Covid News Sparks Long Liquidation
March cocoa gapped lower and sold off sharply overnight on the news that a new Covid variant has been identified in South Africa. Several European nations have begun restricting travel from that nation. This raises new demand concerns. Cocoa is also under pressure from outside markets like equities and other commodities, and low holiday volume could be exaggerating the move.
Coffee is well into overbought territory with prices at 10-year highs, and it is on-track for a third big weekly gain in a row. The market worked lower overnight, as commodities and equities markets were under pressure from news that a new Covid variant had been identified in South Africa. However, the market continues to receive bullish supply news that can underpin prices.
Cotton has maintained a consolidation pattern during November, and it remains within striking distance of a new 10-year high. The market was closed overnight so it has not had a chance to respond to the Covid news that has damaged equity and commodity markets coming into this morning’s trade, but we expect the market to see pressure once it opens. The prospect of increased exports to China has underpinned cotton prices over the past few weeks, as many analysts believe China needs to restock their strategic reserves.
Sugar has been unable to sustain upside breakout moves since late August despite an increasing bullish global supply/demand outlook. The market gapped lower overnight on reports that a new Covid variant has been identified in South Africa that could be more transmissible and more resistant to vaccines. This dovetails with the recent rise in cases in Europe. The news has hammered the equity and commodity markets, including crude oil, which is negative for sugar as well.
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