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Bearish Consumer Demand Expectations


Cocoa continues to face headwinds from multi-decade high inflation reading that are having more of an impact on demand prospects than actual data results. The market will receive the latest update from an area of the world considered the “engine” for global cocoa demand growth early today, so cocoa prices will need to see a positively received result to avoid finishing the week on a downbeat note.


Coffee prices have loss more than 35.00 cents in value (down 15%) since the end of June as near-term demand prospects have overwhelmed what is still a moderately bullish supply outlook. Until there is some relief from global demand destruction, coffee may extend this downside breakout move. September coffee came under immediate pressure and fell to a new 9 1/2-month low before finishing Thursday’s trading session with a severe loss.


December cotton fell to the lowest level since September 24 early today so a higher close would suggest a short-term low may be in place. Trade sentiment remains bearish from a demand perspective, but the market is oversold after the massive break off of the highs. December cotton opened slightly higher yesterday but closed down the 4 cent limit and the selling pushed the market down to the lowest level since September 27th. Outside market forces carried a very bearish tilt with a sharp break in crude oil, a surge higher in the US dollar and heavy selling pressure in the stock market.


Sugar prices have been resilient in the face of sluggish global risk sentiment and multi-decade high inflation. Sugar has received some positive supply developments from Brazil that can help to underpin prices. Sharp selloffs in energy prices and the Brazilian currency were sources of carryover pressure on the sugar market, as that combination may diminish Brazilian ethanol demand prospects. After a slow start, India’s monsoon rainfall this year is now ahead of their long-period average which also weighed on sugar prices as that should benefit their upcoming 2 cane crops.

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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