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Coiling Action in Sugar Prices


Sugar prices have seen recent coiling action that has resulted in only one “lower low” since the market reached a 9-month low in late December. The sugar market may be close to making a trend decision and with the latest net spec long position one-quarter of the size it had during mid-October. Indonesia set their 2024 sugar import quota at 4.77 million tonnes, which compares to 3.6 million last year which has provided mild early support to prices. There are early indications that next season’s Brazilian Center-South sugar production will come in around 43 million tonnes, which will surpass this season’s record high total and has weighed on sugar prices early this year.


Cotton was a standout commodity Wednesday defying a negative demand environment and a strong Dollar. A sharp rally in crude oil prices in the wake of an explosion at a Tehran cemetery and Red Sea shipping attacks provided carryover support to cotton prices as that could increase the raw material costs for nylon and polyester clothing. The Pakistan Cotton Ginners Association lowered their domestic 2023/24 production forecast to 8.5 million bales from their earlier estimate of 12.8 million. There is also some market optimism that US cotton shipments to China will remain strong. This week’s export sales report release is delayed until Friday due to Monday’s holiday.


Coffee prices have had a rough start to 2024 as demand concerns have flared up due to sluggish global risk sentiment. Following a strong fourth quarter performance and a managed money net long position close to a 1 1/2 year high of 39,761 contracts, coffee remains vulnerable to profit-taking and additional long liquidation. There has been decent rainfall over Brazil’s major Arabica-growing regions over the past few weeks and while the weather turns dry starting tomorrow for several days, daily rains are forecast to return Tuesday. This should benefit next season’s Brazilian production, and that has weighed on coffee prices this week.


After a positive start to the year, cocoa prices have lost upside momentum. While global risk sentiment has seen a mild positive turnaround early in today’s trading, cocoa prices remain vulnerable to sliding further. The Euro has found moderate strength this morning after losing 2% over the past four sessions which may provide carryover support to the cocoa as that will make it easier for European grinders to acquire near-term supplies. Although there has a recent increase in optimism over this season’s West African cocoa production, any increase in supply is unlikely to occur until their late main crop harvest (February and March) and mid-crop harvest is underway April to September. With sharp early declines from last season, the 2023/24 season is on-track for a sizable global production deficit.


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