Sugar Winning Streak Continues
Sugar prices were able to extend their winning streak to four sessions and will start today 14 ticks away from a new 6-year high. While the market has found support from supply developments in India, Thailand and the EU over the past few weeks, a shift in focus towards Brazil could put some brakes on sugar’s rally. Crude oil prices made a new 2-month high early in the session yesterday which provided carryover support to the sugar market, as that can help to strengthen near-term ethanol demand. There are few signs that India will allow any additional exports this season, which has also supported sugar prices as that will occur as this season’s Chinese production is expected to reach a 9-year low.
Cocoa prices were able to overcome a negative shift in global risk sentiment as they continue to find support from a bullish longer-term supply/demand outlook. While it may see volatile trading action over the rest of this week, the cocoa market should remain well supported on near-term pullbacks. The Eurocurrency reached a 2-month high while the British Pound reached a 9-month high, both of which provided carryover support to the cocoa market that offset pressure from lukewarm US data and a pullback in US equity markets. Indications that West African supply will remain tight for several more weeks provided additional support to cocoa prices. Global risk sentiment is likely to have a bumpy ride over the rest of this holiday-shortened week, so cocoa prices will remain vulnerable to a near-term pullback.
While recent supply developments have helped the market lift clear of its late March lows, coffee will need to see a rebound in global risk sentiment in order to extend this recovery move. North American demand prospects were weakened by lukewarm US economic data and a pullback in US equity markets, both of which pressured the coffee market. While year-over-year inflation readings have been on the decline since last year, they continue to be high enough to have a dampening effect on restaurant and retail shop consumption. In addition, the Brazilian currency continued its pullback from Monday’s 8-week highs which also weighed on coffee prices as this could encourage Brazil’s farmers to more aggressively market their remaining coffee supplies.
May cotton sold off yesterday and broke below its recent consolidation. For the second session in a row, the market did not seem to draw much strength from a break in the Dollar Index. The 8-14-day forecast call for above normal precipitation in Texas and Oklahoma, and this may have eased concerns about persistent dry conditions in those areas. However, topsoil and subsoil conditions are extremely short in the West Texas region. The crop progress report this week showed 4% of the US cotton crop was planted as of Sunday, which was the same as last year and just below the five-year average of 5%. The market may also be disappointed that the USDA prospective plantings report US cotton planted area at 11.3 million acres versus 11.0 million expected.
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