Limited Uptrend in Cotton
While progress on a COVID-19 vaccine has put “light at the end of the tunnel” for 2021, global demand will remain a concern for the cocoa market through the end of this year. However, recent supply-side developments should help cocoa prices remain well supported. March cocoa maintained strong upside momentum as it reached the highest level since February 21st this morning.
Coffee prices are likely to face headwinds from near-term global demand concerns as rising COVID-19 case and additional shutdown will significantly reduce restaurant and retail shop consumption for a few more months. This week’s supply developments may continue to generate headlines and support.
The market seems to have the supply/demand fundamentals short-term to see a significant setback, however, cotton is following the grain markets higher. While the longer-term demand situation looks good after the first quarter, the surge in coronavirus could hold the short-term demand situation at a low level. In fact, the cotton pipeline and the textile pipeline is clogged due to very slow sales for the spring and summer, and this will take time to work through.
March sugar has risen more than 50% above its late-April contract low and is on-track for a seventh monthly increase in a row. While the market was able to climb above its late September and late October/early November consolidation zones, sugar may have gotten ahead of itself and remains vulnerable to a set-back. Indications that India’s 2020/21 production will have a sizable increase from last season continue to weigh on prices, with the USDA estimating their output at 33.76 million tonnes versus 28.9 million last season.
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