Global Demand Prospects For Cocoa
Global demand prospects will remain a front and center issue for the cocoa market, particularly with this year’s Halloween holiday likely to be negatively impacted by coronavirus restrictions. A positive shift in global risk sentiment has helped to soothe some demand concerns with the market, and along with near-term bullish supply developments can help cocoa to maintain upside momentum over the rest of this week.
The market has seen a post-holiday negative shift in tone. Although the market continues to find bullish supply/demand factors, coffee may see further downside price action before it can find its footing. A more than 1% rebound in the Brazilian currency helped coffee to find its footing as that eases pressure on Brazil’s producers to market their coffee to foreign customers.
While December cotton closed higher yesterday and the market is up overnight, the trend remains down and the longer-term fundamentals show burdensome US and world ending stocks. Ending stocks are expected to drop for the report this week, but the decline is not enough to cause any tightness concerns. The dollar was lower and the stock market recovered, and both of those factors lent support. For Friday’s monthly crop reports, the average trade estimate for US cotton production is 17.57 million bales (range 16.75-18.08 million) down from 18.08 million estimated in August.
Sugar has been able to put some brakes on its September selloff, but has only had one positive daily result so far this month. A positive turnaround in key outside markets has led to the market finding its footing. A rebound in the Brazilian currency and stronger energy prices both provided support. Keep in mind that during the first 5 months of the 2020/21 season, Center-South mills have devoted 47% of their crushing to sugar versus 35.3% over that timeframe last year.
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