Slow Demand Recovery For Cocoa
While the longer-term outlook is much more positive, near-term demand concerns remain a major source of pressure on the cocoa market. While prices have reached their lowest levels since November, cocoa’s late rebound could indicate that a near-term low may be close at hand.
With a bullish longer-term supply outlook providing underlying support, the prospects for improved demand later this year can help coffee turn up. Expectations that restaurant and retail shop consumption will significantly improve when COVID shutdown measures are relaxed provided the market with support.
March cotton traded to new contract highs again yesterday and closed well off its highs of the day. The nearby contract has traded to its highest level since July 2018. The dollar index reversed after starting out lower and went to higher on the day, which will be a negative for cotton if it means the dollar is putting in a bottom.
Sugar was able to overcome a negative weekly key reversal from Friday as it continues to receive carryover support from “the key” outside market. Sizable 2-session rallies in crude oil and RBOB gasoline up to new 1-year high were driven in large part by brutal weather in Texas, Oklahoma and the Deep South, but they provided sugar with significant carryover support.
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