USDA Report Very Bullish Cotton News
Since the start of the second quarter, cocoa prices have been pressured by concerns about global demand. However, second quarter grindings for Europe and Asia showed year-over-year gains and the largest second quarter readings on record while Ivory Coast (the world’s top cocoa processing nation) is projected to have record grindings this year. For the week, however, December cocoa finished with a gain of 53 points (up 2.3%) which was a second positive weekly result over the past 3 weeks. Sharp selloffs in the Eurocurrency and British Pound put carryover pressure on the cocoa market.
Coffee prices have been able to break out of their coiling price pattern and now have closed above their 50-day and 100-day moving averages for a second session in a row. While demand concerns have not been fully soothed, coffee’s bullish supply factors can help the market to extend this recovery move. For the week, December coffee finished with a gain of 16.00 cents (up 7.8%) which was a third positive weekly result over the past 4 weeks. Tightening near-term supply in Europe and North America continues to provide coffee with underlying support. USDA report came out with very bullish news vs expectations.
The USDA supply/demand report on Friday was bullish, and the release of the report immediately sent December cotton up the daily limit, where it stayed the rest of the day. The market gapped higher this morning and is trading up the 5 cent limit early. The report showed US 2022/23 cotton production at 12.57 million bales versus an average trade expectation of 14.75 million and a range of expectations from 14.00 to 15.75 million. This was down from the July estimate of 15.50 million and well below the bottom end of the expected range. US ending stocks came in at 1.80 million bales versus 2.17 million expected (range 1.90-2.50 million) and down from 2.40 million in July. This brings the stocks/usage ratio down to 12.6%, down from 20.3% in 2021/22 and the lowest on record going back to 1960/61.
Sugar’s longer-term trend has seen a positive turnaround with the market starting out August with 9 positive daily results over the first 10 sessions of the month. Key outside markets remain volatile, however, so the sugar market may be vulnerable to a near-term pullback this week. For the week, October sugar finished with a gain of 66 ticks (up 3.7%) which was a second positive weekly result in a row. Estimates for 2022/23 EU sugar production have been dialed back due to very hot weather over major beet growing regions, and that has underpinned sugar prices during August.
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