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Dry W Africa Supports Cocoa


The market appears to have begun another leg higher as both supply and demand news flow supports. While global demand concerns will continue to shadow the market, cocoa can extend this current recovery move above the early August highs. Cocoa found carryover support from stronger global equity markets which pointed towards improved demand levels. Drier than normal weather over many West African growing areas has supported cocoa prices as those conditions should have a negative impact on the region’s upcoming 2020/21 main crop production.


Coffee’s demand outlook over the rest of this year will depend upon how quickly the world can end coronavirus restrictions that have severely limited restaurant and retail shop business. There is evidence that demand is already starting to improve in many areas, however, and that can help coffee prices to maintain their recovery move.


There remains concern that the delta crop will need to absorb just too much rain in the next week which could damage yield. The hook reversal yesterday is a bearish short-term technical development. Concerns that Hurricane Laura will bring excessive rains to part of the Delta lent support on ideas that it could damage the crop when bolls are open. The US and world supply/demand outlooks point to ample stocks for 2020/21, and it could take some extremely heavy damage to alter that picture.


Sugar prices were able to put some brakes on the near-term pullback with a hook reversal yesterday led by support from outside markets and stronger global risk sentiment. Sugar continues to have a bearish global supply outlook for the 2020/21 season that will weigh on prices. A strong recovery move by the Brazilian currency boosted sugar prices as it eases pressure on Center-South mills to produce sugar instead of ethanol.

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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