Texas Rain May Help Crop Outlook
Cocoa prices have a long way to go to fully recover from their second quarter losses, but they continue to show signs that a longer-term low may be in. If global risk sentiment can show more improvement, cocoa may find additional buying support. Mild improvement in global risk sentiment was reflected in a positive turnaround in European and US equity markets, which benefited the cocoa market as that will help to soothe near-term demand concerns that have been a source of pressure for more than 2 years.
While coffee has seen a third sizable recovery move fall apart over the past 6 weeks, it continues to hold its ground above the late June lows. The market continues to receive bullish supply/demand developments that should help coffee prices find their footing. Colombia’s June coffee production came in at 955,000 bags which was 10% below last year’s total, and is due in part to wetter than normal weather.
Strength in the grains is adding to the positive tone in cotton. However, the technical recovery bounce could be short-lived as demand factors look weak, and the US crop conditions may be improving. December cotton resumed its selloff yesterday and traded to its lowest level since December 9. The dollar continued its move higher which makes US cotton less competitive on the global market. The 1 to 5 day forecast calls for little rainfall in west Texas and some modest amounts for the Texas Panhandle.
While they remain at the bottom end of their June/July selloff, sugar prices were able to find their footing in spite of continued weakness in their key outside markets. If there is a sustained turnaround in global risk sentiment, sugar should be able to lift well clear of Tuesday’s 4-month low.
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