Brazil May Shift More Cane to Ethanol Production
Cocoa prices have seen 3 negative monthly results in a row as they lost more than 13% in value during the second quarter. Until the market’s near-term demand outlook improves, cocoa prices are likely to slide further to the downside before they find a longer-term floor. September cocoa dropped to a new 19-month low Friday with a moderate loss and an eighth negative daily result in a row.
Many commodities continue to be pressured by lukewarm global demand in the face of high inflation. This has been particularly true for coffee. For the week, September coffee finished with a gain of 1.40 cents (up 0.6%) which broke a 3-week losing streak. Ongoing concern with out-of-home consumption levels due to high inflation continued to weigh on coffee prices late last week.
December cotton closed moderately lower on Friday and this was the third straight week of declines. The dollar was higher on Friday and pushed up against the June 15 highs, which put some pressure on cotton. Traders are balancing the increased likelihood of a global recession and demand destruction due to inflation against concerns over the crop in Texas. Last week’s crop monitor showed little improvement in the drought in west Texas, and an expansion of drought conditions in the Delta and southeastern US.
The sugar market has been pressured over the past month by larger production and exports from India and Thailand. However, Brazil’s Center-South sugar production was 23% below last season’s pace by the middle of June, and that may help the market to regain some support soon. Brazil may shift more and more cane to ethanol production. For the week, October sugar finished with a loss of 24 ticks (down 1.3%) which was a sixth negative weekly result in a row.
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