More La Nina Weather Forecasted
Cocoa prices have been unable to overcome near-term demand concerns during the third quarter, but they continue to hold their ground above their July and August lows. With global risk sentiment on the mend, cocoa has an opportunity to regain some support. Concern over demand prospects in Europe and Asia continue to be a major source of pressure on cocoa prices, as those 2 regions account for the largest shares of global grindings.
Coffee prices have given back two-thirds of their gains from the 4-session rally in late August as the market continues to be pressured by near-term demand concerns. The US Climate Prediction Center updated their La Nina forecast to a 91% chance that it will continue through December, and a 54% that will continue into the first quarter of 2023. La Nina has a negative impact for coffee production in Brazil (drier than normal conditions) and Colombia (heavier than normal rainfall) who combined account for more than half of global Arabica output.
December cotton closed sharply higher yesterday and is seeing follow-through buying this morning. Traders described it as bargain hunting after the steep selloff the past couple of weeks. Traders are looking for a slight increase in the US production estimate for next week’s USDA supply/demand report, but not much. For the report, the average trade expectation for US 2022/23 cotton production is 12.77 million bales, with a range of expectations from 12.20 to 13.50 million.
Sugar prices have maintained coiling price action over the past 3 weeks as the market continues to tighten its trading range. The market may be setting up for a breakout move and with key outside markets and global risk sentiment starting to work in its favor, sugar may be able to hold its ground above the August lows. Stronger energy prices and a rebound in the Brazilian currency helped to underpin sugar prices early in the day, as that combination should give a boost to Brazil’s ethanol demand outlook.
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