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Lockdowns Weigh on Cotton Futures


Cocoa prices have come through a negative shift in global risk sentiment and carryover pressure from its key outside markets to return to the upper portion of its July/September trading range. For the week, December cocoa finished with a gain of 3 points (up 0.1%) which was a third positive weekly result over the past 4 weeks. Increasing market concern with the upcoming 2022/23 West African production continues to underpin cocoa prices going into early September. A shortage of fertilizer has also resulted in very high prices when it is available, and that has led many West African farmers to cut back on its usage over the past few months.


The market continues to receive bullish supply developments and that can help coffee prices find their footing soon. For the week, December coffee finished with a loss of 9.30 cents (down 3.9%) which was a third negative weekly result over the past 5 weeks. A negative shift in global risk sentiment weighed on coffee prices, as that will weaken out-of-home consumption prospects. High inflation levels for many developed economies have led to a cutback in restaurant and retail shop purchases, and that has weighed on coffee’s overall demand outlook. Honduras coffee exports last month came in 29% below last year’s total, due in part to an outbreak of the Roya fungus in several of their growing areas.

cotton up close


December cotton closed limit down on Friday, for the second day in a row. Reports of new Covid lockdowns in China raised concerns about demand, as China has been the largest buyer for US cotton in recent years. The dollar rallied to new contract (and 20-year) highs early in the session, which weighed on US export prospects as well. There were reports on Monday that nearly every province in China had recorded infections in recent days and the some 60 million residents were locked down.


Sugar prices have started out September on an upbeat note, but they continued to be pressured by weakness in their key outside markets. Following recent estimates for a global production surplus during the 2022/23 season, sugar may be vulnerable to a near-term pullback. For the week, October sugar finished with a loss of 32 ticks (down 1.7%) which was a second negative weekly result over the past 3 weeks. A sizable rebound in the Brazilian currency and stronger energy prices provided carryover support to the sugar market.


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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