024/25 crop.
COCOA
May cocoa experienced its first lower close since January 25 yesterday, but it has held its ground near the upper end of Friday’s rally. No rain fell last week in most of Ivory Coast’s main growing regions, which adds to the concern about the upcoming mid-crop. Citibank said in a report released yesterday that cocoa prices could reach $6,100-$6,300 per tonne over the next month, and it added that there are risks prices could reach $7,000 to $10,000 if West Africa supply outlooks continue to deteriorate and demand fails to meaningfully contract this spring. They also mentioned the potential for a 20% selloff in the next 8-12 months due to possible recessions in some markets, demand destruction, and substitution effects.
COFFEE
May coffee was lower overnight but inside Monday’s range. The chart shows a series of higher highs and higher lows, which bodes well for a continuation of the uptrend and a possible test of the December high. Tight robusta supplies have supported Arabica prices, and supplies have gotten even tighter with the Houthi attacks in the Red Sea. The attacks have raised the shipping cost from Asia to Europe and have sent more business to Brazil. ICE exchange Arabica stocks totaled 297,470 bags on Monday, down from 297,795 on Friday, with 38,854 pending review. Robusta stocks fell to a record low 2,461 lots. The key Brazilian growing area of Minas Gerais has forecasts for thunderstorms every day for the next two weeks, which can ease concerns about dry weather the region has experienced over the past couple of months.
SUGAR
May sugar extended yesterday’s selloff overnight but was back around unchanged this morning. The market has been chopping around inside the range of the past couple of weeks, but its failure to take out the January high last week, much less key resistance at the 200-day moving average, has clearly disappointed the bulls. Yesterday’s decline may be attributable to the rains forecast for this week for Center-South Brazil. Traders have been concerned about the dry weather there this year, but the forecast shows a 59% chance of rain in 11 out of the next 14 days. The possibly of La Nina arriving in late summer adds to the concern about dryness in South American growing regions.
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