Weather Concern For Cocoa
In the space of 7 sessions, cocoa prices have risen more than 320 points and gone from a 1-month low to a 6-month high. Drier than normal conditions over West African growing areas continue to be a source of strength for the market as it points towards lower production this season, and is likely to have a negative impact on early 2020/21 main crop production as well. There has been an uptick in precipitation over the Ivory Coast, but Ghana and Nigeria growing conditions remain a concern.
Coffee prices remain in a volatile trading pattern, but have put together 4 positive daily results in a row for the first time since July 1st. With a very large Brazilian 2020/21 crop already priced-into the market, coffee may be able to extend this rally. The Brazilian currency regained more than 2% in value and reached a new 3 1/2 week high, and that became a major source of support for coffee as n extended recovery for their currency will ease pressure on Brazil’s producers to market their near-term supply to foreign customers.
December cotton was unable to take out last week’s high, and the weak close would suggest the market is vulnerable to a corrective break. A continued rise in open interest to the highest level since March 19 suggests that fund traders are adding to their net long position. The inability of the market to make a new high with bullish outside market forces like weakness in the US dollar and a further new high for the stock market shows relative weakness for the cotton market.
Sugar prices have been able to hold their ground within their recent consolidation zone for more than a month now in spite of sizable 2020/21 production increases from Brazil and India. However, their inability to benefit from strong carryover support from key outside markets and fresh bullish supply news may not bode well. October sugar maintained its coiling price pattern above the 200-day moving average, but once again could not sustain upside momentum.
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