Sugar to Extend its Recovery Move?
While cocoa’s post-holiday recovery move appears to have run out of steam, the market remains on-course for a positive weekly reversal. With global risk sentiment on the mend in front of key demand-side data next week, cocoa may find commercial support on breaks. A rebound in global risk sentiment provided the cocoa market with early support as that may help to soothe near-term demand concerns.
Coffee prices have not seen a positive daily result so far this month, but continue to hold their ground above the late-June lows. A more than 1.5% rebound in the Brazilian currency provided early carryover support to the coffee market, as an extended recovery in that currency would ease pressure on Brazil’s farmers to market their coffee to foreign customers. Although their June exports came in below their May total, news that Vietnam’s 2022 exports so far this year are running more than 21% ahead of last year’s pace put pressure on coffee prices late in the day. Brazil’s main Arabica-growing areas will have mostly dry weather through the end of next week, which should help the harvest to make up for early delays.
December cotton recovered a good portion of its losses from Wednesday, mimicking similar moves in the grain markets. Crude oil and the stock market were also higher, which bodes well for demand. The fact that the dollar stopped going up may have also supported cotton. The weekly US Drought Monitor showed drought conditions expanding or worsening across the cotton growing regions, including west Texas, the Delta, and southeastern US.
Sugar’s 2-day rally has recovered all of its early July losses and put the market on-course for a positive weekly reversal. Although it will continue to need key outside markets to remain strong, sugar seems to be in position to extend its recovery move. Crude oil and RBOB gasoline turned sharply to the upside and climbed well above their Wednesday lows, and that provided carryover support to the sugar market as it should strengthen ethanol demand both in Brazil and India.
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