Cocoa Prices Remain Vulnerable
While cocoa prices are nearly 100 points below Wednesday’s 8 1/2 month high, they remain over 370 points above their 2 1/2 year low for late September. Even with a bullish supply/demand setup going into 2023, cocoa prices remain vulnerable to further profit-taking and additional long liquidation. As inflation levels continue to fall back in many developed economies, consumers will have more incentive to buy discretionary items such as chocolates. Ivory Coast port arrivals so far this season are running ahead of last season’s pace. On the other hand, Ghana and Nigeria are unlikely to have a sizable increase in cocoa production from last season.
Coffee prices have seen coiling price action over the past few weeks as they are unable to sustain an upside breakout move. This may set the stage for a near-term pullback, but coffee continues to have uncertain supply factors that can help the market find its footing. The Brazilian currency gave back large early gains, and that put carryover pressure on the coffee market as that may encourage Brazil’s producers to market their remaining coffee supply to foreign customers.
March cotton pushed lower again yesterday and the market experienced the lowest close since December 16. Traders indicated that nearby cotton futures are set for the worst year since 2014. Traders will monitor the weekly export sales news closely as there has been cancellations of sales from China recently, and this has left net sales negative last week and very slow in the past several weeks. There seems to be plenty of uncertainty on just how quickly China demand may recover with talk that Covid restrictions are being lifted, and the reopening could eventually bring back demand.
While sugar prices have fallen back from last Friday’s 5 1/2 year high, they will start today on-track for sizable monthly and quarterly gains. Brazil’s government agency Conab made a sizable increase to their nation’s 2022/23 sugar production forecast earlier this week, and that continues to be a source of pressure on the market. On the other hand, the EU is widely expected to have this season’s sugar production come in well below last season, while there are increasing chances that India’s 2022/23 production will fall short of last season’s record high.
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