Hurricane Impacts Cotton
The results of the USDA supply/demand report plus any news on short-term damage from the hurricane should set the short-term trend. Open interest is at the highest level since February which leaves the market vulnerable to increased selling if support levels are violated. For the USDA Supply/Demand and Crop Production reports today, the average trade estimate for 2020/21 US cotton production is 16.74 million bales (range 16.35-17.03 million) which is down from 17.06 million in September.
Demand concerns have pressured cocoa prices over the past few weeks, and the market will receive critical demand-side data before the Halloween holiday. In contrast to Monday’s pullback, cocoa prices were able to follow-through on Wednesday’s positive daily reversal as they finished Thursday’s trading session with a moderate gain.
Brazilian near-term supply will continue to weigh on prices, but a shift towards supply issues with other key producers can help support. December coffee was able to shake off midsession pressure and finish yesterday with a mild gain. This was coffee’s third straight positive daily result which was the first time it has achieved that since late August.
Sugar prices have been able to extend their upside breakout as they have benefited from stronger key outside market and fresh bullish supply/demand developments. Even with stronger global risk sentiment, sugar’s upside momentum is slowing as the market may be increasingly vulnerable to long liquidation. March sugar reached a new 7-month high and closed higher for four sessions in a row.
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