Sugar Prices Rise
Sugar prices have risen by nearly 1 cent in value over the past 3 sessions as they have benefited from bullish supply developments and carryover support from key outside markets. While the market remains on-track for a positive monthly reversal, sugar may need to receive a clearer picture on this season’s Indian exports to see a sizable extension to this current rally. There is a growing belief in the market that India’s government will not approve a second export tranche until they have a better gauge on their nation’s production this season which provided a boost to sugar prices. There is also talk that India could ban exports.
After several weeks of volatile price action, cocoa is back on-track to see a fourth positive monthly result in a row. If global risk sentiment continues to improve, cocoa prices could be heading for a retest of their early January highs. A sharp quarterly decline in US core PCE provided more evidence that inflation is in a sustained decline, which will benefit the cocoa market as that can strengthen the near-term demand outlook for discretionary items such as chocolates. Several major growing nations are having production issues this season that are providing the cocoa market with additional support. Ghana continues to deal with outbreaks of the swollen shoot virus, while Nigeria has seen black pod disease in several of their growing regions. West Africa is in the middle of their dry season with very warm temperatures, which may benefit harvesting, drying and transporting beans but has a negative impact on upcoming production. While global risk sentiment has taken a negative shift early in the day, signs that inflation is declining in many developed economies should help to strengthen cocoa’s demand outlook.
Coffee’s late January recovery move has been fueled in part by a better near-term demand outlook. If global risk sentiment continues to improve, coffee should gain further ground. A better than expected US fourth quarter GDP reading provided coffee with underlying support. Improving growth along with lower inflation should strengthen coffee’s domestic demand outlook as it will encourage more restaurant and retail shop consumption. Several major Arabica growing nations have supply issues this season that have also been a source of strength to coffee prices. Honduras and Guatemala saw a sharp decline in fourth quarter exports from the previous year, while Colombia’s annualized production pace has fallen to its lowest level since mid-2014.
March cotton managed a strong rally yesterday which pushed the market up to the highest price level since December 21, but failed to close above key resistance at 87.82. This is a slightly negative technical development. Solid export sales for the second week in a row plus a turn up in the stock market were seen as positive forces. Cumulative sales for 2022/23 have reached 9.282 million bales, down from 11.659 million a year ago and the lowest for this time of year since 2015/16. There has been plenty of talk of a sharp drop in the planted area for the coming year given the high prices for other grains. Even if we assume a 20% drop in planted area, if we use a 20 year average abandonment rate, and trendline yield, ending stocks could surge to 6.24 million bales as compared with 4.2 million this year, 3.75 million last year and 3.15 million bales two years ago. This
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