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Declining Production, Improving Demand For Coffee


Cocoa’s recovery move has run out of steam as near-term demand concerns continue to shadow the market. While the longer-term demand outlook is positive, cocoa may consolidate last week’s bounce. The British Pound rallied sharply due to renewed optimism that a Brexit deal will be reached by year-end, and that provided cocoa ith early carryover support as it encouraged arbitrage buying of New York cocoa versus the London cocoa contract that is denominated in Pounds.


Coffee has risen more than 9.00 cents (up 7.8%) over the past 3 sessions as traders see lower production and improving demand for 2021. There were more forecasts for Brazil’s 2021/22 coffee production to have a sizable decline from this season, with Rabobank on the lower end of estimates by calling for a 15% decline from this season.


The cotton market remains in a short-term uptrend. March cotton resumed its uptrend yesterday by trading to its highest level since December 2018 and making a new high close for the move. The dollar fell to its lowest level since April 2018, and this was supportive to cotton as it makes US cotton more competitive on the world market.


Unless it can find additional carryover strength from its key outside markets, sugar could see a sizable downside long liquidation move ahead. March sugar reached a new 6 1/2 week low. Brazil’s 2020/21 sugar production is more than 11.5 million tonnes ahead of last season’s pace in the latest Unica supply report, which should lead to record Brazilian sugar exports this season and this remains a major source of pressure.

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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