Mixed Softs Led By Coffee
With a nearly 350 point rally (up 16%) over the past 3 weeks, cocoa is likely to be a prime candidate for some profit-taking if global risk sentiment takes a negative shift. There may be a “wild card” factor developing on the supply side of the market, however, and that can help cocoa remain fairly well supported on pullbacks.
The market turned lower from an overbought condition this week from the key resistance level of 127.15 and is now well into a correction. An improving global demand outlook provided support following positive guidance from Starbucks and Nestle. In addition, ICE exchange coffee stocks fell by 20,797 bags on Thursday and are close to falling below 1.5 million bags for the first time since mid-2017.
December cotton pushed through the July 9 high yesterday and traded to its highest level since March 5th finding support from weather and export sales. China was an active buyer. The report showed US cotton export sales for the week ending July 30 coming in with net cancellations of 68,537 bales for the 2019/20 (current) marketing year and net sales of 130,762 for 2020/21 for a total of 62,225.
While it has benefited from improving global risk sentiment and recent strength in key outside markets, sugar will continue to face headwinds from increasing production both in Brazil and India. October sugar rallied to a new 4 1/2 month high yesterday. While there was significant rainfall this week, increasing concern that Thailand’s 2020/21 production will stay near multi-decade lows has given the market an early source of strength.
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