Sugar May Be “Top Heavy”
Sugar prices have put together 3 straight positive daily results for the first time since the late January updraft. With a negative shift in key outside markets, sugar may be “top heavy” at current price levels and remains vulnerable to a near-term pullback. While the French Farm Ministry will compensate farmers for losses due to disease, indications that French farmers are still going to pull back from planting sugar beets this year following a ban on a popular pesticide continues. This has supported sugar prices as that increases the chances for 2023/24 EU sugar production to have a third decline in a row. There are increasing chances that India will not allow for additional sugar exports this season, which has also underpinned sugar prices late this week as the market had earlier expected India’s second export tranche to be at least 2 to 3 million tonnes in size.
May cocoa’s last 5 closes have been within an 8 point range (2621 to 2613) as the market has been unable to regain and sustain strong momentum in either direction. Cocoa continues to be vulnerable to further deterioration in global risk sentiment, but the market has a bullish longer-term supply/demand outlook that should underpin prices on a near-term pullback. A sizable rebound in the Eurocurrency and British Pound provided carryover support to the cocoa market as that can help European grinders to acquire near-term supplies. On the other hand, a surprise uptick in German CPI shows that European inflation levels remain fairly high, and that may dampen chocolate demand in the region. A shift towards dry and very warm weather in the forecast for West African growing regions provided additional support to cocoa prices. A Reuters survey forecast the 2022/23 season would result in a global production deficit of 70,000 tonnes, which compares to a deficit of 306,000 tonnes last season.
After rallying to a 3 1/2 month high at the start of the month, coffee prices have struggled to sustain upside momentum. Unless the market can find fresh bullish supply news, coffee looks vulnerable to a sizable near-term pullback. A new 1-month low in the Brazilian currency put carryover pressure on the coffee market as extended weakness will encourage Brazil’s farmer to market their remaining near-term coffee supplies. A recent shift toward wetter weather along with the likely finish for the current La Nina weather event have led to increased market optimism for the upcoming Brazilian 2023/24 coffee crop. The Brazilian trade group Cecafe said that Brazil’s Arabica exports during January came in at 2.43 million bags which was 18.7% below last year’s total. The recent buildup of ICE exchange coffee stocks has also weighed on coffee prices, as they have climbed from a 23 1/2 year low in late October to their highest levels since June this week.
May cotton closed slightly lower on the session yesterday after the market seemed to draw mild support from the weekly export sales report. A bearish USDA update Wednesday may have limited the advance after the bullish export sales news. US cotton export sales for the week ending February 2 came in at 262,788 bales for the 2022/23 marketing year and 4,840 for 2023/24 for a total of 267,627. This was up from 191,400 the previous week and the highest since September 1. Cumulative sales for 2022/23 have reached 9.716 million bales, down from 12.176 million a year ago and the lowest since 2015/16. Sales have reached 86.4% of the USDA forecast for the marketing year versus a five-year average of 85.0%. The largest buyer this week was China at 87,661 bales, followed by Turkey at 72,570 and Vietnam at 45,276.
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