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Gas Price Decline Sets Correction in Sugar


May cocoa gapped lower this morning and sold off to its lowest level since March 3. Concerns that the steep selloff in Chinese tech stocks will spill over to other markets contributed to a risk off tone this morning. This comes on top of demand worries stemming from the Russian invasion of Ukraine. The latest reading for Ivory Coast port arrivals came in ahead of last season’s comparable total, putting the 2021/22 full-season total slightly ahead of last season’s pace.


May coffee prices were lower overnight after closing at their lowest level since November 11 on Monday. Concerns about the Russia/Ukraine war pressuring demand and a slight improvement in the harvest data out of Brazil have pulled the market lower. A meltdown in Chinese tech stocks overnight due to expanding Covid lockdowns could lower risk appetites as well. A build-up of ICE exchange coffee stocks since late February may have also weighed on prices on ideas this is an indication that export bottlenecks are easing.


May cotton was slightly weaker overnight but held up surprisingly well in the face of lower energy markets and another sharply lower day for Chinese tech stocks. As has often been the case recently, the cotton market had a breakout day on Friday, only to give back a good portion of its gains the following session. On top of the lower energy prices, the market may have also been spooked by reports that China was closing two ports due to a new Covid outbreak.


May sugar gapped lower overnight as it continued to feel pressure from lower crude oil and gasoline prices. The market has broken below last week’s consolidation and could be set for a more substantial correction of the rally off the February lows. Another steep selloff in Chinese tech stocks have added to outside market pressure. However, we are seeing more evidence that the high energy prices are expanding ethanol production at the expense of sugar.

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