Uptrend Channel Support in Coffee
Cocoa prices have been weighed down by high inflation levels in many economies that diminish demand prospects for discretionary items such as chocolates. In front of several key inflation readings during today’s action, cocoa received positive demand-side news that has lifted prices back to the upper portion of their recent consolidation zone. A group of major Ivory Coast cocoa processors said that their July cocoa grindings were 14% above last year’s total, and that resulted in their 2021/22 grindings total staying more than 14% ahead of last season’s pace.
Coffee prices have found support at progressively higher levels during the past few weeks. With the market continuing to receive bullish supply news, coffee may be able to climb above its recent consolidation zone. A shift towards wetter weather over Brazil’s main Arabica growing regions as well as a pullback from a new 7 1/2 week high in the Brazilian currency weighed on cocoa prices early yesterday. With their Arabica harvest expected to be mostly completed over the next few weeks, Brazil’s near-term supplies will slowly tighten over the next few months. Colombia’s production continues to fall below last year’s total as their 2022 output may come in well below 13 million bags.
December cotton closed sharply higher yesterday after trading to its highest level since June 30. Monday afternoon’s Crop Progress report showed US cotton crop conditions declining sharply last week, particularly in Texas, which reinforced ideas that US production will lower than the current USDA forecasts. The Texas crop fell 11 percentage points last week, with only 14% rated good to excellent versus a 38% average.
Sugar prices may have only gained 4 ticks during the first two sessions of this week, but the market continues to extend this month’s recovery move. With key supply-side data released at midsession, however, sugar could show strength today. The Brazilian currency fell back from early gains while Brazil’s Center-South cane-growing regions have rain in the forecast, both of which put early carryover pressure on the sugar market yesterday. EU sugar production could have a sizable decline this season due to very hot and dry weather over many of their beet-growing regions, and that helped the market to rebound late in the day.
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