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Cotton Prices Get Lift

COTTON

The passage of the debt limit bill in the US House has brought some relief to the commodity sector, and this has helped lift cotton prices back towards this week’s highs. The market felt pressure yesterday from lower near-term demand expectations and additional, needed rain in Texas. Traders were concerned about disappointing economic signals from China after their manufacturing PMI reading for May came in softer than expected. The 1-5 day forecast calls for rainfall of up to seven inches in the Texas panhandle, with amounts diminishing to an inch or less further south.

cotton field blue sky

COCOA

July cocoa worked higher overnight after some bullish supply news out of the International Cocoa Organization (ICCO), which released its quarterly supply/demand update. The report raised the 2022/23 global production deficit to 142,000 tonnes from 60,000 in their February update. This would be the seventh largest deficit of the past 50 years. On the demand side, Ivory Coast grindings were increased by 35,000 tonnes, but US grindings were 20,000 tonnes lower and German grindings 10,000 tonnes lower. Lower-than-expected readings for German and French CPI seemed to have only a minimally supportive effect on Wednesday. The Eurocurrency fell to its lowest level since March 16 on Wednesday, which is negative to cocoa as it makes it more expensive in a key demand market, but the Euro rebounded overnight.

COFFEE

July coffee gapped higher overnight in the wake of the passage of the debt ceiling bill in the US House and stronger Robusta prices in Asia. The market was able to rebound from an 8-week low on Wednesday to finish with a moderate gain and a positive daily reversal. This week’s sharp selloff in the Brazilian currency had put pressure on coffee prices. However, lower than expected German and French CPI readings gave a boost to European demand prospects, and this helped to lift coffee prices back into positive territory. The premium between Arabica and Robusta prices has reached its lowest level since January 2021, which has provided support to New York Arabica prices. The narrowing of the spread is being driven by a shortage of Robusta beans in major Asian producing countries. The Honduran Coffee Institute reported Honduras’ coffee exports reached 1.2 million bags in May, up 79% from a year ago. They are the largest exporter in Central America. However, Costa Rican exports declined for the month.

SUGAR

July sugar worked higher overnight, taking back most of Wednesday’s losses, as it apparently garnered some support from the passage of the debt relief bill in the US House and a generally positive vibe in the equity and commodity sector. The market received some bullish supply news Wednesday but still closed lower. Crude oil fell to a 4-week low, which put pressure on the sugar market. The Brazilian currency lost another 1% in value and reached a 9-week low, which weighed on sugar prices on ideas it would encourage mills to produce more sugar for export. On the bullish side, there are reports of planting delays for this year’s French, German, and Polish sugar beet crops due to wet weather, which increases the chances that EU 2023/24 sugar production will decline from 2022/23. This may support some follow-through gains early in the US session on Thursday.

 

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