Softs Under Pressure
It has been bullish supply-side developments that have helped to lift prices well clear of the 2020 lows, and can help the market maintain upside momentum after the impressive break-out yesterday. September cocoa reached a new 2-week high yesterday. This was cocoa’s fourth positive daily result in a row which was its longest winning streak since the end of April. Recent wetter than normal weather over several key West African cocoa producing nations have caused transportation and drying problems for this year’s mid-crop production.
Coffee prices remain in the June consolidation zone, but will start today’s trading 1.25 cents above last week’s contract low. With a record high Brazilian crop weighing on the market, coffee will need to see fresh positive demand-side news to avoid sliding down to new low ground. Global demand concerns remain a front-and-center-issue for the coffee market, and were given additional weight from reports of increasing coronavirus cases in several US states.
With mostly hot and very dry conditions for the West Texas region through July 9, the market seems to be in position for another leg higher. Demand news remain strong and Texas crop ratings are already poor and traders see smaller planted acreage for the report at the end of the month. US cotton export sales for the week ending June 18 came in at 102,725 bales for the current (2019/20) marketing year and 67,861 for the next (2020/21) for a total of 170,586 bales. This is the lowest combined weekly total since May 28 and the second lowest since April 16.
With fresh evidence of a bearish global supply outlook, sugar needs to see stronger global risk sentiment and stronger outside markets in order to hold in the recent consolidation. Early pressure yesterday came from the India Sugar Mills Association (ISMA) which forecast their nation’s 2020/21 sugar production at 30.5 million tonnes which would be an increase of 12% from this season’s 27.2 million. Maharashtra is expected to have their 2020/21 production come in at 10.13 million tonnes, which compares to this season’s weather-impacted 6.16 million tonnes. In addition, the ISMA estimated India’s 2020/21 sugar exports at 6.0 to 7.0 million tonnes, which compares to this season’s record high 5.2 million and the government’s 2019/20 export target of 6 million tonnes.
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