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Shift to More Sugar/Less Ethanol Production


Cocoa prices have put together 3 positive daily results in a row and are now on-track for a positive weekly reversal from Tuesday’s 3 1/2 month low. European and US equity markets extended their recovery moves which provided cocoa with carryover support as that can help to soothe near-term demand concerns in both regions.


With a positive turnaround in global risk sentiment, coffee may be able to finish April on an upbeat note. While it posted a second daily gain in a row, the Brazilian currency has lost more than 6.5% in value over the past week. The Real’s decline to 6-week lows continues to be a source of pressure on coffee prices, as extended weakness in front of next month’s start of the Arabica harvest could encourage farmers to market their remaining coffee supply.


July cotton is higher again this morning and closed limit up for the second day in a row yesterday, this time with an expanded 7-cent limit. The market took off on concerns about India’s exports and the ongoing drought in west Texas. India is the largest producer in the world and there are fears that India could temporarily ban exports in order to improve the supply for local end users. If India suspends cotton exports, even temporarily, other world buyers may need to turn to the US.


After 4 sessions of coiling action so far this week, sugar is now on-track for a positive weekly reversal. While it will need global risk sentiment and key outside markets to regain and maintain strength, sugar prices look set for at least a technical bounce. Crude oil prices were able to maintain their recovery move while RBOB gasoline reached a 1 1/2 month high, and that offset a sluggish Brazilian currency to provide sugar with carryover support as higher energy prices should help to strength ethanol demand in both Brazil and India.

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