Sugar Started Aug With Renewed Strength
Cocoa prices saw little upside follow-through from last Thursday’s outside-day higher close as they continue to have trouble sustaining a recovery move. While the market has extended a choppy price pattern since late June, cocoa has seen bullish supply developments that can help prices regain upside momentum soon. For the week, December cocoa finished with a loss of 32 points (down 1.3%) which was a second negative weekly result over the past 3 weeks. The Eurocurrency and British Pound sustained heavy losses in the wake of July US jobs data, and that put carryover pressure on cocoa prices as that will make it more expensive for European processors to acquire new cocoa supply.
While coffee is a “staple” for many consumers around the globe, concern over out-of-home consumption continues to put brakes on the market’s upside momentum. Although it may see downside follow-through early this week, coffee continues to have bullish supply developments that can provide underlying support to the market. For the week, December coffee finished with a loss of 7.40 cents (down 3.5%) which broke a 2-week winning streak and was a negative weekly reversal from Monday’s 4-week high. Concern that high inflation will lead to a pullback in restaurant and retail shop purchases continues to pressure coffee prices, as the sharp rise in many regularly-bought items has led to many consumers cutting back on their discretionary spending.
December cotton closed higher on Friday after trading to the highest level in a week. The market approached the July 29th high of 97.65 before backing off. More talk of the precarious situation for the Texas crop lent support after the weekly Drought Monitor showed no improvement in west Texas last week. The 1-5 day forecast calls for some rainfall in the Texas Panhandle, but very little in other parts of west Texas. The 6-10 and 8-14 day forecasts call for above normal temperatures and normal or below normal chances of rain in west Texas and the Panhandle.
The sugar market saw chaotic price action last month as carryover pressure from sluggish crude oil and gasoline prices weakened sugar prices since mid-June. In contrast, sugar prices have started out August with renewed strength as the market seems to have the supply fundamentals to fuel a recovery move. For the week, October sugar finished with a gain of 40 ticks (up 2.3%) which broke a 2-week losing streak and was a positive weekly reversal from Monday’s 11 1/2 month low. A rebound in crude oil and RBOB gasoline prices provided the sugar market with early support, while the Brazilian currency regained some strength that in turn gave a boost to sugar prices.
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