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Steady Uptrend Continues for Cocoa


Cocoa prices are on-track for a second positive weekly result in a row. With the market receiving bullish news for its demand outlook, cocoa may maintain upside momentum. The November US CPI and core CPI year-over-year readings had sizable monthly declines, which provided evidence that inflation is in a longer-term decline. This should benefit cocoa’s demand prospects during the first quarter, as lower inflation can result in consumers increasing their purchases of discretionary items such as chocolates. Both US CPI readings were in-line with trade forecasts, however, and that may have triggered profit-taking. Later in the day, strength in European and US equity markets helped cocoa prices to find their footing as they should bode well for near-term demand prospects.

Cocoa Dashboard


March coffee broke a 9-session losing streak. A more than 1% gain in the Brazilian currency as it reached a 2-month high provided coffee with carryover support yesterday, as that can ease pressure on Brazil’s farmers to market their remaining coffee supply. While in-line with trade forecasts, a sizable decline in the year-over-year US CPI rate reflects the downtrend in inflation for many developed economies, which can help to strengthen restaurant and retail shop coffee consumption. The buildup of ICE exchange coffee stocks could finish by month-end, and that could relieve significant pressure on the coffee market.


March cotton closed sharply lower on the session following the bearish USDA report, and the selling pushed the market down to the lowest level since January 5. While the USDA news was bearish, outside market forces carried a slightly bullish tilt and grain markets rallied sharply, so the weakness in cotton is a negative development. Traders were keying in on global consumption estimates for the USDA. The USDA pegged world consumption at 110.85 million bales from expectations for 111.57 million bales with a range of 111-112 million. US production came in at 14.68 million bales from trade expectations for 14.14 million bales, 13.84-14.32 range. Traders expected to see exports near 12.12 million bales from 12.25 million in December, but the USDA came in at 12.00 million bales. Ending stocks came in at 4.2 million bales which was well above trade expectations for 3.5 million bales with a range of estimates of 3.1-3.82 million. This is the highest ending stocks since the 2019/2020 season.


Sugar prices appear to be running out of upside momentum on their recovery move, but they remain on track for a positive weekly result. While it continues to receive carryover support from key outside markets, sugar’s upside may be limited. Crude oil and RBOB gasoline provided a boost to the sugar market as they extended their January recovery moves that should give a boost to near-term ethanol demand prospects. A strong rally in the Brazilian currency provided additional support to sugar prices as that can ease pressure on Brazil’s Center-South mills to produce sugar for export. With some mills still operating in January likely to keep sugar’s share of crushing at current levels, however, the sugar market lost support late in the session yesterday. Brazil’s 2022/23 Center-South sugar production is now more than 4% ahead of last season’s pace, and that should increase when January production is added on. Heavier than normal rainfall over many of Thailand’s cane-growing areas led to a slow start to their 2022/23 harvest, but should also result in a sizable increase in production.


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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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