Bearish Global Supply Weigh on Sugar Prices
While cocoa’s global demand concerns are far from being soothed, the market has so far been able to avoid any severely negative surprises with critical demand-side data points. With positive tilt to the Asia data overnight, the market may be able to extend a recovery move higher. Sluggish global equity markets and a pullback in the Eurocurrency were sources of carryover pressure, but they were more than offset by critical demand-side news.
For all of the headwinds coming from both the supply and demand sides of the market, coffee prices continue to stay clear of the mid-June contract low. A 1% gain and a new 1-week high in the Brazilian currency provided coffee with underlying support as it eases pressure on their producers to market their near-term supply to foreign customers.
December cotton reversed direction yesterday and closed higher for the first time since last Friday. The market was buoyed by a statement from China that it would stick to the Phase 1 trade deal reached earlier in the year. China said it would respond to the “bullying” tactics from Washington separately. US cotton export sales for the week ending July 9 showed net cancellations of 17,455 bales for the current (2019/20) marketing year and net sales of 29,125 for 2020/21 for an overall total of 11,670. This was down from a combined total of 50,460 the previous week and was the lowest combined total since May 28.
With a bearish global supply outlook weighing on prices, sugar will need to see stronger key outside markets in order to hold recent gains. The Brazilian currency regained more than 1% in value and reached a new 1-week high, and that provided early support to sugar prices as it eases the pressure on Center-South mills to produce more sugar at the expense of ethanol. However, that was more than offset by a sizable pullback in energy prices as that is likely to keep Brazilian domestic ethanol demand from seeing tangible improvement during the near future.
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