Cotton Down on Bearish Outside Forces

COCOA

Cocoa prices continue to climb further into technically overbought levels as they are more than 380 points (up 16.9%) above the 2021 low from mid-July. Open interest has started to increase again after dropping more than 50,000 contracts from its late July high, however, which indicates that bullish supply/demand developments are replacing fund short-covering as a major source of strength.

COFFEE

Coffee prices have seen coiling action since late last week after its breakout move above the early August consolidation zone. Although the market has had trouble sustaining upside momentum, coffee has bullish supply factors that should help to underpin prices.

COTTON

Bearish outside market forces intensified overnight and helped to turn cotton lower. The US dollar is higher again and equities sold off further, and both of those moves are negative to cotton. The market had rallied sharply in the wake of last week’s monthly USDA supply/demand report that lowered US cotton yield and production considerably from the previous month’s report.

SUGAR

While sugar prices will start the day above the 20.00 cent level and in close proximity to a new multi-year high, the market has held within less than a 50 tick range so far this week. This could indicate that prices are losing upside momentum and with sluggish action from key outside markets, sugar remains vulnerable to a sizable near-term pullback.