Coffee Demand Remains Weak
With global risk sentiment subdued and fresh coronavirus lockdowns in Europe generating news headlines, a sluggish start to the week for the Eurocurrency and global equity markets could put cocoa prices under early pressure. Ivory Coast political tensions continue to simmer following an outbreak of violence last week, and that increases the possibility of near-term supply bottlenecks over the next month.
Although global demand concerns (particularly for Europe) will remain a front-and-center issue for the market, coffee prices are well into near-term oversold territory now and it will not take much in the way of bullish supply/demand news to trigger a near-term bounce. For the week, December coffee finished with a loss of 1.65 cents (down 1.5%) and a third negative weekly result over the past 4 weeks.
The cotton market has coiled up and looks vulnerable to a break, but another tropical storm is likely to hit Louisiana and leave hefty rain totals for the Delta. With the extreme overbought condition, and the surge in virus cases plus a general sense that the market has already priced in some hurricane losses, the market may have put in a short-term peak. The 1-5 day forecast is still a concern with hefty rain totals for the Delta and the southeast US plus even some rain for Texas.
The sugar market does not seem to have the supply fundamentals for a continued bull trend, but fund traders have been active buyers, and the market has remained in a steep uptrend. With the market remaining at near-term overbought levels and with a net spec long position at its largest level for several years, sugar remains vulnerable to long liquidation if support levels are violated. Egypt is tendering to buy 50,000 tons of raw sugar.
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.