Cotton Traders Focus on Poor US Crop
Cocoa prices held up fairly well during Friday’s severe negative shift in global risk sentiment and key outside markets that weakened its near-term demand outlook. With supply-side factors returning to a front-and-center position in the market, cocoa should finish August by breaking a 4-month losing streak.
From mid-July until mid-August, the coffee market saw coiling price action, with sharp rallies followed by quick pullbacks. After a daily reversal on August 19, prices rallied more than 26 cents (+12%) in just four sessions, but the coffee market has a bullish supply outlook that could improve further by the end of September. For the week, December coffee finished with a gain of 24.75 cents (up 11.6%) which was a third positive weekly result over the past 5 weeks.
December cotton closed higher on Friday and experienced the highest close since June 17. The dollar reversed higher, but this had little effect on cotton as traders are more focused on the poor US crop and the expected strong export demand even as the dollar gains strength. Reports that China will take more steps to support their economy were supportive as well, as that would support US cotton exports. The 6-10 and 8-14-day forecasts call for normal to above normal chances of rain across Texas, the Delta, and the Southeast. The rain is coming too late to save the Texas crop, and we are getting to the point in the season where growers will be concerns about rainfall damaging open bolls.
After seeing coiling action for most of last week, sugar’s upsurge on Friday lifted prices back above their 50-day moving average for the first time since mid-August. While key outside markets are providing carryover support, sugar is also receiving bullish supply news that can help sugar maintain upside momentum through month-end.
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