Upside Breakout in Coffee
Cocoa prices have extended their November recovery move in spite of significant carryover pressure from key outside markets. With bullish developments from both the supply and demand sides of the market, cocoa can lift further clear of last week’s 3 1/2 month low.
After nearly 3 1/2 months of coiling price action, coffee has reached a new 7-year high. Although the market is approaching near-term technically overbought levels, a bullish supply outlook and improving global demand should lead to further upside before this rally runs out of steam. Reports late last week that Brazil’s October coffee exports came in well below last year’s total provided evidence of shipping container shortages and low near-term Brazilian supply, both of which have underpinned coffee prices.
December cotton closed slightly lower on Monday. The dollar was sharply higher. The December Dollar Index traded to new contract highs, and the nearby contract traded to its highest level since July 2020. This would normally be bearish for cotton, but traders are apparently turning their eyes towards China, as there are reports that domestic cotton prices there are high relative to the US.
Sugar prices continue to face pressure from key outside markets, but recent coiling price action has helped the market lift clear of its mid-October lows. The global supply outlook remains bullish, and that should help sugar prices remain well supported on near-term pullbacks.
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