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Dec Cocoa Contracts High Overnight


December cocoa finished yesterday with a loss, but it held the gap higher open from last Thursday and was back near the contract highs overnight. Persistent rain in Ghana and Cameroon are delaying harvest and drying and are creating ideal conditions for disease, and this has raised concerns about the main crop. It appears that Ivory Coast has avoided this fate so far, but that nation experienced similar problems this summer, which has reduced the crop’s prospects. Ivory Coast port arrivals have fallen behind year ago levels after a surge in the first week of the marketing year that began October 1. Declines in the euro and the British pound raise concerns about demand, as the weaker currencies make it more expensive for European grinders to buy cocoa on the world market.


December coffee has climbed above the 200-day moving average for the first time since mid-June and will start today trading 24.45 cents above the early October lows. A large Brazilian crop may limit the upside, but the market is seeing evidence of an improvement in global demand with the decline in ICE exchange coffee stocks, which have fallen to 11 1/2-month lows. Stocks fell another 7,125 bags on Tuesday, and there is currently no coffee waiting to go through the exchange grading process. Brazil’s major Arabica growing regions received lower than normal rainfall last week, which could have a negative impact on upcoming production. There are reports that some Vietnamese farmers are switching away from coffee production, which could result in a long-term decline in output.


March sugar is close to taking out its contract high this morning, as the market has followed through on Monday’s sweeping reversal. The UNICA supply report for will be released today, and it is expected to show Brazilian Center-South sugar production for the first half of October to be well ahead of last season. S&P Global put first-half October production at 2.21 million tonnes, up 19.9% from a year ago. The results of the UNICA report could drive the market over the next couple of sessions, as a sharply lower than expected number could spark a move to the 28.50 area, and a high number could spark a setback, given the current overbought status. Indonesia has been one of the world’s top-two sugar importing nations , and they may ramp up their imports during the next two quarters.


The cotton market is looking at so-so demand for 2023/24 and an ample global supply despite the lower US crop. However, with the US harvest in full swing, there may still be enough uncertainty as to how much the US crop was damaged this year for the market to avoid further declines in the immediate future. Traders commented yesterday that they thought Monday’s rally shut off buying interest. The dollar reversed and closed higher yesterday and was higher again overnight, and this makes US cotton more expensive on the global market. The 6-10- and 8-14-day forecasts are looking less rainy than they were earlier in the week across the US cotton belt, which improves the outlook for harvest. However, Texas is expected to see heavy rainfall over the next seven days, which could delay harvest there.


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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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