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Sugar Vulnerable to Short Covering


The sugar market has been unable to find its footing after falling 24% since the November 29th close. The market is well into bargain territory and is still facing reduced production in south Asia. Indications that Brazil will see much larger sugar exports during the first quarter of 2024 have sparked the leg down this week. However, India’s production is expected to come in below last season, which could keep them out of the export market until mid-2024. Thailand’s production is expected to be down sharply from last year. Concerns over dry conditions in Brazil that would negatively affect next year’s crop have eased with the rain in the forecast this week.

sugar packets


March coffee overextended with its surge to 15-month highs on Tuesday and has been consolidating those gains ever since, and it could see more consolidation and possibly some long liquidation ahead of the holiday weekend. Prices were moderately lower overnight but held within yesterday’s range. The sharp decline in global Robusta production this year was verified in the USDA’s Coffee World Markets and Trade report released this week, but the news was not really a surprise given the surge in Robusta prices this year and industry reports of lower output in Vietnam, and the market put it its high for the week before the report was released. In the report, the USDA revised its forecast for 2023/24 world coffee production down to 171.4 million bags from 174.3 million in their June update. Robusta’s production was lowered to 74.1 million bags from 78.0 million previously, thanks to a 3.6 million-bag cut to Vietnam’s output. World ending stocks were lowered to 26.5 million bags, which was the lowest in 10 years. This news was not a surprise, and the market peaked before the report was released.


After monthly gains in October and November of 419 points and 430 points (up 12.2% and 11.2%), cocoa starts today’s session only 11 points above its November close. The supply outlook remains bullish, but the market remains vulnerable to a pullback, and a loss of upside momentum on the rally may have the bulls nervous. On the other hand, there is no relief in sight to the production problems. Most of the market’s attention has been focused on Ivory Coast, Ghana, and Nigeria, but Ecuador may see their first production decline since the 2017/18 season.


March cotton’s quick rejection of a move to a six-week low yesterday suggests that it has reached a value area around 78.00. The market did not find much support from the export sales report, and the low of the day came more than two hours after the data was released. The trade seemed to back off from selling when the market did not attempt to take out the November harvest low at 77.66. The report showed US cotton sales for the week ending December 14 at 146,700 bales for the 2023/24 marketing year and 1,300 for 2024/25 for a total of 148,000. This was up from 71,400 the previous week and the highest since November 23. It also marked the first increase after six straight weeks of declines. Cumulative sales have reached 71% of the USDA forecast for the marketing year versus a five-year average of 74% for this point in the season. Ample global supply and lackluster demand could make it difficult for March cotton to lift much beyond the December high at 82.50.


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