Softs Mostly Higher
Cocoa continues to be pressured by global demand concerns, and that will likely continue until the market receives quarterly grindings data late next week. There has been additional pressure from bearish West African supply developments which has pushed cocoa into oversold territory. Increasing coronavirus cases and the likelihood of paused reopenings are weighing on near-term global cocoa demand prospects, and that remains a major source of pressure.
Coffee continues to have trouble sustaining upside momentum. A moderate recovery in the Brazilian currency provided coffee with an early source of support, but that carryover support has been limited with the Real holding in a fairly tight range over the past week. Demand concerns continue to weigh on prices and were given additional fuel from reports of increasing coronavirus cases and the threat of paused reopenings for several regions in the US.
The market remains in a steep uptrend in the rally Wednesday drove the market up to the highest level since March 5th. Fears of deteriorating crop conditions continue to provide solid support. The trade seems focused on dry weather in Texas and is discounting concerns about the growth of coronavirus cases in the US and how that could affect demand, perhaps because the two largest importers of US cotton, Vietnam and China, appear to have weathered the virus threat relatively well.
Unless the market can find additional carryover support from key outside markets and stronger global risk sentiment, sugar remains vulnerable to a more sizable pullback. Stronger energy prices and a rebound in the Brazilian currency provided sugar prices with early carryover support, as they both encourage Brazil’s Center-South mills to favor ethanol over sugar in their crushings. There is dry weather in the forecast for Brazil’s Center-South cane-growing regions which should help to reduce the chances for harvesting and crushing delays, and that pressured the sugar market.
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