COFFEE
Traders were disappointed with the poor performance in coffee yesterday after a lower-than-expected US CPI number sparked rallies in equities and several commodity markets. The report this week that Brazil’s Arabica exports in October were higher than a year ago ran counter to the dominant theme of port congestion causing delays in shipping. ICE exchange stocks have held steady for two sessions after what seemed like an endless string of declines. There are 4,400 bags pending review. Dry weather has allowed Vietnam’s harvest to pick up, with 10% gathered so far. This will help bring needed supplies to the market. The Brazilian real reached its highest level since August yesterday, which should have also lent support.
COTTON
The cotton market benefited from the lower-than-expected CPI result this week, as it reduces pressure on the Fed to raise rates and pressures the dollar, which makes US cotton more competitive on the world market. March cotton broke out of a four-day consolidation yesterday after appearing to put in a harvest low last week. Selling pressure appears to have eased with the harvest reaching 67% complete. March cotton’s low last week came one day ahead of the bearish USDA supply/demand report, which suggests the relatively ample global supply has been absorbed by the market. The trade has become less concerned about demand with the improvement in export sales numbers over the past couple of weeks.
COCOA
A key reversal in March cocoa yesterday from a 45-year high could be the technical top that traders have been anticipating. The fact that the market closed lower despite a bullish risk-on mood in the wake of the lower-than-expected US CPI reading yesterday also suggests exhaustion on the part of the bulls. There was no reported change in the market’s fundamentals. Slow arrivals at Ivory Coast ports continue to point to low production for the main crop, and traders are aware of the potential for a third straight global supply deficit in 2023/24. Yet the market is technically overbought, and the funds are holding a large net long position. There is also the concern than high prices will shut off demand.
SUGAR
The sugar market’s inability to benefit from the wide-ranging “risk on” mood in the wake of Tuesday’s US CPI number encouraged profit-taking yesterday, and the market appears to be starting off on the defensive today. Recently, Covrig Analytics increased their 2023/24 global production deficit forecast by 200,000 tonnes to 2.4 million due to output declines in India and Thailand. Hot, dry weather in Brazil is allowing mills to extend the crushing season. The Brazilian real reached an eight-week high yesterday, which should have lent some support to sugar. The market has been supported by expectations for tight global supplies in 2023/24 and the current delays at Brazilian ports. The delays can continue to slow exports, but supplies look less tight now than they looked 24 hours ago.
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