Sugar Prices Rebound
Sugar prices have rebounded more than 60 ticks above Monday’s 13-month low and are on-track for a positive weekly reversal. If sugar can find additional carryover support from energy prices and improving global risk sentiment, it may be able to climb back above the 50-day moving average for the first time since mid-July. There are reports that Thailand will delay a tax on sugary beverages from next month until next April. As a result, that should boost Thailand’s domestic sugar consumption which in turn will cut into their 2022/23 export total. Thailand is expected to be the world’s second largest sugar exporter during the 2022/23 season with India expected to limit their 2022/23 exports to 8 million tonnes.
Global grindings remain on-track for a record high total this season while global production will have its largest year-over-year decline in 15 seasons. Cocoa prices continue to face near-term demand concerns that are fueled by high inflation and sluggish global risk sentiment. In spite of this pressure, the cocoa market is only down 1% for the third quarter so far as it consistently held its ground above the early July lows. A severe negative shift in global risk sentiment pressured the cocoa market as that is seen as further weakening its near-term demand outlook. In addition, sizable pullbacks in European and US equity markets, the Eurocurrency and the British Pound put carryover pressure on cocoa prices. However, there are indications that several major Chinese metropolitan areas are going to relax their COVID restrictions, and that could help to shore up Asian demand prospects.
December cotton continued its slide yesterday, with a move to its lowest level since August 4. The dollar closed higher, which is negative to US cotton exports, crude oil was lower, which makes man-made fibers more competitive, and the stock market was lower, which is bad for demand. The markets in general are anticipating the conclusion of the FOMC meeting today with widespread expectations of a 75-basis point hike. This has been supporting the dollar. Now there is talk that the Fed may get too aggressive in fighting inflation and bring on a recession, which would be negative to many commodities, including cotton. The weather looks generally drier except for some rain parts of the Delta over the next five days and chances for above normal precipitation in the southeast US in the 8-14 day outlook. The generally dry weather should be favorable to harvest.
Coffee prices have recovered a large portion of their August/September selloff in 2 sessions as the market received fresh evidence of Brazilian supply issues. While the demand side will continue to face pressure from high inflation, coffee should be well supported. The Brazilian government agency Conab slashed their nation’s 2022/23 Arabica production forecast by 3.3 million bags down to 32.41 million, due in large part to adverse weather conditions. While Conab expects Brazil’s 2022/23 Robusta production to reach a record high 18 million bags, their combined 2022/23 production (Arabica plus Robusta) estimate of 50.38 million bags compares to 63.08 million during the last “on-year” season in 2020/21. In addition, the Brazilian currency reached a 1-week high which also provided coffee prices with carryover support as that eases pressure on Brazil’s farmers to market their remaining coffee supply. ICE exchange coffee stocks fell by 17,384 bags Tuesday and are close to falling below 500,000 bags for the first time since July 1999.
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