High Open Interest in Cotton
December cotton broke out of its recent trading range on Friday and traded to its highest level since February 20. Rains across the Delta and other cotton growing regions in the US are delaying harvest and raising concerns about quality. Also, a strong September US retail sales number on Friday, with clothing store receipts up 11% from the previous month providing encouragement on the demand front.
The cocoa market may have already priced in the global demand concerns with its pullback this month. There is a strong chance that West Africa’s production will be pulled lower by the dry conditions earlier this year. That and the potential for political tensions in that nation in front of their presidential election could lead to tighter supplies. This could have left cocoa undervalued at current levels.
Coffee prices have received some bullish supply/demand developments over the past few weeks, but they continue to face headwinds from a near-record Brazilian 2020/21 crop. With a negative shift in demand from an area of recent demand-side strength, coffee may struggle to find its footing.
While prices are back to within striking distance of its 2020 highs from mid-February, sugar continues to have bearish supply developments from its top 2 producers (who combined accounts for over 38% of global production) that leave the market vulnerable to long liquidation.
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