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Cocoa May See Upside Follow-Through


Cocoa prices have seen choppy action during the third quarter as bullish supply factors have been balanced against near-term demand concerns. With the market benefiting from a rebound in global risk sentiment, cocoa may be able to see upside follow-through. Indications that this season’s West African production will fall below last season has provided support to the cocoa market. Ghana will have a production decline this season of over 300,000 tonnes from their 2020/21 total, and that should help to underpin cocoa prices going forward. In addition, several weeks of above average rainfall over West African growing areas may damage cocoa beans and increase the spread of diseases, and that could cut into early 2022/23 main crop output.

colorful cocoa pods


December cotton sold off sharply for the second straight session yesterday and traded to its lowest level since August 5. Outside market forces were mixed. The dollar was slightly higher but the stock market and crude oil were both higher. The selling was likely sparked by concerns over the global economy and what that would mean for US cotton exports. The trade is also looking to the FOMC meeting results on Wednesday, which is largely expected to show another “jumbo” rate 75 basis-point rate hike.


Coffee’s positive turnaround this week is due in part to a rebound in global risk sentiment that should help to soothe near-term demand concerns. With the market already having bullish supply factors to provide support, coffee can extend this recovery move over the rest of the third quarter. Brazil’s National Coffee Council said that their nation’s coffee stocks may drop down to 7 million bags by March. This would be a record low for that time of the year and compares to a normal range of 9 to 12 million bags, which provided a significant boost to coffee prices. Brazil and Colombia will continue to have production issues due to La Nina through early next year, while Central American producers are also vulnerable to adverse weather that could curb their upcoming output.


Sugar prices started the week with a downside breakout below the August low and down to the lowest level since August 12th, 2021. A risk off mood throughout global markets put added pressure on sugar prices. However, a rebound in energy prices and a sharp rally in the Brazilian currency helped the sugar market to lift clear of its early lows by the close. India will soon announce the next year’s export quota. The market faces a global production surplus for the coming year unless weather emerges as a significant factor (problem) in a key producing country. A positive development that failed to provide much support was the aggressive imports by China for the month of August which came in at 680,000 tons, up more than 35% from last year.

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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