COFFEE
Coffee prices have been unable to sustain upside momentum since mid-April and have held within a tight trading range since the start of May. There is no rain in the forecast for major Brazilian Arabica growing regions through the end of next week, and the shift towards drier weather is expected to speed up harvesting operations. This pressured coffee prices as new crop Brazilian supply will reach the global export marketplace by mid-year. While the Brazilian currency extended its recovery move, it provided little carryover support to the coffee market. Out-of-home consumption has been subdued by stubbornly high inflation levels in many nations.
COCOA
Cocoa’s near-term demand outlook has been driven by the ebb and flow of global risk sentiment over the past few years, so it was no surprise that the market lost upside momentum following Thursday’s slate of global economic data. Unless global markets can regain a “risk on” mood during today’s action, cocoa prices are a bit vulnerable to profit-taking. While lower inflation normally benefits cocoa’s demand outlook, sluggish Chinese CPI and PPI readings do not bode well for their near-term economic strength. This in turn put pressure on the cocoa market as that will cast a shadow over Asian demand during the second and third quarter. In addition, negative guidance from the Bank of England weakened cocoa’s European demand outlook which also weighed on cocoa prices.
COTTON
The results of the USDA update should dictate price direction today. A breakout rally in the dollar on seemed to put pressure on cotton prices yesterday, even in the face of a decent export sales report. The report showed US cotton export sales for the week ending May 4 at 246,817 bales for the 2022/23 (current) marketing year and 12,760 for 2023/24, for a total of 259,257. Cumulative sales for 2022/23 have reached 12.499 million bales, down from 14.781 million a year ago and the lowest for this time of year since 2015/16, but they have reached 109% of the USDA forecast for the marketing year versus a five-year average of 106% for this point in the season. This suggests the USDA could raise its 2022/23 export forecast in their monthly supply/demand report on Friday. For the supply/demand report today, the average trade expectation for US 2023/24 cotton production is 15.78 million bales, with a range of expectations from 14.70 to 18.05 million. This would be up from 14.68 million in 2022/23.
SUGAR
After several sessions of coiling price action, the sugar market was unable to climb above its late April high and is on-track for a negative weekly result. The Brazilian trade group Unica released their latest supply report for Brazil’s Center-South region which showed sugar production during the second of April coming in at 989,000 tonnes which was 5.8% above last year’s total. Over the same timeframe, Center-South cane crushing was 12.5% below last year’s comparable total, due in part to wet weather limiting operations during 3 days of that period. Sugar’s share of Center-South crushing during the second half of April was 6.7% above last season’s levels, which added further pressure to sugar prices as it shows that mills continue to favor sugar production over ethanol production.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.