Sugar Upside Momentum
Sugar prices are maintaining upside momentum in spite of a negative shift in energy prices and are on-track for a third weekly result in a row. While the market has benefited from improved global demand prospects, sugar may find it difficult to extend this current rally with a bearish global supply outlook weighing on prices.
Cocoa prices have regained upside momentum over the past few sessions. With bullish near-term supply developments providing underlying support, a rebound in global risk sentiment can help soothe near-term demand concerns and help cocoa move up. The market continued to find carryover support from a stronger Eurocurrency as that should benefit Euro zone near-term demand prospects as grinders find it easier to acquire near-term supplies.
Global demand has been on the mend in recent weeks, and that can help coffee to maintain upside momentum. Safras and Mercado reported that Brazilian farmers have sold over half of their 2020/21 crop so far, which is well ahead of the 5-year average of 37%. While a weak Brazilian currency and a record-high crop were factors, this also indicates that there will be less than normal hedge selling over the rest of this year which in turn gave a boost to coffee prices.
The market found some support from continued harsh growing conditions in West Texas and from solid gains in grain markets, but the bearish supply/demand report is going to be tough to look past. The trade is also looking closely at drought conditions in Texas. Areas of abnormally dry to extreme drought conditions have expanded somewhat over the past week and now extend across most of the state with the exception of the southern quarter and the southeast coast.