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Bearish Consumer Demand Tone For Cocoa


Cocoa’s abrupt turnaround late last week was fueled in large part by a rebound in global risk sentiment and renewed strength in key outside markets. Until there are more signs that global demand is on the mend, however, cocoa remains vulnerable to further downside price action this week. A rebound in US and European equity markets provided cocoa with carryover support, while the Eurocurrency and British Pound also recovered from multi-year lows which gave cocoa an additional boost. News that a group of major global chocolate makers will work with Ivory Coast and Ghana to support their Living Income Differential provided further support to cocoa prices last week.


Coffee was able to put some brakes on its July selloff, but remains more than 30.00 cents below its June month-end price coming into this week’s action. September coffee was able to rebound from a new 9 1/2 month low to finish Friday’s trading session with a sizable gain. Friday’s rebound in global risk sentiment benefited the coffee market as that may help to soothe near-term demand concerns. Many nations are seeing recent inflation readings at multi-decade highs, and the likelihood that will diminish consumption at restaurants and retail shops continues to weigh on coffee prices this month.


A sweeping reversal in December cotton on Friday offers the first indication that the steep selloff from the May high may have finally concluded. The dollar was weaker on Friday, and crude oil and the stock market were higher, all of which is supportive to cotton prices. Better than expected US retail sales data helped alleviate nagging concerns that a recession would hurt demand. The latest 1-5-day forecast calls for little rain in Texas but ample amounts in the Delta and Southeastern US.


After falling to its lowest price level in four months on July 5, October sugar rallied to a five-week high on Friday. This recovery occurred despite significant weakness in crude oil prices and the Brazilian currency, and that should bode well for sugar prices going forward. For the week, October sugar finished with a gain of 23 ticks (up 1.2%) and a second positive weekly result in a row.

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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