ADMIS News
SUGAR
Sugar prices overcame a negative shift in global risk sentiment late Friday and found support from bullish supply developments. In response to lower production this season, the Indian government has restricted sugar exports, and it has restricted the amount of cane juice to be allocated for ethanol production to 1.7 million tonnes. Some trade groups have advocated for an additional 1.5 million to 1.8 million, but there has been no movement on that end. There has also been a rebound in Brazilian ethanol demand, which could encourage some movement away from sugar production there as well. The rally in sugar prices of the January lows seems designed to discourage such a shift. The market analysis from BMI said they anticipate that Brazilian sugar exports will face constraints starting in March, as the grain harvest begins and starts to compete with sugar for port space.
COFFEE
March coffee has backed off from Tuesday’s five-week high and may face additional pressure from a negative shift in global risk sentiment after the US Fed Chair further lowered expectations for an upcoming rate cut when he indicated that there was still a way to go before inflation got down to the targeted 2%. ICE exchange Arabica coffee stocks rose 4,997 bags on Friday, putting them 17,061 bags higher than where they were on January 31. There are 65,114 bags pending approval, which is also negative. However, the market is still facing extremely tight Robusta supplies, with poor back-to-back crops in Vietnam and shipping problems through the Red Sea limiting movement to Europe. There were reports overnight that farmers in Vietnam are refusing to deliver coffee they have sold unless contracts are renegotiated.
COCOA
March cocoa was sharply higher overnight and traded to new contract (and 46-year) highs. The market broke above the $5000 level on Friday and passed a test of that level overnight. Recent dry and very warm conditions in West Africa are expected to negatively impact mid-crop production, which begins in April. There are indications that the El Nino event may end during the second quarter, which could mean better conditions as the season moves forward. But in the meantime, global supplies are very tight. Ivory Coast port arrivals totaled 43,354 tonnes for the week ending February 4. Total arrivals since the season began on October 1 have reached 1.04 million tonnes, down from 1.71 million a year ago, a 39% decline.
COTTON
March cotton extended its uptrend overnight to trade to its highest level since October 16. Cotton traders have been impressed with the pace of US export sales lately, and last week’s strong report sparked a new leg higher. The strong pace of exports suggests global supplies are tighter than previously thought. Open interest has been climbing on the rally, which is bullish as well. The dollar had an outside day higher on Friday to trade to its highest level since November 17, and it extended its gains overnight. This move could dampen US export prospects, but it does not appear to have had much impact on the cotton prices so far. With cumulative 2023/24 US export sales currently running at 87% of the USDA forecast versus a five-year average of 83% for this point in the season, traders may be expecting an increase in the USDA export forecast in Thursday’s monthly supply/demand report, which could tighten ending stocks.
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.
