Ethanol Demand Weakens
For the week, March sugar finished with a loss of 41 ticks (down 2.7%) which broke a 6-week winning streak. Sluggish energy prices remain a significant source of carryover pressure on the sugar market as they are likely to weaken the Brazilian domestic ethanol demand outlook. As a result, Brazil’s Center-South mills should continue to emphasize sugar production over ethanol production which will keep pressure on sugar prices during the fourth quarter.
The flare-up in European COVID-19 shutdowns is a bearish short-term force. While global demand remains a concern, cocoa prices have fallen back to bargain levels which could provide a new opportunity to approach the long side of the market. For the week, December cocoa finished with a hefty loss of 186 points (down 7.5%) which is a fifth negative weekly result over the past 6 weeks.
December coffee continued its coiling action as it stayed in a relatively tight range Friday. For the week, December coffee finished with a loss of 1.00 cent (down 0.9%) and a fourth negative weekly result over the past 5 weeks. Coffee has been pressured by a negative shift in global demand expectations as several European nations go back into shutdown mode. Brazil warehouse stocks are nearly full.
The sharp selloff on Friday helps to confirm that expectations for major hurricane damage to the cotton crop may have been overblown. December cotton closed sharply lower on Friday for the fourth day in a row. There is no rain in the five day forecast, but the 6-10 day forecast still calls for above average precipitation in the Georgia, eastern Alabama and the Carolinas.
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