The sweeping reversal from an overbought condition is a bearish short-term development and points to a significant correction ahead. Near-term demand prospects remain a concern for the market, so the Eurocurrency extending its near-term pullback put significant carryover pressure on cocoa prices.
Coffee’s downside follow-through from a negative weekly reversal has taken prices back below their 200-day moving average for the first time since July 29th. While the market may be vulnerable to additional long liquidation, coffee has seen more signs of improving global demand that can help the market find its footing soon.
For Wednesday’s USDA Crop Report, traders are expecting 2020/21 US production and ending stocks forecasts to decline from the July report. One survey shows the average trade guess for US production at 17.2 million bales (from a range of 16.5 to 17.5 million), down from 17.5 million in the July report. Exports are expected at 15.2 million versus 15.0 million in July, and ending stocks are expected at 6.3 million versus 6.8 million in July.
Sugar prices have maintained a coiling price pattern since the start of August. While the market has benefited from mildly positive supply developments over that timeframe, the 2020/21 supply outlook still remains bearish which will leave sugar needing to find more carryover support from key outside markets to avoid a near-term pullback.
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.