ADMIS News
SUGAR
The bulls may be disappointed that the sugar prices did not see stronger gains in the wake of bullish supply data from the International Sugar Organization (ISO) yesterday. May sugar was lower overnight, and it could be heading back to test 50-day moving average support. In its report, the ISO increased the 2023/24 global production deficit forecast from 335,000 tonnes to 689,000, but despite this news, May sugar failed to take out Monday’s high yesterday. The market has drawn support this week from short covering ahead of the expiration of the March contract, which occurs today. Traders are watching to see how dry weather this winter will affect the upcoming crop in Center-South Brazil. The two-week forecasts show mixed chances of rain across the region.
COCOA
May cocoa was higher overnight following yesterday’s steep selloff. Trading at all-time highs makes for extremely volatile action. At the overnight low, prices had fallen 11% from Monday’s contract high. The global supply situation remains tight, but traders are on the lookout for any indication of a slowdown in demand. The selloff yesterday was triggered by an announcement from Swiss chocolate maker Barry Callebaut that they were cutting 2,500 jobs (19% of their workforce) over the next 18 months. They said that this move was to increase efficiency and reduce costs, but traders also took the news as an indication that the company is preparing for a drop in demand as retail prices climb. Later in the day, an official with the company said they expect global production deficits of 500,000 tonnes in 2023/24 and 150,000 in 2024/25. The representative also expressed concerns that farmers in Ivory Coast and Ghana do not have the incentive to grow more. Both nations sell most of their cocoa before the season starts, which means it will take some time before growers can benefit from higher prices. Also, EU regulations restricting imports of cocoa grown on deforested land will limit output expansion
COFFEE
May coffee is under the influence of an outside reversal day higher on Tuesday, which leaves key support at Tuesday’s low of 177.50. Recent rainfall over Brazilian growing areas is expected to benefit the upcoming Arabica crop after the dry conditions earlier this year. Recent forecasts call for a greater than 50% probability of rain for each of the next six days. Indonesia’s January robusta coffee bean exports totaled 3,192 tonnes, down 79% from the same month last year. However, Vietnam exported 398,000 tonnes in February, up 16.2% from a year earlier. This was the second straight month that Vietnam’s exports showed an improvement over last year and could indicate further loosening of global coffee stocks. The switch to La Nina later this year could bring more favorable weather to Asian robusta and Brazil Arabica growing regions.
COTTON
May cotton was lower overnight after it traded to another new contract high yesterday. We could see some more back and fill as the market digests its latest move. Fund and other spec buying have led the market higher after the nearby contract broke above a 15-month consolidation pattern earlier this month. The wildfires in Texas may have fueled some of the buying, as they raised concerns about the dry conditions there, even though there is no cotton in the ground yet. The state’s 2023 production fell to 2.285 million bales from 3.107 million in 2022 and 7.726 million in 2021. However, soil moisture has improved considerably in recent months. Most of the main cotton growing areas in the state are no longer under drought. Last week’s drought monitor showed 10% of US cotton area was under drought versus 45% a year ago. US export sales eased a bit with the Lunar New year holidays, and traders are watching to see if there was an improvement this week.
Interested in more futures markets? Explore our Market Dashboards here.
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.
