Traders Optimistic on Cotton Demand
March cotton closed lower for the second session in a row yesterday and the market will follow the results of the USDA supply/demand report and also follow the weekly export sales news today. Traders appear to have been overly optimistic on the recovery in cotton demand globally, and especially from China. Traders may be keying in on global consumption estimates from the USDA. For the USDA supply/demand report, traders see production coming in near 14.14 million bales, 13.84-14.32 range, as compared with 14.24 million bales in December.
Cocoa has spent the last 2 1/2 weeks in a volatile wide-sweeping price pattern as the market has had trouble sustaining momentum in either direction. With the market receiving bullish supply news over that timeframe, cocoa can see a resumption of the uptrend soon. Strength in European and US equities provided carryover support to the cocoa market as that can help to soothe near-term demand concerns in both regions. Most of Ivory Coast’s cocoa product production is exported, so this year-over-year gains reflect well on global demand prospects. Indications that Nigeria’s cocoa production this season will come in below last season provided underlying support, as a Nigerian trade group has downwardly revised their 2022/23 output forecast twice since the start of the season.
Coffee’s selloff is picking up momentum as the market moves further to the downside. The jump in open interest suggests that fund traders are building a short position. Although the market is well into oversold territory, coffee needs to find some positive news before it can put some brakes on this current downdraft. A US importer forecast Brazil’s 2022/23 Arabica production at 44 million bags, which compares to 36 million during the 2021/22 season, and this put pressure on the coffee market. In contrast, that US importer also said that Colombia’s 2022/23 coffee production would come in between 10.5 million and 11.0 million bags which is a further decline from their current annualized production pace. The continued rise in ICE exchange coffee stocks have been an additional source of pressure on the coffee market this year, as they increased by 7,630 bags on Wednesday to climb above the 850,000 level for the first time since July.
Sugar has found carryover support from key outside markets, but it has been unable to overcome bearish near-term supply news. Unless there are bullish developments from India or Thailand, sugar remains vulnerable to selling pressures. A strong rally in crude oil and RBOB gasoline prices provided carryover support to the sugar market as that can strengthen near-term ethanol demand. The Brazilian trade group Unica said that Center-South sugar production during the second half of December came in 165,000 tonnes. Since there was no Center-South sugar production during that period last year, 2022/23 Center-South sugar production is now 1.4 million tonnes ahead of last season’s pace.
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.