More Uncertainty for Coffee Market
The coffee market continues to deal with uncertainty with two key factors, Brazil’s upcoming production and out-of-home demand prospects. This year’s Brazilian Arabica harvest is picking up speed, and that has pressured coffee prices late this month as that will bring fresh supply to the global export marketplace. There has been better weather for Brazil’s growing areas over the past few months which should result in their 2023/24 “off-year” Arabica crop exceeding the output of their 2022/23 “on-year” crop. In addition, a sizable pullback in the Brazilian currency weighed on coffee prices as that may encourage Brazil’s farmers to market their near-term coffee supply to foreign customers.
Cocoa prices will go into today’s trading on-track for an eighth monthly gain in row as they have risen more than 680 points (up 29%) over that timeframe. While this leaves the market vulnerable to profit-taking, cocoa prices should remain well supported on a near-term pullback. A rebound in global risk sentiment following news of a US debt limit deal provided cocoa with early support as that should help to soothe near-term demand concerns. Although the Eurocurrency reached a 10-week low, that carryover pressure was offset by a recovery move in the British Pound.
July cotton closed higher on Monday but well off its highs of the day. Earlier in the session the market traded to its highest level since May 22. December cotton closed lower after a less-impressive rally. The June dollar index ended lower after trading to its highest level since March 15 earlier in the session. If this outside reversal proves to be a top, it could lend support to cotton on ideas a weaker dollar makes US exports more competitive on the world market. However, crude oil was sharply lower, which is negative to cotton because it makes man-made fibers cheaper to produce. India’s monsoon has advanced after stalling for 11 days, which should be beneficial for planting crops, including cotton. The 1-5-day forecast calls for heavy rainfall in the Texas Panhandle and areas immediately south of there, with lesser amounts as you move further south.
The market looks vulnerable to more selling pressures and long liquidation selling over the near-term. With a bearish shift in the global supply outlook, sugar may see a retest of last week’s lows. A sharp selloff in crude oil and RBOB gasoline prices as well as a pullback in the Brazilian currency put carryover pressure on the sugar market. The USDA’s latest biannual supply/demand update was released late last week which forecast 2023/24 global sugar production at a record high 187.881 million tonnes, while also estimating 2023/24 global consumption at a record high 180.045 million tonnes.
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