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Demand Concerns Persist


While cocoa prices consolidated in a relatively tight range over the past 3 sessions, they were unable to avoid a second negative weekly result in a row. Although the market continues to find support from bullish near-term supply factors, cocoa will have trouble regaining upside momentum until there is a definitive rebound in global demand prospects. For the week, however, December cocoa finished with a loss of 47 points (down 1.8%).


With demand continuing to show signs of improvement while Brazil’s harvest is almost completed, coffee could reach new high ground if dryness issues persist in Brazil. For the week, December coffee finished with a loss of 1.55 cents (down 1.2%). The Brazilian currency fell back into negative territory after first reaching a new 1-week high, which helped to keep further coffee gains in check. The Brazilian trade group Cecafe said that last month’s Brazilian coffee exports were 2.2% less than last year’s total, which provided early support to the market as it reflects tighter than expected near-term supply in spite of Brazil’s 2020/21 “on-year” crop that is widely expected to reach a record high total.


The market reacted positively to the USDA supply/demand report Friday, but sold off steadily after that and made new lows before closing unchanged. News of more rain and possible flooding this week in Texas helped to support the bounce overnight. The report showed a drop in the US production estimate, but overall it was less bullish than trade expectations due to revisions lower in US exports and domestic usage. US 2020/21 cotton production came in at 17.06 million bales, down from 18.08 million in the August estimate and below the average pre-report trade estimate at 17.57 million.


The market is finding little carryover support from outside markets and continues to be weighed down by bearish global supply factors. March sugar fell to a new 6 1/2 week low Friday. For the week, March sugar finished with a loss of 1 tick and a fourth negative weekly result in a row. The combination of sluggish energy prices and a pullback in the Brazilian currency weighed on the sugar market as they continue to encourage Brazil’s Center-South mills to produce more sugar at the expense of 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.

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