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EU Demand Remain Source of Pressure


While the cocoa market is looking at lower production from major West African production this season, demand issues continue to be a source of pressure. May cocoa had a sixth negative daily result in a row on Friday and the market is lower this morning.


Coffee’s bullish supply/demand outlook has resulted in a record sized net spec long position which left the market vulnerable to long liquidation if support levels are violated. If global risk sentiment remains subdued early this week, coffee is likely to see further downside price action before the market can find its footing.


With the strong inflationary undertones and a surge higher in crude oil prices and a sharp advance in grain markets, the lower trade for May cotton this morning indicates demand concerns are emerging. The market is still operating under the negative technical influence of the February 4 key reversal, and with outside market forces so strong, the lower trade is telling. The market experienced a short covering bounce on Friday as traders moved to the sidelines ahead of the three day weekend.


Sugar has been a notable laggard this year, falling more than 12% in value since December and at one point reaching its lowest price level in more than 6 months. This is due in part to the market shifting its focus from Brazil’s Center-South region where 2021/22 production fell 6 million tonnes, and towards Thailand and India where their combined production has increased more than 3 million tonnes. However, the sugar market is showing signs that a near-term low is in and that it could be in the early stage of a rally.

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