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Softs Mixed, Sugar Lower


In front of critical demand-side data, cocoa may be able to extend this recovery move. For the week, September cocoa finished with a loss of 19 points which was a fifth negative weekly result over the past 6 weeks. Stronger equity markets in Europe and the US built on last Thursday’s positive Barry Callebaut guidance to help improve cocoa’s demand outlook. There will be key data points on global demand on Thursday, with the second quarter European grindings total released before the opening while the second quarter North American grindings total released after the close.


Coffee was unable to bounce back from last Monday’s selloff. The coffee market continues to be pressured by a bearish global supply outlook, but there are some positive demand signs. For the week, September coffee finished with a loss of 5.80 cents that broke a 2-week winning streak. The Brazilian currency posted a mild gain on Friday that provided coffee prices with carryover support. While the Brazilian government agency IGBE forecast their 2020/21 production at 59 million bags, expectations for a record-sized Brazilian coffee crop continue to pressure the market with many trade forecasts coming in at 66 million bags or higher.


The 6-10 and 8-14 day forecasts continue to call for above average temperatures and below normal rainfall in the non-irrigated regions of Texas, and the 5-day forecast calls for no rain in that region with surging temperatures. This should continue to support the uptrend. As expected, the USDA lowered 2020/21 US planted area to 12.19 million acres in Friday’s supply/demand report, but they also lowered yield to 820 pounds per acre versus 825 in the June report. This brought production down to 17.5 million bales from 19.5 million estimated in June and 19.91 million in 2019/20.


Sugar has failed twice to retest their 4-month high from early June. Unless they can find additional carryover support from key outside markets, a bearish global supply outlook may help to drive sugar prices lower. For the week, October sugar finished with a loss of 48 ticks. A rebound in energy prices helped to keep further losses in check, while a mild rebound in the Brazilian currency provided sugar prices with additional support. Prospects for sharp production increases in Brazil and India continue to weigh on the sugar market as they point towards a sizable 2020/21 global production surplus.

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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