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Softs Lower, Except Cocoa


Cocoa continues to face demand concerns that have been given additional fuel by the negative shift in global risk sentiment. With the market potentially dealing with fresh supply issues, however, the cocoa markets may see solid support on pullbacks.


While coffee prices ran out of near-term steam, they remain more than 12.00 cents above their mid-June lows and showing more signs that a longer-term low may be in. A 1% pullback in the Brazilian currency weighed on coffee prices as a weaker currency may encourage Brazilian producers to become more aggressive with marketing their near-term coffee supply to foreign customers.


A combination of improving weather conditions, a lack of heat in the 6 to 10 day forecast (with much of the cotton growing areas looking at below normal temperatures) and bearish demand tone were all factors to help pressure the market yesterday. With the late break in the stock market, cotton could see continued active selling today.


Sugar has been unable to retest its early June high for over 6 weeks and is looking increasing top-heavy at current levels. With a negative shift in global risk sentiment, sugar could finish this week with a sizable downside move. A more than 1% pullback in the Brazilian currency weighed on the sugar market as it encourages Brazil’s Center-South mills to produce more sugar instead of ethanol.

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