Cocoa Trending Higher
Cocoa prices have been able to extend this week’s recovery move in spite of a significant negative shift in global risk sentiment. While demand concerns remain a major issue to overcome, cocoa may be able to maintain upside momentum short-term. While there were sizable losses in European and US equity markets, the Eurocurrency and the British Pound, cocoa was able to overcome that carryover pressure with bullish near-term supply developments.
Coffee is finding fresh supply/demand support. September coffee was able to build on early strength and reach a new 2-week high, but closed lower yesterday. The Brazilian co-op Cooxupe said that their 2020/21 harvest was 23% completed on June 19th, and that compares with 44% completed last year on that date. While some of that deficit is due to record high production this season, that news provided early support to coffee prices as it indicates how far behind Brazil’s harvest is due to labor availability issues in spite of an early start this year.
Economic concerns, a higher US dollar and sharp decline in crude oil all factors to keep December cotton in a consolidation. There is some uptrend channel support at 58.85 today and a close below this level might hint at a more serious downside correction. The surge in Covid-19 cases in the US is weighing heavily on market sentiment. US stock indices were down sharply, and that pressured cotton on concerns about demand.
Sugar prices are showing more signs of being top-heavy. India sugar production this season could jump 12% and reach 30.5 million tons, up from 27.2 million this year according to the Indian Sugar Mills Association. Unless there is a significant improvement in global risk sentiment, sugar could see a sizable near-term pullback over the rest of this week.
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