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Sugar Prices Pressured

SUGAR

October sugar fell below round-number support at 13.00 overnight. Prices had been fairly resilient in the face of a bearish global supply outlook, benefiting from improving risk sentiment early this week. But with decline in the Brazilian currency, sugar remains vulnerable to a near-term pullback. Yesterday’s 1% decline in the Brazilian real was a key factor in sugar ending the day in negative territory. The weaker currency provides more incentive for Brazil’s Center-South mills to shift their crushing towards sugar production.

COCOA

December cocoa moved slightly higher overnight but was confined to Monday’s range. The market has been overbought for several weeks and may be setting up for a near-term pullback. While it has a bullish supply outlook and global risk sentiment has shown some improvement, ongoing concern with global demand may fuel additional long liquidation. December cocoa followed through on last Friday’s outside-day down session on Monday with move to a new 2-week low, but it managed a mild rebound late to finish with a moderate loss.

COFFEE

December coffee moved higher overnight, within striking distance of last week’s highs. As of yesterday it had posted three closes in a row above the 200-day moving average. It appears that the record Brazilian crop has already been priced into the market, so the prospects for improving demand can help coffee extend its recovery move. Stronger than expected demand has been reflected in this month’s sharp drop in ICE exchange coffee stocks, which fell another 21,552 bags on Monday to reach a multi-year low.

COTTON

December cotton edged higher overnight, testing Monday’s highs. However, we are skeptical that the cotton can continue its rally with US and world ending stocks expected to come in a record or near record levels, even in the face of drought problems in Texas. Monday afternoon’s Crop Progress report actually showed an improvement last week, with 45% of the US crop rated good/excellent (G/EX) as of August 16, up from 42% the week earlier and not too far off last year and the 10 year average, both of which were 49% at this point in the season.

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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