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High Open Interest in Cotton


December cotton broke out of its recent trading range on Friday and traded to its highest level since February 20. Rains across the Delta and other cotton growing regions in the US are delaying harvest and raising concerns about quality. Also, a strong September US retail sales number on Friday, with clothing store receipts up 11% from the previous month providing encouragement on the demand front.


The cocoa market may have already priced in the global demand concerns with its pullback this month. There is a strong chance that West Africa’s production will be pulled lower by the dry conditions earlier this year. That and the potential for political tensions in that nation in front of their presidential election could lead to tighter supplies. This could have left cocoa undervalued at current levels.


Coffee prices have received some bullish supply/demand developments over the past few weeks, but they continue to face headwinds from a near-record Brazilian 2020/21 crop. With a negative shift in demand from an area of recent demand-side strength, coffee may struggle to find its footing.


While prices are back to within striking distance of its 2020 highs from mid-February, sugar continues to have bearish supply developments from its top 2 producers (who combined accounts for over 38% of global production) that leave the market vulnerable to long liquidation.

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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