Softs Markets Mixed
The market remains in a short-term uptrend. For the week, September cocoa finished with a gain of 176 points (up 7.9%) which was a second weekly gain in a row. There have been more indications that this season’s production from Ivory Coast and from Ghana will fall short of last season’s results, and that provided underlying support to the market.
The market is overbought and vulnerable to long liquidation selling after the recent surge higher left technical indicators overdone; like RSI at 82.3. The market pushed up to a new 14-week high Friday. For the week, September coffee finished with a gain of 10.55 cents (up 9.7%) which was a fifth positive weekly result over the past 6 weeks. Strong coffee sales figures from Nestle and positive guidance from Starbucks continued to fuel coffee’s rally as they have soothed concerns with global demand.
The latest weather 6-10 and 8-14 day forecasts call for a return of below normal precipitation to the Texas growing regions that extends into the Delta and eastward all the way to eastern Georgia. In addition, the heat returns to West Texas. However, some of these areas may see some rain in the next 5 days, which should bring relief to the dry areas. With that in mind, we could see further improvement in crop conditions in this afternoon’s report.
Sugar’s upside breakout came with little carryover support from key outside markets as it benefited from recent bullish supply/demand developments. The 2020/21 season is still expected to result in a sizable global production surplus, so sugar’s near-term upside may remain limited at best. After more than 7 weeks of trying, October sugar was finally able to break out of its consolidation range and reached a 4 1/2 month high. For the week, October sugar finished with a gain of 115 ticks (up 10.0%) which broke a 3 week losing streak.
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