Lower Softs Led by Sugar
Cocoa clearly benefited early this week from a positive early tone for global risk sentiment and carryover support from key outside markets. Global risk sentiment continued to mend in spite of increasing coronavirus cases in many areas. This in turn led to strong starts to the week for European and US stock markets and the Eurocurrency, all of which helped to shore up cocoa’s global demand outlook in front of second quarter grindings data released later this week.
A positive vibe to global risk sentiment and stronger European equity markets provided a boost to coffee prices as they helped to soothe near-term demand concerns, but a late pullback in US equities helped to spark some selling early today. Vietnam’s June coffee exports came in at 127,700 tonnes (2.128 million bags), which was down 2% from May’s total and 11.5% from last year’s total which may be a sign that their near-term coffee supply may be tightening. The Brazilian trade group Cecafe said that their nation’s June coffee exports came in at 2.47 million bags which was 9.8% below last year’s total.
With the improvement in crop conditions and an overbought condition, the market looks vulnerable to at least a short-term technical correction. However, the forecast is still quite threatening and the intense heat could cause significant damage in the next few weeks. The trade continues to stew about US/China relations and what they mean for US export prospects.
With little help from its key outside markets, sugar remains on the defensive early this week. A negative shift in global risk sentiment could put further pressure on sugar prices. The Brazilian currency posted a mild loss yesterday, but energy prices turned sharply to the downside after sugar’s close. Both will be a source of carryover pressure on sugar prices today as they should encourage Brazil’s Center-South mills to produce more sugar at the expense of ethanol.
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