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Sugar Prices Pressured


October sugar fell below round-number support at 13.00 overnight. Prices had been fairly resilient in the face of a bearish global supply outlook, benefiting from improving risk sentiment early this week. But with decline in the Brazilian currency, sugar remains vulnerable to a near-term pullback. Yesterday’s 1% decline in the Brazilian real was a key factor in sugar ending the day in negative territory. The weaker currency provides more incentive for Brazil’s Center-South mills to shift their crushing towards sugar production.


December cocoa moved slightly higher overnight but was confined to Monday’s range. The market has been overbought for several weeks and may be setting up for a near-term pullback. While it has a bullish supply outlook and global risk sentiment has shown some improvement, ongoing concern with global demand may fuel additional long liquidation. December cocoa followed through on last Friday’s outside-day down session on Monday with move to a new 2-week low, but it managed a mild rebound late to finish with a moderate loss.


December coffee moved higher overnight, within striking distance of last week’s highs. As of yesterday it had posted three closes in a row above the 200-day moving average. It appears that the record Brazilian crop has already been priced into the market, so the prospects for improving demand can help coffee extend its recovery move. Stronger than expected demand has been reflected in this month’s sharp drop in ICE exchange coffee stocks, which fell another 21,552 bags on Monday to reach a multi-year low.


December cotton edged higher overnight, testing Monday’s highs. However, we are skeptical that the cotton can continue its rally with US and world ending stocks expected to come in a record or near record levels, even in the face of drought problems in Texas. Monday afternoon’s Crop Progress report actually showed an improvement last week, with 45% of the US crop rated good/excellent (G/EX) as of August 16, up from 42% the week earlier and not too far off last year and the 10 year average, both of which were 49% at this point in the season.

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