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Ethanol Demand on The Rise


Cocoa prices continue to be driven by the ebb and flow of global risk sentiment in the wake of Russia’s invasion of Ukraine, as that will impact near-term European demand prospects. Ongoing tensions are putting pressure on the market early this week, but cocoa would be a major beneficiary if and when the Ukraine/Russia conflict finally concludes. For the week, May cocoa finished with a loss of 26 points (down 1.0%) and a second negative weekly result in a row.


The market is still probing for a short-term low. However, with a very large net spec long position, a negative shift in global risk sentiment could put coffee prices back on the defensive. For the week, May coffee finished with a loss of 7.35 cents (down 3.0%) and a second negative weekly result in a row. The Brazilian currency remained under pressure for a second day in a row, which in turned weighed on coffee prices as that may encourage Brazil’s farmers to market their remaining near-term supply.


May cotton experienced the lowest close since January 25 on Friday, but the market managed to bounce well off of the lows of the day. The selling pushed the market down to the lowest level since January 18. The sharp break in the grain markets and a surge higher in the stock market had some traders feeling that there was some hope that the war would not last much longer, and that the impact might not be as severe as believed. Traders remain concerned that a major conflict in the Black Sea region could hurt the global economy, and might spark lower demand for cotton.


Sugar’s abrupt turnaround left prices nearly 4% below Thursday’s 4-week high and just above their February lows. With the market already receiving positive ethanol demand news, a sizable rebound in key outside markets could lift sugar prices back above the recent consolidation zone. For the week, May sugar finished with a loss of 2 ticks. Energy prices followed through to the downside as they saw heavy losses again Friday, which put carryover pressure on the sugar market but crude is sharply higher today.


Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. The market’s short-term trend is positive on the close above the 9-day moving average.

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