Rains May Damage Cotton Crops
Hurricane Sally made landfall and brought flooding to the Florida Panhandle and southern Alabama. It will work its way north and east through the rest of the week and could damage cotton crops. It may be early to assess the damage, but some analysts expect it. Some areas in southern Alabama had received as much as 20 inches and are expected to get 10 more by the time the storm is over, and the Carolinas could get as much as 5 inches. A decline in retail sales for the month of August added to concerns about the effect that the coronavirus is having on the economy and therefore cotton demand.
Cocoa’s severe changes in fortune over the past 2 sessions have left prices above their recent consolidation zone, but far below their 8-month high in early September. A sizable pullback in the Eurocurrency also weighed on cocoa prices as a weaker currency may diminish near-term Euro zone demand prospects. Indonesia is the world’s third largest grinding nation and now imports more cocoa than it produces, so this reflects the sharp drop in Asian demand earlier this year.
Coffee has been unable to shake off a volatile price pattern and sustain a recovery move, but the market continues to close above the 50-day and 200-day moving averages. While bumpy, coffee may be able to hold its ground above Tuesday’s 4-week low. There is increasing expectations that next week’s Brazilian rain event will lead to widespread flowering that will benefit their 2021/22 “off year” crop, and that weighed on coffee prices as several of their major Arabica growing regions have seen extensive dry weather over the past few months.
Sugar has found significant carryover support from key outside markets over the past 2 days, but there have been bullish supply/demand developments which have provided support as well. While further upside may be limited by Brazilian and Indian production prospects, sugar may be in position for a recovery bounce. A major source of strength came from crude oil and RBOB prices which both rose sharply after the latest weekly EIA report showed US stocks at lower than expected levels, and that boosted sugar prices as that may help to improve Brazilian domestic ethanol demand.
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