Improving Crop Conditions For Cotton
Cocoa prices have been able to maintain a mild recovery move into the new trading week in spite of lukewarm global risk sentiment. With a US economic data point providing some hope of demand improvement, cocoa may be able to extend this rally. A sizable rally in the Eurocurrency and a new 5-week high in the British Pound provided the cocoa market with carryover support, as that can help to shore up European near-term demand prospects.
Coffee’s whipsaw price action to start out August does not bode well for the market near-term as it failed to climb above and beyond key price levels. Although it continues to have a bullish supply outlook, coffee may see further downside prices before it can find its footing. The Brazilian currency reached a new 6-week high which provided the coffee market with carryover support as that eases pressure on Brazil’s farmers to market their near-term supplies.
With improving crop conditions and the overbought condition, the market may stay on the defensive short-term. December cotton closed sharply lower yesterday after trading to its highest price level since July 5 last week. The dollar was lower but so were crude oil and equities, so outside market forces were mixed. Traders worried about Chinese demand in the wake of their Covid shutdowns this year. The market may have also followed the grain markets lower. Weather reports showed that the Texas Panhandle received significant rain last week, which will help the crops there, but West Texas rainfall was sparse.
Sugar’s abrupt turnaround late yesterday may be an early sign that a longer-term low may be in. If key outside markets can regain some strength, sugar should be able to extend this recovery move. A sharp selloff in crude oil and RBOB gasoline put carryover pressure on the sugar market as that may weaken the near-term ethanol demand outlook. The Brazilian government said that their July sugar exports were 2.884 million tonnes which compared to 2.469 million last year, and that weighed on sugar prices as it showed more evidence that Brazil’s Center-South mills were shifting some of their crushing from ethanol production to sugar production.
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