ADMIS News
COCOA
Cocoa prices have run out of upside momentum as near-term demand concerns have been given additional fuel following Wednesday’s “risk off” mood throughout global markets. While it continues to find support from bullish supply developments, cocoa remains in a downtrend due to poor demand and consumer demand could weaken further as food and energy prices rise. A significant negative shift in global risk sentiment weighed heavily on cocoa prices as it was triggered by negative guidance from US retailers Target and Walmart that point towards a downturn in consumer discretionary spending.
COFFEE
While it was not surprising that the market had a sizable pullback, keep in mind that coffee prices have given back less than half of their May recovery move, and remain on track for a positive weekly result. It may be difficult to overcome a continued “risk off” mood across global markets, but coffee’s ongoing South American production issues should help to underpin prices. Early indications are that the cold weather in Brazil’s major Arabica-growing regions early Wednesday did not result in widespread frost damage. Concern over upcoming consumer discretionary spending could dampen the outlook for out-of-home coffee consumption.
COTTON
July cotton continues to see a negative tilt to demand and acts like a top is in place. The dollar was higher and the stock market sharply lower, and that action was negative to cotton. Traders continue to express concerns about Chinese demand, and the stronger dollar did not help. Chinese cotton futures were down sharply. Grain markets sold off on reports of UN efforts to restore Ukraine grain exports and forecast of ample Russian supplies, and the selling pressure may have spilled over to cotton.
SUGAR
Sugar prices have held onto most of their gains from the 4-session updraft in spite of negative global risk sentiment and weakness in key outside markets. Although a “risk off” mood may continue during today’s trading, sugar prices should remain well supported on a near-term pullback. A sharp selloff in energy prices weighed heavily on the sugar market as that may weaken near-term ethanol demand, while a pullback in the Brazilian currency was another source of carryover pressure on sugar prices.
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