ADMIS News
COCOA
September cocoa recovered overnight following Monday’s selloff. The market has recently received some positive demand news, but it has been unable to find its footing. The mid-June lows would appear to be in bargain territory given the bullish supply outlook, which suggests prices are closing in on a near-term low. September cocoa fell to its lowest level in a week on Monday as a pullback in US and European equity markets raised concerns that it would hurt demand, but news that Beijing is relaxing some of its COVID restrictions offers a ray of hope for Asian demand in the third quarter. Transportation bottlenecks in Ivory Coast may be starting to ease, which suggests more beans will be arriving at ports.
COFFEE
September coffee was a bit higher overnight but was confined to yesterday’s range. The market continues to be pressured by near-term demand concerns, but there have also been some bearish supply forecasts that have weighed on prices recently. So far, the market has been able to hold its ground above the mid-June lows, and that could be an indication that the market is approaching a near-term low. Many of the world’s developed economies are seeing their highest inflation in decades, and that has dampened the outlook for coffee consumption at restaurants and retail shops.
COTTON
The cotton market reacted to yesterday afternoon’s bullish Crop Progress report with an outside reversal day higher overnight. The report showed US cotton conditions declining for a second straight week, with declines in most of the producing states. Traders continued to worry about demand, citing the US ban on imports of goods from China’s Xinjiang region and the possibility that this will cause China to cut its imports of US cotton. (China is the number-one US customer so far for the 2021/22 marketing year.) Texas growing regions have received some rains recently, but the US Drought Monitor last week showed little or no improvement, and the Crop Progress reports indicate the crop has gotten worse.
SUGAR
Sugar traded higher overnight as higher crude oil prices lent support. On Monday, sugar fell to its lowest level since March 3 after Brazil’s Sao Paolo state cut its gasoline tax by 7% and kept the ethanol tax unchanged. This reduces ethanol’s price advantage over gasoline and could diminish ethanol demand and encourage Brazilian mills to produce more sugar instead. However, the sugar market has shown signs that it is closing in on a low, and a rally in crude oil could spark a recovery move. A rebound in the Brazilian currency and stronger crude prices have already lent some support this week, as that combination could encourage the mills to focus more on ethanol.
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.
