Exchange Stocks Continue to Tighten
While a more than 13.50 cent trading range on Monday reflected the volatility seen throughout financial and commodity markets, coffee was able to see upside follow-through from a positive weekly reversal. Subdued global risk sentiment will continue to weigh on prices, but coffee has bullish supply factors that can keep the market well clear of last week’s lows. A second sizable daily loss in the Brazilian currency in as many sessions as it reached a 2-month low put notable carryover pressure on the coffee market late in the day. Tight near-term supplies as Brazil and Colombia both deal with their current production issues helped to fuel coffee’s early upside move.
Cocoa prices continue to face concern over near-term demand prospects which drove the front-month December contract down to a new contract low. The market was able to rally nearly 90 points above its midsession low yesterday, however, and that could be an early sign that a short-term low may be in. The prospect of rising interest rates in major developed economies has diminished cocoa’s demand outlook, as the prospect of high inflation levels through next year will diminish the outlook for chocolate purchases during that timeframe.
December closed sharply lower yesterday after trading to its lowest level since July 15. The market is down 24.84 (22%) since August 31. The dollar was sharply higher again with the nearby Dollar Index trading to its highest level since May 2002, and this undercuts US export expectations. The weekly Crop Progress Report showed 15% of the US cotton crop had been harvested as of September 25, up from 11% the previous seek and ahead of 11% last year and the 10-year average of 11%.
In spite of recent volatile price action, sugar prices continue to stay clear of last week’s 13-month low. While it needs to see a positive turnaround in key outside markets, sugar is still probing for a low enough price to clear the Brazil sugar production. A negative shift in energy prices put carryover pressure on the sugar market as that should weaken near-term ethanol demand in Brazil and India.
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