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Sugar Breaks Winning Streak


Despite strength from energy prices and the Brazilian currency, the sugar market has broken a 4-session winning streak and turned sharply to the downside. Unless it can find fresh bullish supply news, sugar prices may lose further ground this week. While The Philippines cut their 2023/24 sugar production forecast, they also reduced their latest sugar import tranche by 10,000 tonnes. This provided further evidence of lukewarm global demand which has pressured sugar prices early this week. On the other hand, Brazil and Thailand are expected to have increased exports this season following their production increases from last season, and that have also weighed on sugar prices. Although there will a significant decline in Louisiana’s cane sugar production due to their late December freeze, US beet sugar production will have a sizable increase which should result in only a minimal uptick in sugar exports from last season.

sugar cubes


Cocoa prices continue to face near-term demand concerns and will have to get past a key US inflation gauge at midsession. The market continues to receive bullish supply news, however, and that may help cocoa to maintain upside momentum week. There are reports that a group of Ivory Coast exporters are close to defaulting on their contracts and will need 150,000 tonnes of beans in order to fulfill those agreements. The latest weekly Ivory Coast port arrivals total was well below last year’s comparable total. There was below-normal rainfall over West African growing areas last week, and those regions have hot and dry weather in the forecast through late next week. A strong start to the week by European and US equity markets, the Eurocurrency and British Pound all provided additional support to the cocoa market as they should help to improve cocoa’s demand prospects over the rest of the first quarter.


Coffee has benefited from an improved demand outlook that has kept the market from retesting its February lows. With an uncertain global supply outlook for the upcoming season, coffee could fall out of its near-term consolidation zone. The Brazilian currency extended its recovery move, which in turn provided coffee with carryover support as that eases pressure on Brazil’s farmers to market their remaining near-term supply. Indications that recent heavy rainfall over Brazil’s major growing areas may provide some relief from drier than normal conditions over the past few seasons was seen as a negative force as this could increase the chances for the 2023/24 “off-year” Arabica crop to come in higher than this season’s production total. However, this rainfall could also result in a delay for fertilizer and pesticide use, and that gave coffee prices an additional source of strength.


May cotton continues to chop around inside last Tuesday’s range. The dollar was softer, which lent support to US export products like cotton. The trade has found support from strong US export sales recently, but the USDA supply/demand report last week was weak. Traders will be looking to the US CPI report on Tuesday for insight regarding the Fed’s next move. A strong jobs report for January reignited expectations for additional rate hikes, which could raise the chance of recession and threaten cotton demand. However, US inflation data has softened recently, and this has raised hopes that the Fed would slow its rate hikes. If the CPI is high today, then we would expect Fed rate hike concerns to increase, which could pressure cotton as well as other commodities.


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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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