ADMIS News
COFFEE
While Brazilian frost was reported as localized and scattered on Monday, the frosts occurred in the main coffee belt. Furthermore, with the pre-existing and lingering bullish psychological impact on coffee from the recent announcement of US tariffs on Brazil products, the tightest ICE warehouse stocks in 15 months, and an ongoing frost threat should leave the bull camp firmly in control. As indicated yesterday, a “bullish buzz” has surfaced in several soft commodity markets and that could facilitate additional fund buying of coffee, especially with the December coffee contract yesterday climbing above the 50 day moving average for the first time since June 10th. Historically, speculative interest from Brazilian frosts can be significant as evidenced by the sharp progressive jump in daily trading volume since the beginning of August. On the other hand, the August rally has resulted in a drop in open interest giving credence to the bear argument that the rally so far is merely short covering.
COCOA
While December cocoa fell back sharply from multi-month highs posted early yesterday, the market ultimately held above the midpoint of the biggest range day and most active trading volume day in five months and has traded higher this morning in a fashion that gives the bull camp a lingering edge. While many dealers’ think yesterday’s sharp range up trade was an overreaction one should not argue against additional and definitive upside market action. However, it should be noted that West Africa has adverse conditions with dryness in some areas and cold/wet conditions in other areas. Dryness remains pervasive in the Ivory Coast and Ghana while Cameroon and Nigeria are suffering cold and wet. On the other hand, some professional traders discounted the large move yesterday as misguided speculation which in turn sparked compacted short covering. A potential anecdotal sign of an eventual major historical price peak in cocoa might have surfaced with a venerable (top six cocoa trader dating back to 1848) (Touton) put up for sale! Adding to the psychological/anecdotal sign of a major historical inflection point is the fact the French cocoa trading company posted a jump in earnings of an unheard of 1000%.
COTTON
While outside market lift from the grain markets added to cotton gains off last week’s lows yesterday and might have contributed to a three-day high this morning, it is a stretch to suggest cotton is poised for anything beyond a simple technical short covering bounce. On the other hand, with cotton maintaining substantial net spec and fund short positioning since September 2024 and the most recent net spec and fund short at a significant 40,392 contracts, the cotton market could see noted technical buying in what has been a very quiet market.
While the weekly crop progress report showed a slight drop in the good to excellent category cotton (53% versus 55% previously) lift from that development should be mitigated by the fact that cotton is ahead of normal pace on squaring, bolls opening and the setting bolls.
SUGAR
While bullish internal sugar market fundamentals are not pervasive, the sugar market appears to have “come alive”. As in other soft commodity markets sugar reversed some bearish technical signals with yesterday’s extension above the 50 day moving average at 16.49 with the market this morning definitively rejecting a dip back toward that level. However, the press is reporting increased speculative selling on the current rally perhaps because traders see the Pakistan purchase of 100,000 metric tons as a one-off event. On the other hand, an Indian sugar company saw lower quarterly profits off reduced production which in turn has sparked chatter that 2025 overall Indian sugar production will result in a national deficit for the first time since 2017/2018! Current overall Indian monsoonal rainfall is nearly equal to year ago levels, with Eastern and northeastern regions seeing below normal rain offset by above normal rain in the northwestern region. While it might seem we are focusing significant attention on positioning reports in soft commodity markets this week, notable reversal/upside action versus established down trends creates the potential of significant position reversals especially in those markets holding net spec and fund shorts like cotton and sugar.
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