Smaller Brazil Crop Next Year May Help
Cocoa prices have found their footing after falling more than 110 points below last Wednesday’s 4 1/2 month high, but that was not enough to prevent a fourth negative monthly result in a row. Unless the market is confident that global demand will see longer-term improvement, cocoa prices will have trouble sustaining upside momentum.
Coffee prices finished the week and month with back to back daily losses, but will start August well above the 10-month lows seen in mid-July. If global risk sentiment continues to improve, coffee prices can regain upside momentum and climb back above its 3 major moving averages. However, reports that this year’s Vietnamese coffee exports are more than 18% ahead of last year’s pace put pressure on coffee prices going into the weekend. Brazil’s major Arabica growing regions have little to no rainfall in the forecast through the middle of next week, and that extends the drier than normal conditions seen over the past few years. If the La Nina weather event continues through late this year, it will have a negative impact on Brazil’s 2023/24 “off-year” Arabica crop.
The long-lasting drought in Texas with no relief in sight is raising more and more concern about the US crop as the season wears on. Last week’s US Drought Monitor much of Texas, including the unirrigated regions in the west, remaining under extreme to exceptional drought. The 1-5 day forecast shows no rain for west Texas. The 6-10 and 8-14 day forecasts call for above normal temperatures and normal to below normal precipitation for the most part. The normal precipitation could offer some relief, but time is running out.
Sugar prices have been unable to find their footing as they will start August in close proximity to last Wednesday’s 11 1/2 month low. While key outside markets have been a recent source of strength, sugar needs to receive fresh bullish supply news from Brazil in order to lift decisively clear of its recent lows. October sugar closed lower Friday which was a seventh negative daily result over the past 9 sessions.
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