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Demand Tone Weakening in Cotton


Although a negative shift in global risk sentiment may put early pressure on the market, cocoa is showing some signs that it has found a near-term low. A rebound in European and US equity markets provided cocoa with carryover support as that can help to shore up near-term demand prospects in both regions.


With the market over 24.00 cents below where the last COT report was measured (down 9.8%), coffee’s net spec long position should have seen a significant reduction during the last 7 sessions. A negative shift in global risk sentiment helped to pressure, but a bullish supply outlook should have prices closing in on a low. May coffee reached a new 8 1/2 week low. Early indications that global shipping bottlenecks are starting to ease have weighed on coffee prices over the past few days.


May cotton closed moderately higher yesterday after spending the day well inside Wednesday’s range. The market drew support from the weekly US export sales report, which showed strong cotton sales for the second week in a row. Crude oil closed lower after trading to its highest level since 2011, and this may have put some pressure on cotton. Too much dryness in Texas and demand tone weakening.


The sugar market should remain fairly well supported on a near-term pullback. May sugar reached a new 6-week high with a sizable gain yesterday and a fourth positive daily result in a row. Crude oil continues to provide significant carryover support to the sugar market as ethanol demand in Brazil and India should see a significant increase.

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