Choppy Action Continues In Sugar
While sugar prices have lost upside momentum, they remain in the upper portion of their recent consolidation zone. While the market is holding up in the face of bearish near-term supply developments, sugar remains in a near-term consolidation phase. India’s 2022 monsoon rainfall remains 6% above the long-period average with a little more than 2 weeks left to go in the season. This has pressured the sugar market as above average monsoon rainfall should benefit their upcoming 2 cane crops. Brazil’s Center-South mills have shifted a portion of their crushing from ethanol production to sugar production this season, which has also weighed on sugar prices as it reflects the changes to Brazilian state fuel taxes that have cut into ethanol’s price advantage over their domestic gasoline prices.
Cocoa prices are within striking distance of a 2-year low, as the market has been unable to shake off concern with near-term demand. While key outside markets and global risk sentiment are improving, cocoa may be heading for a retest of its early July low before it can find its footing. Although UK CPI and US PPI came in below trade forecasts, they were the latest in a set of key data points that provide evidence of high inflation in developed economies. With chocolate a discretionary purchase for most consumers, this continues to be a major headwind for global cocoa demand prospects.
Since reaching a 6-month high in late August, coffee prices have lost more than 11% in value as a shift in Brazilian weather has combined with near-term demand concerns to pressure the market. As a result, coffee may need more than improving global risk sentiment in order for the market to find its footing. A shift towards wetter weather over Brazil’s major Arabica growing regions has weighed on coffee prices as it should improve the prospects for their upcoming 2023/24 “off-year” crop. Keep in mind that the current La Nina weather event (which normally results in drier than normal conditions for those same regions) is forecast to last until early next year.
December cotton closed slightly higher yesterday but near the bottom of the recent range. The dollar was slightly lower but near the top of the recent range. Both were consolidating their big moves from Tuesday after the surprisingly high CPI number raised the prospect for a large rate hike buy the Fed next week. Traders are awaiting the weekly export sales report data after the being suspended the past four weeks due to problems with the USDA’s reporting system.
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