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Recovery Bounce as Stocks Inflows Slow


While the supply side is finding pressure, signs of improvement on the demand outlook can help support. The Brazilian currency regained its strength after starting the week on a downbeat note, and that provided coffee with underlying support. While the current La Nina weather event may finish by the end of the first quarter, it has already had a negative impact on Colombian coffee production, and that has also provided some support. ICE exchange coffee stocks fell by 370 bags on Tuesday which is their fourth daily decline over the first 10 sessions of January.


Cocoa prices appear to have lost upside momentum and remain vulnerable to profit-taking and additional long liquidation in front of Thursday’s critical demand data. Lukewarm equity markets in the US and Europe put carryover pressure on cocoa prices as both regions will have their fourth quarter grindings totals released on Thursday. Keep in mind that the US and Euro zone are both seeing consumer inflation have a sustained pullback from multi-decade highs, and that may have encouraged consumers to purchase discretionary items such as chocolate.


The cotton market inched higher in quiet trade on Tuesday with an inside trading session. More talk that China demand is on the rise plus a continued advance in crude oil helped to support the bounce. Ideas that China has reopening will spark a surge in economic activity and helps support better cotton usage helped to support the market as well. Oil prices pushed higher after China’s annual economic growth data was seen as a positive.


Sugar prices have found carryover support from key outside markets and have recovered more than half of their losses from the December/January selloff. Energy prices extended their January recovery moves with WTI crude oil climbing back above the $80 per barrel levels, which provided the sugar market with carryover support. In addition, a rebound in the Brazilian currency was an additional source of strength for sugar. Czarnikow reduced their 2022/23 global sugar production surplus down to 2.8 million tonnes and projected global sugar consumption would reach a record high 176.2 million tonnes.

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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