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Pullback in Energy Prices Weighs on Sugar


Cocoa prices have fallen back on the defensive this week as near-term demand concerns are back to being a front-and-center issue for the market. While there are bullish supply factors to provide support, cocoa is vulnerable to further downside price action. There have been few signs that Shanghai’s COVID lockdown will end soon as it has been extended to the entire city, and that could lead to Asian near-term demand prospects being dialed back.


The market has rallied in the face of sluggish global risk sentiment and weak outside markets, and that could lead coffee to extend its recovery move. A sizable pullback in the Brazilian currency weighed on coffee prices early in the day, and that added to the carryover pressure from a pullback in European and US equity markets. Ongoing production issues in Brazil and Colombia helped the coffee market to regain strength late in the day, as both nations account for more than half of global Arabica output.


May cotton closed lower yesterday after trading to its highest level since last Thursday. For Friday’s USDA monthly supply/demand report, the average trade expectation for US 2021/22 cotton ending stocks is 3.54 million bales, with a range of expectations from 3.20-4.00 million. There is no rain in the next five days for West Texas, but the 6-10 day forecast models show normal precipitation.


Sugar prices have regained upside momentum and have held onto strength after key outside markets turned negative. With the market finding fresh supply-side support, sugar can extend this recovery move further above its late March consolidation zone. A pullback in energy prices and the Brazilian currency weighed on the sugar market early in the day, but both outside markets remain at high enough price levels to encourage Brazil’s Center-South mills to shift more of their crushing over to ethanol production.

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