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Fear of Slow Demand Offset Supply Concerns


Cocoa is one of many commodities in which a bullish supply outlook has been offset by fears of demand destruction. European demand prospects have been weakened by potential energy shortages this winter, and that has been a major source of pressure on the cocoa market. Europe will account for 36% of global grindings during the 2021/22 season, with Netherlands and Germany 2 of the world’s 4 largest grinding nations. In addition, a large portion of cocoa processed into butter and powder is exported to European nations.

Whole cocoa pod


Coffee prices have regained nearly 15.00 cents in value so far this week, and have done so while global risk sentiment continued to deteriorate. If there are fresh signs of demand improvement, coffee may head for a retest of the early June highs. Ongoing production issues in Brazil, Colombia, Honduras and Guatemala have helped coffee prices continue to have upside follow-through from Friday’s positive reversal. Those 4 nations accounted for more than 65% of global Arabica production during the 2021/22 season.


December cotton closed lower yesterday after trading to the bottom of the range it has held since gapping higher on August 15. This was despite a decline in cotton crop conditions last week. The nearby Dollar Index traded to its highest level in 20 years but then closed lower on the day, which could support cotton in upcoming sessions if Tuesday’s high holds. Traders blamed profit taking for the weaker close. Early weakness was blamed on the latest USDA-FSA certified acreage data, which came in higher than expected.


While sugar received some badly-needed help from key outside markets, it was not enough for the market to regain upside momentum. With critical supply-side news expected at midsession, however, sugar may be able to lift well clear of last Friday’s low. Sizable recovery moves in crude oil, RBOB gasoline and the Brazilian currency combined to provide the sugar market with carryover support, as that combination may encourage Brazil’s Center-South mills to shift their crushing from sugar production over to ethanol production.

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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